IBRARY     ^ 


<IV6PSITY  OP 
lAUFORNIA 

;an  oiceo 


J 


SELECTED 


SPEECHES    AKD    REPORTS 


ON 


FINANCE  AND  TAXATION, 


FROM  1859   TO  1878. 


BY 

JOHN     SHERMAN 


NEW   YOEK: 
D.    APPLETON    AND    COMPANY, 

549   AND  551   BROADWAY. 

1879. 


COPYRIGHT    BY 

D.  APPLETON  AND  COMPANY, 

1679. 


PREFACE. 


In  accordance  with  tlie  expressed  wish  of  friends  and  for  con- 
venient reference,  I  have  selected  for  publication  the  following  speeches 
and  reports  made  by  me  on  the  finances  and  taxation  of  the  Govern- 
ment since  1859. 

Most  of  the  topics  mentioned  are  still  debated  in  Congress  and 
before  the  people.  Many  of  the  speeches  were  made  on  the  passage  of 
Acts  of  Congress  now  forming  the  body  of  existing  laws  relating  to 
the  issue  of  United  States  notes  and  coins,  and  the  circulating  notes  of 
national  banks.  The  few  explanatory  remarks  are  deemed  necessary 
to  enable  the  reader  to  better  understand  the  subject  under  discussion, 
and  no  revision  has  been  attempted  except  to  correct  verbal  inaccu- 
racies. 

If  this  work  shall  contribute  in  any  way  to  throw  light  upon  the 
important  problem  of  securing  a  stable  currency  of  paper  money  re- 
deemable in  coin,  it  will  have  accomplished  its  purpose. 

John  Sherman. 


2003391 


CONTENTS. 


PAGE 

On  the  Morrill  Tariff  Bill        .....  1 

In  the  House  of  Eepresentatives^  May  7,  1860. 

On  the  Issue  of  Treasury  Notes  .  .  .  ,13 

In  the  Rouse  of  Representatives^  December  10,  1860, 

On  the  Loan  of  Twenty-five  Million  Dollars  .  ,         19 

In  the  House  of  Repi'esentatives,  February  2,  1861. 

Issue  of  United  States  Notes     .  ,  .  .  .23 

In  the  Senate,  February  13,  1862. 

Taxation  of  Bank  Bills    ...  ..^        32 

In  the  Senate  of  the  United  States,  January  8,  1863, 

National  Currency  .  .  .  .  ^  .51 

In  the  Senate,  February  9,  1863. 

National  Bank  Currency  .....        58 

In  the  Senate  of  the  United  States,  February  10,  1863. 

On  the  General  Financial  Policy  of  the  Government        .        80 

In  the  Senate  of  the  United  States,  February  27,  1865. 

Ways  and  Means     .......         88 

April  9,  1866. 

Funding  the  National  Debt  .  ,  ,  ,97 

In  the  United  States  Senate,  May  22,  1866. 

The  Tariff  ........       121 

In  the  Senate,  January  23,  1867. 

The  Public  Debt    .  .  .  .  .  ,  .       138 

In  the  Senate,  December  17,  1867. 

The  Funding  Bill  ....,,,       150 

In  the  Senate,  February  27,  1868. 

International  Monetary  Standard    ....   179 

In  the  Senate,  June  9,  1868. 


VI 


CONTENTS. 


Public  Debt  and  Currency  .  .  .  , 

In  the  Senate  of  the  United  States,  January  27,  1869. 

The  Public  Credit  .  .  .  .  . 

In  the  Senate,  February  27,  1869. 

National  Banks       ..... 
In  the  Senate,  March  29,  1869. 

The  Currency  ...... 

In  the  Senate,  January  24,  1870. 

Funding  Bill  ...... 

In  the  Senate,  February  28,  1870. 

Receipts  and  Expenditures — Reduction  of  Taxation 
In  the  Senate,  May  23,  1870. 

Coinage  Laws  ..... 

/?i  the  Senate,  January  9,  1871. 

Income  Tax  ....  .  . 

In  the  Senate,  January  25,  1871. 

Internal  Taxes  and  Tariff  .  ,  , 

In  the  Senate,  March  15,  1872. 

French  Spoliation  Claims 

In  the  Senate,  December  17,  1872. 

Reissue  of  Notes    ..... 
In  the  Senate,  January  I4,  1873. 

The  Currency — Specie  Payments 

In  the  Senate  of  the  United  States,  January  16,  1873. 

Coinage  Laws  ..... 

In  the  Senate,  January  17,  1873. 

The  Currency  and  Specie  Payments 
In  the  Senate,  January  16,  187^. 

Free  Banking — The  Currency     .  .  , 

In  the  Senate,  May  13,  187 4. 

The  Issues  of  the  Hour    .... 

Delivered  at  Columbus,  September  2,  1874- 

The  Resumption  Act  .... 

In  the  Senate,  December  22,  1874. 

The  Currency  ..... 

At  Marion,  Lawrence  County,  Ohio,  July  31,  1875. 

National  Finances — Specie  Payments    . 
In  the  Senate,  March  6,  1876. 


PAGE 

187 


203 
207 
216 
239 
284 
307 
317 
336 
356 
380 
387 
400 
402 
436 
452 
465 
474 
492 


CONTENTS. 


PAGE 

Fractio^tal  Currency — Silver  Coinage  .  .  .  .517 

In  the  Senate^  April  11,  1876. 

Legal  Tender  op  Silver  Coin      .....       538 

In  the  Senate,  June  8,  1876. 

Dangers  of  the   Restoration  of  the  Democratic  Party  to 

Power     ........       549 

At  Marietta,  Ohio,  August  12,  1876. 

Conduct  of  Public  Affairs  .....       570 

At  Mansfield,  Ohio,  August  17,  1877. 

Annual  Report  to  Congress         .....       589 
Treasury  Department,  Washington,  I).  C,  December  3,  1877. 

Finances         .  .  .  .  .  .  .  .       602 

Delivered  at  Toledo,  Monday,  August  26,  1878. 

Condition  of  the  Country  .....       625 

Speech  at  Cumberland,  Maryland,  October  24,  1878. 

Annual  Report  to  Congress        .....       630 
Treasury  Department,  Washington,  D.  C,  December  2,  1878. 


SELECTED  SPEECHES  AND  EEPOETS 


FINANCE    AND    TAXATION. 


ON  THE   MOREILL  TAEIFF  BILL. 

m  TEE  EOUSE  OF  REPRESENTATIVES,  MAT  7,  1860. 
THIRTY-SIXTH  CONGRESS. 

This  speech  was  made  with  a  view  of  securing  additional  revenues  to  strengthen 
the  Treasury,  which,  since  the  first  year  of  Mr.  Buchanan's  administration,  then  in 
power,  had  suffered  unusual  depletion.  On  June  30,  1857,  the  public  debt  was  only 
$29,060,386.90,  against  which  the  Treasury  held  of  cash  in  its  vaults  $17,710,114.27. 
To  set  free  the  increasing  balance,  and  thereby  to  relieve  if  possible  the  commercial 
and  other  interests  of  the  country,  which  were  then  struggling  to  ward  off  the 
revulsion  which  finally  came  upon  them,  the  Secretary  of  the  Treasury,  Howell 
Cobb,  purchased  before  the  middle  of  November,  of  stock  not  due,  an  amount  of 
$4,878,377.33,  paying  thereon  a  premium  of  $688,977.78.  The  revulsion  affecting 
the  trade  and  business  of  the  country  more  severely  than  was  anticipated,  the  cur- 
rent revenues  of  the  Treasury  were  suddenly  decreased  more  than  one  half  in 
amount,  and,  upon  the  opening  of  the  first  session  of  the  Thirty-fifth  Congress  in 
December,  the  Secretary  was  compelled  to  ask  for  a  loan  of  $20,000,000.  Prompt 
response  was  made,  and  on  the  23d  of  that  month  Congress  authorized  the  issue  of 
$2,000,000  Treasury  notes,  payable  one  year  fi-om  the  dates  of  their  issue;  and 
before  the  adjournment  of  the  session,  on  the  23d  of  June  following,  it  authorized 
an  additional  issue  of  $20,000,000  of  bonds,  payable  in  fifteen  years. 

At  the  close  of  the  fiscal  year  (June  30,  1858),  there  was  in  the  Treasury  a  cash 
balance  of  only  $6,398,316.10,  but  none  of  the  notes  or  bonds  authorized  had  then 
been  sold. 

During  the  next  year  the  expenses  of  the  Government  were  increased,  but  no 
steps  with  a  view  of  increasing  the  revenue  from  taxation  appear  to  have  been 
taken.  To  meet  current  expenses  during  the  year,  the  Treasury  realized  from  issue 
of  notes  of  December  23,  1857,  $9,667,400,  and  from  the  bonds  authorized  by  act 
of  June  14,  1858,  $18,620,000,  increasing  the  debt  to  $58,754,699.33,  but  still  leav- 
ing the  Treasury  at  the  close  of  the  year,  June  30,  1859,  with  a  balance  of  only 
$4,339,275.54. 
1 


2  SPEECHES  AXD   REPORTS   OF  JOHN  SHERMAN. 

The  Thirty-sixth  Congress  assembled  December  5,  1859,  and  the  House  organ- 
ized after  a  struggle  over  the  election  of  Speaker  of  about  two  months.  The 
opposition  finally  succeeded,  and  Mr.  Sherman  was  placed  at  the  head  of  the  Com- 
mittee on  Ways  and  Means. 

Mr.  Sherman  said : 

Mr.  Chairman  :  The  revenue  act  of  March  3,  1857,  which  it  is 
now  proposed  to  repeal,  has  proved  to  be  a  crude,  ill-ad^ased,  and  ill- 
digested  measure.  It  was  never  acted  upon  in  detail  in  either  branch 
of  Congress,  but  was  the  result  of  a  committee  of  conference  in  the 
last  days  of  the  session,  and  was  finally  passed  by  a  combination  of 
hostile  interests  and  sentiments.  It  was  adoj^ted  at  a  time  of  inflated 
prices,  when  the  Treasury  was  overflowing  with  revenue.  When  that 
condition  of  affairs  ceased,  it  failed  to  furnish  ordinary  revenue,  and 
by  its  incidental  effects  operated  injuriously  to  nearly  every  branch  of 
industry. 

It  went  into  operation  on  the  1st  of  July,  1857.  At  that  time 
there  was  in  the  Treasury  of  the  United  States  a  balance  of  $17,710,- 
11-1.  The  amount  of  the  public  debt  then  remaining  unpaid — none  of 
which  was  then  due — was  a  little  over  $29,000,000.  So  that  there  was 
in  the  Treasury  of  the  United  States,  when  the  tariff  act  of  1857  went 
into  operation,  nearly  enough  to  have  paid  two  thirds  of  the  public 
debt.  Within  one  year  from  that  time  the  public  debt  was  increased 
to  $44,910,777.  On  the  1st  of  July,  1859,  the  public  debt  had  in- 
creased to  $58,754,699.  On  the  1st  of  May,  1860,  as  nearly  as  I  can 
ascertain,  the  public  debt  had  risen  to  $65,681,099.  The  balance  in 
the  Treasury  on  the  1st  of  July  next,  as  estimated  by  me,  will  be 
$1,919,349. 

Thus  it  is  shown  that,  under  the  operation  of  the  tariff  of  1857,  the 
deficit  in  the  revenue  in  thi*ee  years  is  over  $52,000,000.  It  may  be 
stated  thus : 

Balance  in  the  Treasury  July  1,  1857 $1 7,710,1 14 

Balance  in  the  Treasury  July  1,  1860,  estimated 1,919,349 

Decrease $15,790,765 

Amount  of  public  debt  May  1,  1860. $65,681,199 

Amount  of  public  debt  July  1,  1857 29,060,386 

86,620,813 

Increase $52,411,578 

It  is  impossible  to  ascertain  from  the  report  of  the  Secretary  of  the 
Treasury  the  condition  of  our  finances  for  the  fiscal  year  ending  June 
30,  1860.  I  have  prepared  a  statement  of  receipts  and  expenditures, 
based  upon  the  actual  sums  received  and  paid  for  three  quarters  of  the 
year,  and  the  Secretary's  estimate  for  the  last  quarter. 

The  total  expenditures  will  be  $67,702,818,  and  the  receipts  from 
all  sources  will  be  $58,950,445,  thus  showing  a  deficit  for  this  fiscal 
year  of  $8,852,873.  It  thus  appears  that  during  the  present  fiscal  year, 
a  year  of  great  commercial  prosjDerity,  the  ordinary  receipts  have  been 
insufficient  to  pay  the  exi^enses  of  the  Government  by  over  $8,000,000, 
and  that  too  at  a  time  when  the  expenses  of  the  Government  have 


ON  THE  MOKRILL  TARIFF  BILL.  3 

been  largely  reduced  below  what  they  were  but  one  year  ago.  It  is 
very  easy  to  see,  if  this  system  of  finance  is  persisted  in,  that  the  debt 
of  this  Government  in  a  few  years  will  approach  the  debt  of  some  of 
the  European  governments.  It  is  impossible  that  any  government  can 
be  properly  carried  on  under  such  a  system.  It  is  perfectly  clear, 
therefore,  that  unless  a  different  state  of  facts  exists  in  the  future,  the 
present  tariff  bill  will  be  wholly  insufficient  to  pay  the  ordinary  ex- 
penses of  the  Government. 

This  deficit  is  not  merely  temporary,  but  it  is  permanent.  During 
the  present  fiscal  year  the  importations  into  this  country  will  amount 
to  over  $412,000,000,  or  $50,000,000  more  than  in  1S5T— higher  than 
ever  before.  Although  the  importations  have  gone  up  thus,  they  have 
not  under  the  present  tariff  produced  sufficient  revenue  to  pay  the 
ordinary  expenses  of  the  Government.  We  must,  therefore,  consider 
one  of  three  propositions.  We  must  either  diminish  the  expenses, 
increase  the  public  debt,  or  increase  the  revenue.  I  take  it  that  no  one 
in  our  day  desires  to  increase  the  national  debt.  The  idea  that  a 
national  debt  is  a  national  blessing  is  an  absurd  one,  which  should 
never  have  been  tolerated  ;  and  I  believe  that  no  respectable  political 
party  proposes  that  the  Government  should  go  on,  as  it  has  for  three 
years  past,  on  the  public  credit.  I  do  not  suppose  that  any  other 
Administration  than  the  present  one  would  tolerate  the  practice  for 
three  years. 

jN^ow,  can  we  diminish  the  expenditures  ?  That  is  the  first  question 
to  which  I  desire  to  direct  the  attention  of  the  Committee.  I  have 
before  me  a  table,  which  has  been  carefully  prepared,  showing  that  the 
estimates  of  the  Secretary  of  the  Treasury  for  the  next  fiscal  year,  for 
ordinary  purposes,  reached  $46,278,893.  Including  the  interest  on  the 
public  debt,  and  the  expenses  of  collecting  the  revenue,  and  other  per- 
manent appropriations,  amounting  to  $8,173,582,  the  total  amount 
estimated  for  is  $54,452,475.  But,  sir,  to  this  are  to  be  added  a  vast 
number  of  appropriations  asked  for  by  the  several  Departments,  but 
which  the  Secretary  of  the  Treasury  totally  ignores.  He  declares  that 
he  asks  but  for  $54,452,475  ;  yet  other  Departments  of  the  Govern- 
ment estimate  for  other  appropriations  to  the  amount  of  $9,606,250. 
I  wish  to  warn  my  political  friends  that,  if  they  vote  these  appropria- 
•tions,  they  will  be  placed  precisely  in  the  same  position  that  they  were 
in  the  Thirty-fourth  Congress.  They  will  be  told  that  these  appro- 
priations were  the  extravagance  of  a  Republican  House,  and  were 
made  in  the  face  of  the  report  of  the  Secretary  of  the  Treasury, 
although  the  appropriations  were  asked  for  by  the  appropriate  De- 
partments of  the  Government.  For  the  pm*pose  of  showing  the  char- 
acter of  these  estimates,  I  have  prepared  a  statement  of  most  of  them, 
as  follows  : 

Estimates  of  the  Secretary  of  the  Treasury  for  the  service  of  the  year  1861 .  .  $46,2*78,893  56 

Interest  on  the  public  debt $3,386,621  34 

For  expenses  collecting  revenue  from  imports 2,000,000  00 

Other  permanent  appropriations 2,786, 961  14 

8,173,582  48 

The  following  estimates  not  embraced  in  those  of  the  Secretary  of  the 


4  SPEECHES  AXD  REPORTS  OF  JOHN  SHERMAN. 

Treasury,  and  amounts  embraced  in  bills  now  before  both  Houses  of  Con- 
gress : 

Estimates  for  public  works  in  the  course  of  construction. .  . .  .  $2,282,400  00 

Completion  Washington  aqueduct 500,000  00 

Public  buildings  and  grounds 44,418  47 

Estimate  Third  Auditor  of  the  Treasury,  payment  of  Oregon 

and  Washington  war  debt 2,'714,808  55 

Enlargement  of  public  grounds 168,250  00 

Texas  regiment,  Senate  amendment  to  Military  Academy  bill. .        '779,392  03 

Lighthouse  bill,  reported  by  Committee  on  Commerce 653,000  00 

Restoring  mail  service,  in  Post  Office  bill,  1860 500,000  00 

Restoring  mail  service,  in  Post  Office  bill,  1861 1,539,221  00 

Mail  routes  established  in  1858  and  Kansas 425,160  00 

9,606,250  05 

Total §64,058,726  09 

Among  tliem  are  estimates  for  continuing  public  buildings  in  the 
course  of  constniction.  These  are  mostly  for  the  Charleston  and  New 
Orleans  custom  houses,  and  for  the  Treasury  extension.  These  appro- 
priations are  asked  for ;  and  gentlemen  here,  who  will  vote  against  this 
or  any  other  tariff  bill,  yet  urge  the  pressing  necessity  of  these  appro- 
priations. But  the  Secretary  of  the  Treasury,  who  should  take  a  view 
of  the  whole  field  of  expenditures,  totally  ignores  them  in  his  estimates. 
The  TVashington  aqueduct,  the  Oregon  and  Washington  war  debt,  the 
enlargement  of  the  public  grounds,  and  the  Texas  mounted  regiment, 
have  been,  or  will  all  be,  pressed  upon  us,  and  yet  neither  is  included 
in  the  estimates.  These  ex]^enditures  will  be  voted  for  by  the  friends 
of  the  Administration,  who  all  know  that  there  are  no  means  provided 
for  their  payment,  and  who  will  thus  create  the  necessity  for  new  reve- 
nue, and  then  generally  vote  against  increasing  the  revenue,  and  go 
before  the  people  clamoring  about  new  taxes  and  tariffs.  Charged  with 
the  administration  of  the  Govermnent,  yet  they  exjDeet  the  Oj^position 
to  vote  them  supplies  for  all  sorts  of  demands,  to  furnish  them  revenue 
against  their  votes,  or  they  will  pay  the  salaries  of  their  officials  by 
increasing  the  public  debt. 

As  an  example,  take  the  proposed  regiment  of  volunteers  for  Texas, 
which  ineasure  is  now  pressed  by  the  representatives  of  Texas.  The 
pro])Osition  was  voted  for  by  every  member  of  the  other  side,  and  per- 
haps by  some  members  on  this  side  of  the  House.  If  this  be  granted, 
then  here  is  an  addition  to  the  expenditures  of  the  Government  of 
nearly  $1,000,000;  and  we  on  this  side  of  the  House,  who  are  desirous 
of  raising  the  revenue  sufficiently  to  meet  the  expenses  of  the  Govern- 
ment, will  be  charged  with  having  appropriated  this  large  sum,  not 
estimated  for,  although  nearly  all  of  us  will  vote  against  it ;  and  those 
who  do  vote  for  it  will,  in  the  main,  oppose  all  measures  to  raise  reve- 
nue to  meet  it.  In  my  judgment,  the  best  mode  to  meet  this  new  sys- 
tem of  financial  tactics  is  to  refuse  all  appropriations  for  all  new  objects 
of  expenditure  until  some  proper  revenue  is  provided. 

JMr.  Chairman,  tliere  is  also  a  lighthouse  bill,  which  has  been  or  will 
be  reported,  and  which  asks  for  an  appropriation  of  $653,000.  There 
IS  a  proposition  for  the  restoration  of  the  mail  service,  which  everybody 
seems  to  be  in  favor  of,  and  which  will  require  over  $2,000,000.     Let 


ON  THE   MORRILL   TARIFF   BILL.  5  . 

me  call  your  attention  to  the  cost  of  that  measure.  Althoug;h  our  con- 
stituents in  all  parts  of  the  country  have  called  upon  us  to  increase  or 
restore  the  mail  service,  yet  I  believe  that  the  Postmaster  General  did 
right  in  reducing  it.  It  is  the  only  reform  instituted  by  this  Adminis- 
tration. Gentlemen  upon  this  as  well  as  upon  the  other  side  should 
remember  that  their  mandatory  restriction  will  increase  the  expenses 
of  the  Post  Office  Department  over  $2,000,000. 

I  desire  now  to  say  that  the  Committee  on  Ways  and  Means,  who 
have  had  charge  of  appropriation  bills,  have  endeavored  faithfully  and 
honestly,  without  regard  to  party  divisions — and  all  parties  in  this 
House  are  represented  in  that  committee — to  cut  down  the  appropria- 
tions to  the  lowest  practicable  point,  and  thus  to  reduce  the  expenses 
of  the  Government.  I  have  before  me  a  table,  showing  that,  upon  the 
estimates  submitted  to  us  by  the  Secretary  of  the  Treasury  for  the 
ordinary  expenses  of  the  Government,  we  have  been  able  to  reduce 
the  amount  about  $1,230,000.     It  is  as  follows : 

Statement  of  the  various  bills  reported  by  the  Committee  of  Ways  and  Means,  First  Session 
Thirty-sixth  Congress,  for  the  service  of  the  year  1861,  showing  the  estimates  of  the  Secre- 
tary of  the  Treasury,  tvith  the  reductions  made  therein,  tvith  the  amounts  reported  by  said 
committee. 


Estimates,  Secreta- 
rv  of  Treasury, 
year  1861. 


Amounts  reported 
by  Committee  on 
Ways  and  Means. 


Eeduction  on  Es- 
timates. 


Invalid  pensions,  &c 

Military  Academy 

Indian , 

Consular  and  diplomatic 

Fortifications 

Army 

Legislative,  executive,  and  judicial.. . . 

Sundry  civil 

Naval 

To  supply  deficiencies  in  revenues.  Post 
Office  Department,  year  1861 


$849,000  00 

183,892  00 

1,918,502  38 

1,137,120  00 

675,000  00 

14,623,603  72 

5,995,109  97 

3,663,395  82 

11,244,845  63 

6,988,424  04 


46,278,893  56 


$849,000  00 

180,392  00 

1,907,002  38 

1,082,120  00 

605,000  00 

13,984,126   12 

5,870,315  53 

3,491,414  32 

11,182,283  63 

5,897,221  75 


$3,500  00 

11,500  00 

55,000  00 

70,000  GO 

639,470  60 

124,794  44 

171,981  50 

62,562  00 

91,202  29 


45,048,875  73 


1,230,017  83 


Estimates  Secretary  of  the  Treasury : $46,278,893  56 

Reductions  made  by  Committee  of  Ways  and  Means 1,230,017  83 


Amount  in  bills  as  reported  by  committee $45,048,875  73 

Add  permanent  appropriations,  excluding  interest  on  the  public  debt,  amount- 
ing to   ' 4,786,961  00 


Add  interest  on  public  debt. 


$49,835,836  73 
3,386,621  00 


Total $53,222,457  73 

If  the  House  will  take  the  bills  as  reported  by  the  Committee  of 
Ways  and  Means,  instead  of  the  estimates  of  the  Secretary  of  the  Trea- 
sury, they  will  save  the  Government  about  $1,500,000.  But  I  cannot 
say  that  I  expect  they  will  do  so,  because  I  have  no  doubt  that  the  very 
items  which,  upon  the  fairest  examination,  we  have  found  to  be  too 
large  or  unnecessary  for  the  public  service,  and  have  therefore  reduced, 


6  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

will  be  put  upon  tlie  bills,  either  by  this  House  or  in  the  Senate ;  and, 
no  doubt,  the  bills  will  be  overloaded  with  Senate  amendments  of  four 
or  five  millions  more,  as  has  been  the  case  during  every  Congress  since 
I  have  been  a  member  of  this  House.  If,  however,  the  estimates  of 
the  Committee  of  Ways  and  Means  and  their  reductions  are  sanctioned, 
the  ordinary  appropriations  for  the  Government  will  be  reduced  to 
$45,04:8,875,  aside  from  the  public  debt  and  the  permanent  appropria- 
tions. And,  in  my  judgment,  if  we  would  devote  our  time  to  a  fair 
investigation  of  the  ordinary  operations  of  the  Government,  we  might 
reduce  our  aggregate  expenses  to  $50,000,000  annually ;  but  as  long  as 
sectional  controversy  is  the  chief  employment  of  our  time,  as  long  as 
no  debate  is  allowed  here  except  that  which  involves  the  safety  of  sla- 
very, we  never  can  accomplish  a  radical  reduction  of  the  expenses  of 
the  Government. 

!No  permanent  or  substantial  reductions  can  be  made  without  an 
earnest  cooperation  between  the  executive  and  legislative  branches  of 
the  Government.  We  can  limit  appropriations,  but  we  cannot,  except 
by  the  process  of  impeachment,  prevent  the  misapplication  of  the  pub- 
lic money.  We  may  appropriate  for  officers  and  clerks,  but  if  the 
President  or  a  head  of  Department  will  detail  them  to  edit  a  party 
newspaper,  or  pension  them  for  party  services  by  appointing  them  to 
offices  w^hose  duties  they  never  perform,  we  cannot  prevent  it.  If  the 
head  of  each  Department  shall,  without  fear  or  favor,  administer  his 
Department,  applying  to  services  rendered  there  precisely  the  same 
rule,  as  to  fitness,  industry,  and  compensation,  as  would  be  applied  by 
any  prudent  private  citizen  in  his  own  affairs,  all  the  abuses  we  now 
hear  so  much  of  would  soon  cease. 

There  are  several  branches  of  expenditure  which,  in  my  judgment, 
Congress  could  by  wise  legislation  reduce  without  injury  to  the  public 
sen'ice  ;  and  as  I  do  not  desire  to  debate  the  several  appropriation  bills, 
I  propose  to  state  here  three  or  four  branches  of  expenditure  where 
material  reductions  might  be  made.  The  first  is  the  expenditures  in 
the  naval  service.  I  was  unfortunately  in  the  ininority  of  the  Com- 
mittee upon  the  appropriations  in  the  'Navy  bill.  I  have  no  doubt 
that  the  amount  recommended  to  be  appropriated  for  the  construction 
and  repair  of  vessels  could  be  decreased  fully  $,1,000,000  W'ith  benefit 
to  the  public  service.  In  the  bill,  we  have  reported  $3,500,000  for  the 
construction,  repair,  and  equipment  of  vessels,  in  accordance  with  the 
estimates  sent  in  by  the  Secretary  of  the  JSTavy.  I  am  opposed  to  that 
appropriation  ;  and  when  the  time  comes  for  the  consideration  of  that 
bill,  I  shall  move  an  amendment  to  it  in  that  respect.  Last  session 
Congress  adopted  some  substantial  reforms,  but  those  reforms  have  not 
been  regarded  in  the  present  IS^avy  bill. 

There  are  other  reforms  which  ought  to  be  made,  and  which  can 
only  be  effected  by  careful  legislation.  One  of  these  is  in  the  Post- 
Office  service.  The  deficiency  in  that  Department  is  now  $6,000,000 
annually ;  and  if  you  restore  the  postal  service  to  what  it  has  hereto- 
fore been,  as  is  now  asked,  you  will  have  a  deficiency  of  $8,500,000, 
and  that  sum  has  to  be  paid  out  of  the  public  Treasury.  I  have  no 
doubt  that  the  expenses  of  the  Postal  Department  could  be  paid  out  of 


ON  THE   MOKRILL  TARIFF  BILL.  7 

its  ordinaiy  receipts.  In  the  State  of  Ohio,  according  to  the  tabular 
statement  sent  to  ns  by  the  Department,  the  postal  service  costs  more 
tlian  the  receipts  ;  and  yet  there  are  contractors  in  that  State — men  of 
the  highest  respectability  and  responsibility — who  are  ready  to  engage 
to  perform  all  the  postal  service  in  Ohio  for  one  half  of  the  receipts. 
Why,  sir,  $3,243,974  is  paid  to  railroad  companies  for  transporting  the 
mails,  and  yet  these  very  mails  are  usually  carried  in  the  same  cars  in 
which  express  companies  carry  private  property  for  one  third  of  the 
expense.  If  this  mail  matter  was  now  carried  by  express  companies, 
route  agents  could  be  abolished.  If  the  whole  postal  service  was  let 
out,  as  it  should  be,  to  private  enterprise — to  express  companies — I 
have  no  doubt  that  the  Post-Office  business  would  be  better  managed, 
its  duties  better  performed,  and  a  large  amount  of  money  saved  to  the 
Government. 

As  a  general  rule,  I  take  it,  we  have  in  the  post  offices  an  inferior 
class  of  men — generally  partisan  editors,  who  have  to  be  rewarded  for 
their  services,  or  men  who  have  distinguished  themselves  by  devotion 
to  their  party  in  their  several  localities.  They  are  not  such  men  as  any 
private  company  of  individuals  would  employ  to  perform  the  same 
duties. 

You  also  upon  many  routes  require  coaches  to  be  run  for  the  benefit 
of  passengers,  while  there  is  no  connection  between  that  business  and 
the  carrying  of  mail  matter  for  distribution  among  the  people  of  the 
United  States ;  $3,134,094  is  paid  for  coach  service  alone.  I  have  no 
doubt,  if  the  tJnited  States  were  di^nded  into  postal  districts,  bounded 
as  far  as  practicable  by  State  lines,  and  the  business  of  carrying  all  mat- 
ter over  all  the  postal  routes  established  by  law,  and  its  delivery  at  the 
different  post  offices  were  let  out  under  a  judicious  management  of  the 
Department,  the  expenditures  would  be  decreased  at  least  to  the  amount 
of  the  deficit. 

There  is  another  matter  in  which  there  should  be  a  reform.  We 
are  appropriating  a  million  dollars  every  year  to  pay  the  ordinary  judi- 
cial expenses  of  the  Government  other  than  the  salaries  of  judicial 
officers ;  all  sorts  of  abuses  have  grown  up  in  the  disbursement  of  that 
fund.  I  need  not  speak  specially  of  the  matters  connected  with  the 
offices  of  your  district  attorneys  and  your  marshals  ;  for  all  gentlemen 
must  be  conversant  with  the  abuses  connected  with  those  places.  Men 
are  selected,  summoned,  and  kept  as  jurors  and  witnesses,  because  of 
their  political  opinions,  and  as  a  reward  for  political  service,  and  all 
sorts  of  constructive  fees  and  charges  are  made  and  allowed. 

But  I  am  taking  up  more  time  with  these  details  than  I  intended. 
If  we  could  only  manage  these  matters  as  intelligent  business  men  man- 
age theirs,  there  would  be  an  end  to  all  these  abuses.  This  we  cannot 
do,  because  parties  look  to  the  pul)lic  money  as  the  reward  of  party  suc- 
cess. If  the  Rej)ublican  party  be  charged  with  the  administration  of 
the  Government  next  year,  as  I  trust  it  will,  it  may  oppose  all  reform ; 
it  may  follow  the  example  of  the  Democratic  party,  in  parceling  out 
money  and  patronage  among  its  partisans,  without  regard  to  the  public 
service ;  but  if  so,  it  will  surely  lose  the  confidence  of  its  supporters. 
The  Republican  party  could  not  stand  for  a  moment,  if  it  were  con- 


8  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

victed,  as  tliis  Administration  lias  been,  of  tlie  corrupt  j)ractices  and 
abuses  disclosed  by  committees  of  tbis  House.  Tbe  difference  between 
tbe  Democratic  and  Republican  parties  is  tbat  tbe  disclosure  of  corrupt 
abuses  by  Democratic  officials  does  not  seem  to  excite  censure  or  induce 
removals,  while  tbe  Republican  party  has  shown  a  readiness  to  punish 
such  of  its  agents  as  have  violated  their  trust.  Many  of  these  abuses 
have  grown  out  of  the  necessity  imposed  upon  the  sectional  interest 
controlling  the  Democratic  party,  to  preserve  more  strength  in  the 
Northern  States ;  and  therefore  offices  are  given,  spoils  divided,  and 
newspapers  pensioned  and  edited  in  ISToi'thern  States.  These  coiTup- 
tions  and  abuses  have  gone  so  far  as  to  bring  discredit  and  rej)roach 
ujjon  popular  institutions. 

I  liave  shown,  Mr.  Chairman,  that  we  will  have  to  raise  sixty-five  to 
seventy  millions  for  the  next  fiscal  year.  Where  is  it  to  come  from  ? 
What  sources  of  revenue  have  we  ?  First,  we  have  the  public  lands. 
I  have  here  a  table  which  presents  some  singular  facts  in  regard  to 
these  lands.  In  the  year  1859  the  Government  disposed  of  13,540,262 
acres  of  public  lands,  from  which  it  received  $1,628,18Y,  or  about  a 
shilling  an  acre.  What  became  of  these  lands?  Why,  5,106,015  acres 
went  to  railroad  companies,  to  form  their  capital  stock ;  and  that,  not 
by  the  action  of  one  party,  but  of  all  parties.  I  am  glad  that  I  never 
voted  for  such  grants.  By  the  natural  operation  of  business,  all  these 
lands  go  into  the  hands  of  non-residents,  of  foreigners,  who  furnish 
railroad  iron  on  the  security  of  these  lands.  We  granted  as  swamp 
lands  1,530,966  acres,  and  in  bounty  land  warrants  2,941, TOO  acres. 
The  receipts  paid  into  the  Land  Office  were  but  $1,628,187,  while  the 
expenses  of  the  land  offices,  of  clerks,  registers,  and  receivers,  land  sur- 
veys, etc.,  amounted  to  $1,310,T58  ;  so  that  the  net  proceeds  of  the 
revenue  from  public  lands  was  but  $300,000. 

I  trust,  therefore,  that  the  idea  of  looking  to  the  public  lands  as  a 
source  of  revenue  will  be  at  once  abandoned.  Let  us,  by  a  wise  system 
of  preemption  laws,  or  by  a  homestead  bill,  invite  every  man  who  de- 
sires to  locate  on  Western  lands,  to  go  there  and  make  for  himself  a 
home.  That  is  the  only  honest,  the  only  noble,  the  only  manly  system 
of  disj>osing  of  the  public  lands.  There  is  no  reason  in  the  world  why 
Western  settlers  should  pay  the  Government  for  the  lands  they  occupy. 
They  were  of  no  value  to  the  Government  or  anybody  else  while  they 
lay  there  uncultivated.  It  is  the  labor  of  the  hardy  men  of  the  West- 
ern States  that  gives  to  these  lands  all  their  value  ;  and  yet  they  have 
paid  millions  on  millions  for  the  public  lands.  The  history  of  each 
new  State,  for  the  first  ten  years  of  its  existence,  has  been  a  struggle 
with  poverty  and  debt.  All  the  new  States  are  laden  down  with  debts 
contracted  in  paj'ing  for  the  ]3ublic  lands,  either  to  the  Government  or 
speculators.   It  is  idle  to  look  to  the  public  lands  as  a  source  of  revenue. 

To  show  you  how  so  distinguished  a  gentleman  as  the  Secretary  of 
the  Treasury  may  make  mistakQs  in  these  matters,  I  have  here  a  table 
which  presents  this  curious  state  of  facts.  Mr.  Secretary  Cobb  estima- 
ted the  receipts  from  public  lands  in  1858  at  $6,000,000.  They  turned 
out  to  be  $3,513,715  ;  and  the  great  bulk  of  that  was  paid  for  expenses. 
In  1859  he  estimated  the  receipts  from  public  lands  at  $5,000,000.    They 


ON  THE   MORRILL   TARIFF  BILL.  9 

turned  out  to-be  $1,756,087.  In  1860  he  estimated  them  first  at 
$5,000,000,  and  afterward  at  $2,500,000.  They  have  realized  and  will 
reahze  less  than  $2,000,000.  He  estimates  the  receipts  from  the  sales 
of  public  lands  in  1861  at  $4:,000,000.  In  my  judgment  they  will  not 
reach  $500,000,  because  I  hope  this  Congress  will  pass  a  preemption 
and  homestead  law,  and  that  will  settle  the  question  of  the  public  lands. 

The  miscellaneous  items  found  in  the  estimates  are  merely  receipts 
from  consuls,  fines,  forfeitures,  and  matters  of  that  hind,  which  amount 
to  about  $1,000,000.  The  only  practical  source  of  revenue  for  the 
l^ational  Government  is  duties  on  imports,  and  this  is  ample  and  exclu- 
sive. No  country  in  the  world  has  a  finer  source  of  revenue  than  this. 
"We  import  $1:00,000,000  worth  of  foreign  products  annually.  A  duty 
of  ten  per  cent,  on  that  would  amount  to  $10,000,000.  It  was  the 
boast  of  an  English  Chancellor  of  the  Exchequer  that  an  income  tax  of 
a  shilling  in  the  pound  would  produce  £10,000,000.  A  duty  of  ten 
per  cent,  on  our  imports  would,  at  the  present  rate  of  importation,  pro- 
duce $40,000,000 ;  and  importations  are  constantly  increasing.  All 
our  internal  governments — State,  municipal,  town,  and  village — are 
supported  by  direct  taxation ;  but  the  National  Government,  which 
protects  us  all  alike,  looks  naturally  to  the  duties  on  imports  for 
revenue.  If  required,  we  might  raise  a  revenue  from  this  source  of 
$100,000,000.  If  a  tax  of  twenty-five  per  cent,  were  imposed  on  im- 
portations, it  would  produce  that  sum.  I  trust  such  a  tax  will  not  be 
imposed,  because  it  is  unnecessary.  But  I  speak  of  it  as  an  ample 
source  of  income.  If  the  Government  were  reduced  to  narrow  straits, 
if  we  were  engaged  in  war,  or  if  anything  occurred  requiring  a  great 
drain  on  our  resources,  we  could  raise  that  amount  of  money  from  that 
source  of  revenue  alone,  without  resorting  to  direct  taxation. 

Gentlemen  talk  about  free  trade.  Sir,  no  project  for  free  trade  has 
ever  been  submitted  to  us  with  a  hope  of  passage.  I  believe  that,  if  a 
project  for  free  trade  were  to  be  carried  through  Congress,  it  would 
lose  every  member  who  voted  for  it  his  seat  in  the  House.  Why,  sir, 
the  people  of  this  country  would  not  allow  the  raising  of  $10,000,000 
by  direct  taxation.  If  you  were  to  put  upon  the  State  of  Ohio  a  direct 
tax  of  $1,000,000,  the  people  of  that  State  might  become  almost  as  bad 
as  the  people  of  some  of  the  Southern  States  now  are — they  would  al- 
most be  in  favor  of  secession.  The  only  questions  for  us  to  consider 
in  this  connection  are,  how  much  revenue  is  to  be  raised,  and  how  shall 
we  levy  it  'i  I  say  that  it  is  necessary  for  us  to  raise  $65,000,000. 
Will  the  present  tariff  furnish  that  amount  of  revenue  ?  Every  man 
answers  "  l^o."  The  Secretary  of  the  Treasury  estimates  that  the  tariff 
of  1857  will  yield  $60,000,000  for  the  next  fiscal  year.  Why,  sir,  to 
produce  a  revenue  of  $60,000,000  a  year,  under  the  tariff  of  1857,  it 
will  require  an  importation  of  $41:8,61:1,000.  If  the  prophecy  of  the 
Secretary  of  the  Treasury  should  turn  out  to  be  true,  it  would  bring 
about  a  commercial  revulsion.  To  establish  or  continue  a  tariff  which 
would  induce  an  importation  of  $500,000,000,  would  be  to  destroy  the 
manufactures  of  the  country.  It  would  limit  our  industrial  and  pro- 
ducing power  to  agriculture  alone,  when  every  one  knows  that  diversity 
of  pursuits  is  essential  to  the  prosperity  of  a  people. 


10  SPEECHES  AXD  REPORTS  OF  JOHN"  SHERMAN". 

To  import  tlie  amount  of  $448,000,000  ammally,  with  a  population 
of  thirty  million  inhabitants,  would  give  an  importation  of  about  $15 
per  head,  or  §75  per  family,  throughout  the  United  States,  Now,  the 
highest  rates  of  import  we  have  ever  had  prior  to  the  tariff  of  1857 
were  in  1836,  when  importations  reached  the  amount  of  $10.93  per 
head;  and  in  1857,  when  they  reached  $11.82  per  head;  and  it  is  a 
remarkable  fact  that  the  importations  of  these  two  years  preceded  the 
greatest  commercial  revulsions  of  our  time.  It  took  ten  years  of  econ- 
omy and  industry  to  recover  from  the  troubles  of  1836.  And  now, 
Mr.  Chairman,  if,  by  the  financial  policy  of  the  Secretary  of  the  Treas- 
ury, an  importation  of  $15  per  head  is  produced,  what  will  be  the  effect 
of  it  ?  All  experience  teaches  that  no  people  can  afford  to  pay  for 
foreign  productions  $15  per  head,  or  $75  per  family ! 

Four  hundred  and  fifty  millions  !  When  gentlemen  add  to  this 
amount  freight,  insurance,  the  loss  by  false  invoices,  by  forgeiy  and 
perjury — and  I  tell  them  that  under  our  present  ad  valorem  system 
there  is  a  great  deal  of  both — when,  in  addition,  you  take  into  compu- 
tation the  debt  due  in  this  country  to  Euro]3e,  by  States,  cities,  coun- 
ties, and  railroad  companies,  amounting  to  some  $500,000,000,  upon 
which  they  are  paying  an  interest  of  about  seven  per  cent.,  you  will 
have  an  amount  of  specie,  or  its  equivalent,  going  out  of  the  country, 
of  something  like  $550,000,000 — enough  to  bring  the  country  to  the 
verge  of  bankniptcy.  Therefore  it  is  that  I  say  that,  if  the  prophecy 
of  the  Secretary  of  the  Treasury  should  turn  out  to  be  true,  it  would 
prove  a  national  misfortune,  second  only  to  his  practice  of  living  ujDon 
the  public  credit. 

The  commercial  disaster  and  revulsion  in  England  and  Europe  in 
1857  appear  to  a  very  considerable  extent  to  have  been  caused  by  the 
wars  then  being  carried  on.  There  were,  however,  many  causes  which 
I  do  not  propose  now  to  go  into  a  discussion  of.  Om*  own  commercial 
revulsion  occurred  first,  when  our  ]3eoj)le  were  in  the  midst  of  jDrofound 
peace. 

Mr.  Chairman,  if  I  have  succeeded  in  what  I  have  desired,  I  have 
shown  that  the  tariff  of  1857  will  not  produce  a  sufficient  revenue  to 
meet  the  wants  of  the  Government,  u  ill  the  tariff  measure  now  pre- 
sented to  us — that  reported  from  the  Committee  of  Ways  and  Means 
— ^prove  sufficient  for  that  purpose  ?  In  my  judgment,  it  will.  I  do 
not  approve  all  the  details  of  that  bill ;  but,  in  my  opinion,  if  it  shall 
become  a  law,  it  will  prove  the  best  considered  tariff  that  has  ever  been 
presented  to  the  Congress  of  the  United  States.  It  is  the  result  of  two 
or  three  years'  deliberation  by  two  committees ;  and,  as  finally  agreed 
on,  it  is  based  upon  the  experience  of  the  country  for  the  last  fifty  or 
sixty  years.  It  changes  substantially  the  tariff  of  1857,  by  the  substi- 
tution, as  far  as  practicable,  of  specific  for  ad  valorem  duties ;  and  that 
change  is  in  accordance  with  the  views  and  wishes  of  the  President, 
though  not  in  accordance  with  those  of  the  Secretary  of  the  Treasury. 
By  this  change,  frauds  upon  the  revenue  of  the  Government  will  in  a 
great  measure  be  guarded  against.  Why,  sir,  when  in  Europe  last 
summer,  I  heard  alleged  frauds  upon  our  revenue  frequently  spoken 
of,  and  generally  admitted.     In  some  cases  the  grossest  frauds  are  prac- 


ON  THE  MORRILL  TARIFF  BILL.  It 

ticed  by  importations  by  foreign  firms  to  tlie  same  firms  under  otber 
names  in  this  country.  The  French  returns  of  exportations  to  tliis 
country  show  a  large  excess  over  our  own  returns.  Nearly  every 
French  and  English  house  has  agents  here,  to  whom  they  send  consign- 
ments of  goods,  pui-porting  to  have  been  sold  at  specified  rates,  upon 
which  ad  valorem  duties  are  paid  ;  but,  as  soon  as  they  go  into  the  or- 
dinary commerce  of  the  country,  the  prices  are  very  much  enhanced. 
With  specific  duties  equal  to  the  average  ad  valorem  rates,  the  revenues 
of  the  Government  would  be  increased  ten  ]3er  cent,  beyond  those  now 
received,  simply  by  the  suppression  of  fraud. 

As  nearly  as  I  can  ascertain,  I  think  the  bill  will  be  likely  to  pro- 
duce about  $65,000,000  of  revenue.  I  cannot,  of  course,  tell  precisely, 
since  the  Secretary  of  the  Treasury  did  not  come  within  $15,000,000 
or  $20,000,000.  In  1858  the  Secretary  of  the  Treasury  estimated  that 
the  receipts  from  customs  would  be  $60,000,000,  when  Ave  realized  but 
$38,671,242.  In  1859  he  estimated  that  the  receipts  would  be  $69,- 
500,000,  when  they  were  in  reality  but  $48,869,879,  showing  a  discrep- 
ancy of  only  $20,000,000.  For  1860  the  Secretary  has  approached  near 
the  mark.  For  the  current  fiscal  year  he  estimated  that  the  revenue 
would  be  $56,000,000.  "We  cannot  tell  what  it  will  be,  but  I  judge 
that  it  will  reach  $54,000,000.  I  cannot  say  exactly,  because  the  last 
quarter's  return  cannot  yet  be  known. 

From  the  nature  of  things,  neither  Mr.  Secretary  Cobb  nor  any 
other  Secretary  can,  under  a  system  of  ad  valorem  duties,  come  within 
millions  of  the  actual  receipts.  An  English  Chancellor  of  the  Ex- 
chequer would  consider  himself  disgraced  if  he  did  not  estimate  within 
£500,000  of  the  revenue,  because  there  the  duties  are  specific,  except, 
I  believe,  about  £188,000,  which  is  the  extent  of  the  ad  valorem 
duties.  It  is  the  very  nature  of  ad  valorem  duties  that  they  are  un- 
certain, and  they  can  never  be  estimated  by  any  Secretary  of  the 
Treasury,  however  intelligent.  Therefore  it  is,  I  say,  that  the  present 
bill  is  of  great  importance.  It  prevents  fraudulent  valuation.  It 
gives  our  own  importers  a  fair  chance  to  import  goods  and  to  compete 
with  the  foreigner.  Nearly  all  the  goods  imported  into  our  country 
are  by  foreigners.  The  working  details  of  this  bill  are  an  improve- 
ment on  the  tariff  bill  of  1857.  It  is  more  certain.  It  is  more  definite. 
It  gives  specific  duties.  The  tariff  of  1857  is  made  up  of  complex  and 
inconvenient  tables.  The  number  of  tables  is  too  great ;  and  in  some 
cases  the  same  article  is  in  two  tables.  Thus  flaxseed  comes  with  a 
duty  of  ten  per  cent. ;  and  yet  linseed,  the  same  thing,  yielding  the 
same  product,  the  same  oil,  is  admitted  duty  free. 

This  bill,  on  the  other  hand,  fixes  three  ad  valorem,  tables,  one  at 
ten  per  cent,,  one  at  twenty,  and  the  other  at  thirty.  There  are  a 
number  of  specific  duties,  and  then  there  is  the  free  list.  _  It  conforms 
to  our  decimal  currency,  and  the  duties  under  it  are  easily  calculated. 
There  can  be  but  little  dispute  about  home  and  foreign  valuation  under 
it.  It  will  yield  a  revenue  sufficient  to  pay  the  expenses  of  the  Gov- 
ernment. For  these  reasons,  it  is  obvious  it  ought  to  receive  the  sanc- 
tion of  law. 

I  might  rest  with  the  reasons  already  assigned,  but  there  is  another 


12  SPEECHES  AND  EEPOKTS   OF  JOHN  SHERMAN. 

reason  wliy  I  desire  to  have  tliis  bill  passed,  and  that  is,  because  it  is 
framed  upon  the  idea  that  it  is  the  duty  of  the  Government,  in  impos- 
ing taxes,  to  do  as  little  injury  to  the  industry  of  the  country  as  possi- 
ble ;  that  they  are  to  be  levied  so  as  to  extend  a  reasonable  protection 
to  all  branches  of  American  industry.  Every  President  of  the  United 
States,  from  Washington  to  this  time,  has  recognized  that  principle, 
including  Mr.  Buchanan.  I  admit  that,  as  a  general  rule,  duties  oper- 
ate to  a  greater  or  less  degree  as  a  tax  upon  the  people  ;  and  when 
the  duty  is  levied  upon  articles  we  cannot  produce,  the  people  have, 
directly  or  indirectly,  to  pay  that  tax.  But,  sir,  in  levying  that  tax, 
you  may  so  proceed  as  to  make  it  oppressive.  You  may  make  a  tariff 
to  raise  the  sum  of  $40,000,000,  and  break  up  every  industrial  interest 
of  the  country.  The  Committee  of  Ways  and  Means  report  a  tariff 
which  will  produce  $65,000,000,  and  will  do  no  injury  to  any  indus- 
trial interest.  I  believe  that  it  will  give  a  reasonably  fair  protection 
to  the  great  interests  of  agriculture,  manufacture,  and  commerce,  which 
lie  at  the  basis  of  the  prosperity  of  the  country. 

Mr.  Chairman,  there  is  no  reason  why  this  bill  should  be  considered 
a  party  measure.  It  is  not,  and  it  should  not  be  so  considered.  The 
present  tariff,  from  the  circumstances  attending  its  passage,  cannot 
fairly  be  charged  to  any  party  exclusively.  It  was  based  upon  a  state 
of  facts  that  in  six  months  passed  away.  At  that  time,  March  3, 
1857,  most  vacant  lots  in  Iowa  were  worth  about  $1,000. each.  If  a 
man  inquired  about  the  lot,  the  owner  would  raise  the  price  to  $1,500, 
and  if  two  men  inquired  about  it,  he  would  raise  it  to  $5,000.  At 
that  time  everything  was  inflated,  ]^orth,  South,  East,  and  West. 

In  six  months  the  bubble  burst.  In  1857,  when  the  tariff  law  was 
passed,  it  was  believed  it  would  produce  a  revenue  suflScient  for  the 
Government.  The  average  duty  which  has  been  realized  upon  all 
articles,  including  the  free  list,  is  fourteen  and  four  tentlis  per  cent., 
while  the  gentlemen  who  passed  the  act  believed  that  the  average  duty 
would  be  aijout  tw^enty  per  cent.  ;  so  that  it  turned  out  that  the  average 
duty  paid  did  not  amount  to  three  fourths  of  what  was  expected.  The 
tariff  has  involved  us  in  a  large  debt.  And  yet  the  Secretary  of  the 
Treasury,  and  gentlemen  on  the  other  side  of  the  House,  do  not  seem 
to  be  willing  that  a  sufficient  amount  of  money  shall  be  raised  for 
Government  purposes  by  wise  and  well-considered  legislation.  It  is 
strange  that  an  Administration  that  has  run  the  Government  into  debt 
at  the  rate  of  $17,000,000  a  year  should  resist  an  increase  of  revenue, 
at  least  to  the  extent  of  meeting  the  expenses  of  the  Government.  It 
will  go  out  on  the  Itli  of  March  next,  having  loaded  down  its  successor 
with  a  debt  of  $50,000,000  or  $60,000,000,  without  passing  a  single  law 
in  the  interest  of  the  people  ;  without  providing  revenue  to  meet  the 
expenses  of  the  Government,  with  a  general  load  of  discredit,  almost, 
if  not  entirely,  without  precedent  in  our  history. 

[The  bill  passed  the  House,  but  the  Senate  postponed  its  consider- 
ation until  the  next  session.] 

The  bill  passed  tlie  House,  but  the  Senate  postponed  its  consideration  until 
the  next  session. 


ON  THE  ISSUE   OF  TREASURY  NOTES.  13 

ON  THE  ISSUE  OF  TEEASTJRY  Is'OTES. 

HOUSE   OF  REPRESENTATIVES,   DECEMBER  10,   ISGO. 

Authority  to  convert  the  Treasury  notes  of  1857  into  bonds  having  fifteen 
years  to  run  was  given  by  an  act  approved  June  22,  1860 ;  and  Congress  adjourned 
its  session  without  taking  any  steps  to  strengthen  the  Treasury  either  by  loans, 
increase  of  taxation,  or  reduction  of  expenses. 

On  the  3d  of  the  following  December  the  second  session  of  this  Congress  con- 
vened. By  the  election  of  Mr.  Lincoln  to  the  Presidency  the  country  had  been 
thrown  into  an  intense  excitement,  and  political  tumult  was  already  swelling 
throughout  the  South. 

On  the  4th  Mr.  Buchanan  transmitted  to  Congress  his  last  message,  in  which  he 
declared  that,  while  Congress  possessed  many  means  of  preserving  the  Union  by 
conciliation,  the  sword  was  not  placed  in  their  hand  to  preserve  it  by  force. 
Accompanying  this  message  was  the  report  of  Secretary  Cobb,  showing  the  debt 
on  June  30,  1860,  to  be  $64,769,703,  and  a  balance  in  the  Treasury  of  only 
$3,629,206. 

On  the  10th  Mr.  Cobb  resigned  as  Secretary  of  the  Treasury — "his  duty  to 
Georgia  required  it";  and  on  the  12th  Philip  F.  Thomas  of  Maryland  was  ap- 
pointed his  successor. 

Since  the  beginning  of  the  fiscal  year  the  current  receipts  had  been  less  than 
the  expenditures,  and,  while  the  small  balance  in  the  Treasury  was  diminishing, 
there  stiU  remained  unpaid  appropriations  to  the  amount  of  more  than  $10,000,000. 
In  this  condition  of  affairs,  Mr.  Sherman,  on  the  10th,  reported  from  the  Com- 
mittee of  Ways  and  Means  a  bill  authorizing  an  issue  of  Treasury  notes,  not  to 
exceed  at  any  time  the  amount  of  $10,000,000,  and,  upon  reporting  the  bill  to  the 
House,  made  this  speech : 

]Me.  Speaker  :  It  is  not  my  purpose  to  engage  in  this  debate,  but  it 
is  necessary  to  pass  to-day  a  Treasury-note  bill  in  order  to  relieve  the 
pressing  necessities  of  the  Government.  I  hope,  therefore,  that,  with.- 
out  objection,  we  may  put  upon  its  passage  a  bill  for  that  purjDOse 
which  I  am  instructed  to  report  from  the  Committee  of  Ways  and 
Means. 

The  House  will  perceive  that  the  bill  now  before  us  is  a  mere  tem- 
porary expedient  to  provide  for  tbe  pressing  demands  upon  the  Treas- 
ury. Most  of  the  members  are  aware  that  the  Government  has  not 
been  able  to  pay,  for  the  last  week  or  two,  our  own  salaries,  and  many 
other  demands  at  'New  York  and  other  places.  The  revenues  have 
fallen  short  during  the  last  week,  amounting,  I  believe,  to  but  8250,- 
000.  Most  of  the  revenues  are  now  paid  in  Treasury  notes.  This  bill 
only  provides  a  mode  of  paying  outstanding  Treasury  notes,  the  amount 
of  which  now  outstanding  is  indeed  in  excess  of  the  amount  proposed 
to  be  authorized ;  so  that  the  bill  provides  for  no  increase  of  the  public 
debt. 

I  might  here  rest  what  I  have  to  say  about  the  bill ;  but  it  is  proper 


14  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

for  me  to  add  that  it  will  be  necessary  for  the  House  very  soon  and 
promptly  to  consider  some  other  measures  of  rehef.  On  the  1st  of 
July  last  there  was  in  the  Treasury  $3,029,206,  a  balance  entirely  too 
small  to  carry  on  the  ordinary  operations  of  the  Treasury.  During  the 
first  quarter  of  the  fiscal  year  the  expenditures  exceeded  the  receipts 
some  two  hundred  thousand  dollars,  and  there  are  now  unj)aid  appro- 
priations to  the  amount  of  ten  or  fifteen  millions. 

The  recei2)ts  during  the  current  quarter  will  probably  fall  short  sev- 
eral millions  of  the  necessary  expenditures ;  and  if  we  are  to  judge 
from  the  temper  of  the  times,  the  distress  in  the  country,  and  the  po- 
litical difficulties  that  surround  us,  it  is  probable  that  during  the  remain- 
ing three  quarters  of  this  fiscal  year  there  will  be  a  deficiency  of  from 
ten  to  fifteen  million  dollars.  This  is  not  the  fault  of  this  House,  but 
it  is  the  fault  of  our  revenue  laws.  For  the  last  three  years  we  have 
been  living  upon  the  credit  of  the  Government.  I  have  a  paper  before 
me  showing  that  since  the  1st  of  July,  1S5T,  we  have  gone  into  debt  to 
the  extent  of  nearly  fifty  million  dollars.  In  the  fiscal  year  ending 
30th  June,  1858,  the  deficiency,  or  excess  of  payments  over  revenue, 
amounted  to  $27,162,188.  In  the  next  fiscal  year  it  amounted  to  $15,- 
902,932.  During  the  last  fiscal  year  it  amounted  to  the  sum  of  $6,725,- 
WOO ;  and,  according  to  the  statement  already  made,  during  the  present 
fiscal  year  the  deficiency  has  been  not  less  than  from  fifteen  to  twenty 
million  dollars. 

I  have  prepared  a  statement  which  shows  at  a  glance  the  changed 
condition  of  the  state  of  our  finances  in  three  years. 

On  the  1st  day  of  July,  185Y,  the  entire  debt  of  Government,  after  deducting  the  balance 
then  in  the  Treasury,  was  $11,350,272.63,  as  follows  : 

Public  debt $^9,060,386  90 

Balance  in  Treasury 1'7,'710,114  27 

$11,350,272  63 

On  the  1st  day  of  July,  1858,  the  amount  of  the  entire  funded  debt  was $25,155,977  66 

Treasury  notes 19,754,800  00 

Total  debt $44,910,777  66 

Balance  in  Treasury 6,398,316  10 

$38,512,461  56 

On  the  1st  day  of  July,  1859,  the  amount  of  the  entire  funded  debt  was $43,601,037  69 

Treasury  notes 15,153,661  64 

Total  debt $58,754,669  33 

Balance  in  Treasury 4,339,275  54 

$54,415,393  79 

On  the  1st  day  of  July,  1860,  the  amount  of  the  entire  funded  debt  was $45,079,203  00 

Treasury  notes 19,690,500  00 

Total  debt $64,769,703  00 

Balance  in  Treasury 3,629,206  00 

$61,140,497  00 

It  is  manifest,  therefore,  that  the  House,  in  order  to  preserve  the 


ON  THE  ISSUE   OF  TEEASURY   NOTES.  15 

credit  of  the  Government,  ought  to  make  some  change  in  the  revenue 
laws,  or  decrease  the  expenditures.  We  must  either,  by  a  bold  stroke, 
reduce  the  expenditure  to  fifteen  or  twenty  milKon  dollars  or  contract 
new  loans  or  raise  new  revenues.  The  bill  now  pending  in  the  Senate, 
I  need  not  inform  the  members  of  the  House,  authorizes  a  loan  of  some 
twenty  millions,  and  in  addition  to  that  provides  for  increasing  the 
revenue.  If  that  bill  should  pass,  and  the  present  disturbed  political 
condition  of  the  country  should  be  healed,  the  annual  revenue  would 
amply  cover  our  expenditures  upon  the  basis  of  existing  laws  and  sala- 
ries ;  but  with  the  present  difficulties,  and  with  our  present  revenue 
laws,  it  is  manifest  that  this  bill  will  not  be  the  last  loan  bill  or  the  last 
Treasury-note  bill  that  the  Committee  of  Ways  and  Means  will  have  to 
report  to  the  House.  The  provisions  of  the  bill  are  similar  to  those  of 
the  act  of  1857.  It  simply  authorizes  a  temporary  loan,  and  provides 
that  that  part  of  the  loan  authorized  by  the  act  of  the  22d  of  June  last 
not  already  contracted  for  shall  be  applied  to  the  redemption  of  out- 
standing Treasury  notes.  This  is  all  the  statement  that  I  desire  to 
make. 

The  bill,  after  some  modification,  became  the  act  of  December  17,  1860,  and 
the  Secretary  immediately  advertised  the  loan.  Of  the  amount  authorized,  bids 
were  received  for  $10,010,000,  at  par,  with  interest  from  six  to  twelve  per  cent, 
per  annum.  Additional  offers  were  received  at  interest  varying  from  fifteen  to 
thirty-six  per  cent.,  but  were  refused. 


LETTER  OF  JOHN  A.  DIX. 
CONDITION   OF  THE  TEEASUEY,  JANUAEY  18,  1861. 

On  the  2d  of  January,  1861,  Mr.  Sherman  addressed  inquiries  to  the  Secretary 
of  the  Treasury  concerning  the  debt,  and  also  the  condition  and  resources  of  the 
Treasury.  On  the  11th  Secretary  Thomas  resigned,  differing  from  the  President 
and  the  members  of  the  cabinet,  especially  in  reference  to  the  authority  to  enforce 
the  collection  of  customs  at  the  port  of  Charleston ;  and  on  the  same  day  John  A. 
Dix  of  New  York  was  appointed  his  successor.  On  the  14th  Mr.  Sherman  called 
his  attention  to  the  unanswered  inquiries,  and  on  the  18th  the  following  reply  was 
made. 

Treasury  Department,  January  18,  1861. 

Sir  :  I  have  the  honor  to  acknowledge  your  letter  of  the  14th  instant,  asking 
my  attention  to  the  letter  of  the  2d  instant  to  my  predecessor ;  and  beg  leave  to 
answer  its  several  points  of  inquiry  in  their  order. 

"  What  amount  of  accounts,  debts,  or  claims  against  the  Government  has  been 
allowed  and  passed  by  the  proper  accounting  officers,  which  remain  unpaid?  " 

In  reply  to  this  inquiry,  I  beg  leave  to  state  that,  except  sundry  small  claims 
presented  and  settled  through  the  Department  of  the  Interior,  amounting  to  $33,- 
152.94,  and  certain  claims  presented  and  allowedthrough  this  department,  amount- 
ing to  $82,163.54,  all  claims  duly  allowed  and  passed  by  tlie  proper  accounting 
officers  have  been  satisfied  by  warrants  on  the  Treasurer;  and  that  officer  has  re- 
mitted his  drafts  on  the  various  depositories  to  pay  the  same.  Witliin  the  last  few 
days  the  amount  of  over-due  Treasury  notes  presented  for  redemption  has  exceeded 
the  power  of  the  Treasurer  to  place  drafts  in  payment  on  the  Assistant-Treasurer 


16  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

at  New  York,  where  the  holders  desired  the  remittances  to  be  made ;  and  an  ac- 
cumulation of  warrants,  to  the  amount  of  about  $430,000,  has  occurred  on  this 
account  in  the  Treasurer's  hands,  which  he  has  been  unable  to  pay. 

"What  amount  of  salaries,  compensation  and  other  dues,  not  embraced  in  the 
foregoing,  which  are  due  and  payable  on  or  before  the  1st  day  of  January,  1861?  " 

In  reply  to  this  inquiry,  I  beg  leave  to  state  that  for  all  the  salaries  paid  direct- 
ly from  the  Treasury  warrants  have  been  drawn  on  the  Treasury  and  drafts  re- 
mitted accordingly.  But  it  is  proper  to  suggest  that  officers  and  soldiers  of  the 
army,  officers,  seamen,  and  marines  in  the  navy,  and  a  large  portion  of  the  persons 
employed  in  the  civil  offices  of  the  United  States,  are  not  paid  directly  from  the 
Treasury,  but  through  disbursing  officers,  to  whom  money  is  advanced  from  time  to 
time  for  that  purpose,  as  well  as  for  other  authorized  charges,  iipon  the  requisition 
of  the  proper  Department.  Requisitions  from  the  Secretary  of  War  in  favor  of  dis- 
bursing officers  of  that  Department,  amounting  to  $912,905.90;  from  the  Secretary 
of  the  Navy,  in  favor  of  disbursing  officers  of  that  Department,  amounting  to  $615,- 
487.21.;  from  the  Secretary  of  the  Interior,  in  favor  of  disbursing  officers  of  that 
Department,  amounting  to  $124,866.87;  and  from  the  proper  authorities  of  the 
Treasury  Department,  amounting  to  $255,435.07,  in  favor  of  disbursing  officers  and 
contractors;  making  an  aggregate  of  $1,908,695.05,  for  which  warrants  have  not 
been  issued. 

The  periods  when  the  sums  thus  called  for  were  actually  due  and  payable  can, 
only  be  ascertained  by  special  investigation  into  the  several  cases ;  but  it  is  sup- 
posed that  the  whole  amount  was  due  on  or  before  the  1st  instant.  Beside  these 
requisitions  received  by  this  Department,  it  is  understood  that  the  War  and  Navy 
Departments  have  calls  for  large  amounts  for  which  their  requisitions  have  been 
delayed  on  account  of  the  exhausted  condition  of  the  Treasury. 

Besides  these  claims,  the  bounties  payable  by  law  to  vessels  employed  in  the 
cod  fishery  during  the  last  season  were  due  and  payable  on  the  31st  ultimo.  De- 
tailed estimates  of  these  bounties,  so  far  as  proofs  have  been  presented  to  the  col- 
lectors of  the  several  districts,  have  been  received,  showing  the  amount  due  and 
payable  on  that  day  to  have  been  $447,201.89.  This  Department  has  been  unable 
to  make  any  provision  for  paying  these  bounties,  for  want  of  sufficient  money  in 
the  Treasury.  Adding  this  sum  to  the  foregoing,  the  aggregate  of  sums  due  and 
payable  on  or  before  the  1st  instant  may  be  taken  to  be  $2,855,896.94. 

"  The  facts  connected  with  the  negotiation  of  the  recent  sale  of  Treasury  notes, 
and  how  the  proceeds  thereof  were  applied  ?  " 

I  In  answer  to  this  inquiry,  I  have  the  honor  to  state  that,  under  the  notice 
issued  on  the  18th  ultimo,  inviting  proposals  for  the  exchange  of  five  millions  of 
dollars  for  Treasury  notes,  offers  at  twelve  per  cent,  interest  or  less  were  made 
only  to  the  amount  of  $1,831,000.  Offers  to  exchange  $465,000,  for  notes  bearing 
interest  at  rates  ranging  from  fifteen  to  thirty-six  per  cent.,  were  also  received. 

The  offers  at  twelve  i^er  cent,  and  less  were  accepted ;  those  above  that  rate 
were  rejected. 

Previously  to  the  issue  of  the  notice,  the  Assistant  Treasurer  at  New  York 
was  informed  that  the  exchange  of  five  millions  was  the  smallest  amount  that 
would  enable  the  Department  to  protect  the  public  credit  by  the  redemption  of 
Treasury  notes  falling  due  and  paying  interest  on  the  1st  of  January,  1861,  on  the 
stocks  of  the  United  States.  From  the  preliminary  deposits  of  one  per  cent,  made 
with  him,  under  the  terms  of  the  notice,  that  officer  became  aware  that  not  one 
half  of  the  sum  required  had  been  offered  in  New  York  ;  and  he  probably  endeav- 
ored to  induce  the  banks  and  capitalists  of  that  city  to  exchange  the  residue  of  the 
sum  called  for  at  twelve  per  cent,  interest,  which  was  the  rate  at  which  the  bulk 
of  the  offers  had  been  made. 

Immediately  after  the  decision  of  the  Department  on  those  offers  had  been 
made,  that  officer  advised  the  Department  that  certain  parties  would  take  the  resi- 
due, through  the  Bank  of  Commerce,  at  twelve  per  cent.  This  proposition  was 
accepted,  on  condition  that  the  amount  required  to  make  up  the  five  millions  should 
be  deposited  without  delay.  The  whole  amount  has  been  applied  to  the  payment 
of  over-due  Treasury  notes  and  other  pressing  demands  on  tlie  Treasury. 

Presuming  that  you  desired  only  the  material  facts  of  this  negotiation,  I  have 
not  sent  the  correspondence  in  regard  to  the  offers  for  Treasury  notes,  or  an  ex- 


ON  THE  ISSUE  OF  TREASURY  NOTES.  17 

hibit  in  detail  of  the  receipts  and  payments  by  the  Assistant  Treasurer  at  New 
York,  from  the  28th  ultimo,  when  the  proposals  for  the  Treasury  notes  were 
awarded.     Should  these  particulars  be  desired,  they  will  be  cheerfully  furnished. 

Your  letter  further  asks  "  whether  any  defalcation  of  either  of  the  present 
depositories  of  public  money  is  known  to  the  Department  ?  " 

In  answer  to  this  inquiry,  I  have  the  honor  to  state  that,  so  far  as  is  known 
to  this  Department,  the  depositories  have  promptly  paid  the  Treasurer's  drafts  on 
them,  and  no  defalcation  or  refusal  of  the  present  depositories  has  been  reported. 

"  The  receipts  of  the  Government  from  all  sources,  from  the  date  of  the  last 
annual  report  of  the  Secretary  of  the  Treasury  up  to  January  1,  18G1,  so  far  as 
known  to  the  Department  ?  " 

I  beg  leave  to  suggest  that  the  date  up  to  which  the  receipts  into  the  Treasury- 
are  given  in  the  last  annual  report  of  this  Department  was  the  30th  of  September 
last,  being  the  close  of  the  first  quarter  of  the  current  fiscal  year. 

Tlie  aggregate  receipts  from  all  sources,  during  the  quarter  from  October  1 
to  December  31,  1860,  so  far  as  returns  have  been  received,  appears,  by  the  Treas- 
urer's exhibit  of  current  receipts,  to  have  been  $17,181,783.98, 

"  What  amount  of  means,  in  addition  to  the  Treasury  notes  authorized  by  law 
and  the  current  revenue,  will  be  required  to  pay  outstanding  current  and  accruing 
dues  before  the  close  of  the  current  fiscal  year?  " 

The  first  element  for  an  answer  to  this  inquiry  is  the  amount  required  to  be 
paid  for  carrying  on  the  public  service  during  the  remainder  of  the  current  fiscal 
year.  To  ascertain  this  amount,  we  must  refer  to  the  estimated  expenditures  for  the 
various  branches  of  the  public  service  during  the  three  quarters  of  the  fiscal  year 
from  October  1,  1860,  to  June  30,  1861,  as  stated  in  the  last  annual  report  of  this 
Department.  They  will  be  found  on  page  3,  and  are  $46,935,232.58.  From  this 
sum  deduct  the  amount  expended  during  the  quarter  ending  December  31,  1860, 
which,  by  the  Register's  statement,  is,  exclusive  of  Treasury  notes,  $12,069,107.95, 
leaving  the  sum  of  $34,866,124.63  to  be  provided  for,  besides  the  Treasury  notes 
maturing  on  and  before  June  30,  1861 :  which,  on  the  1st  day  of  January,  1861, 
amounted  to  $11,795,600,  making  the  amount  required  to  be  paid  from  January  1 
to  June  30,  1861,  $46,661,724.63. 

Of  these  outstanding  Treasury  notes  there  have  been  redeemed,  between  the 
1st  and  14th  of  January  instant,  $2,584,200,  reducing  the  current  liabilities  of  the 
Treasury  to  that  extent. 

Tlie  amount  required,  therefore,  to  meet  the  outstanding  current  and  accruing 
dues  before  the  close  of  the  current  fiscal  year,  besides  any  additional  charges  on 
the  Treasury  created  by  legislation  during  the  present  session  of  Congress,  is 
$44,077,524.63. 

The  existing  means  for  meeting  tliis  amount  are  : 

1.  The  balance  of  the  loan  of  $21,000,000  authorized  by  act  of  June  22,  1860, 
for  redeeming  Treasury  notes.  Of  this  loan  $7,022,000  only  has  been  negotiated 
and  paid  into  the  Treasury,  leaving  $13,978,000  to  be  realized  from  that  source. 
Should  the  present  disturbed  condition  of  the  country  continue,  some  modification 
of  the  terms  prescribed  by  the  act  may  possibly  be  necessary  to  make  the  residue 
of  this  loan  available. 

It  may  not  be  improper  to  add  that  when  the  estimates  before  referred  to  were 
submitted,  no  difficulty  was  apprehended  in  meeting  the  outstanding  Treasury  notes, 
as  fast  as  they  fell  due,  by  the  proceeds  of  this  loan.  As  this  resource  has  failed, 
to  the  extent  of  the  above  stated  balance  of  $13,978,000,  to  preserve  the  credit  of 
the  United  States,  it  has  become  indispensable  to  pay  these  notes  out  of  the  revenue 
from  other  sources.  During  the  last  quarter  about  eight  millions  of  Treasury  notes 
were  redeemed ;  which,  with  the  two  and  a  half  millions  redeemed  since  the  1st 
instant,  make  ten  and  a  half  millions.  The  amount  received  from  the  loan,  being 
a  small  fraction  above  seven  millions,  threw  upward  of  three  and  a  half  millions  of 
these  notes  on  the  other  resources  of  the  Treasury  for  redemption.  This  is  one  of 
the  principal  causes  of  the  delay  and  diflSculty  which  have  recently  existed  in  pro- 
viding for  other  demands  of  the  public  service. 

2.  Receipts  from  the  ordinary  sources  of  revenue.  The  Annual  Report  of 
tills  Department  estimated  the  receipts  from  cttstoms  during  the  three  quarters  of 
the  current  fiscal  year  from  October  1,  1860,  to  June  30,  1861,  at  $40,000,000. 

2 


18  SPEECHES  AND   REPORTS   OF  JOHN  SHERMAN. 

Probably,  in  view  of  the  great  abundance  of  exportable  products,  had  the  affairs  of 
the  country  continued  in  their  usual  condition,  this  estimate  would  have  been  re- 
alized. In  October  last  the  prospect  justified  very  liberal  estimates  of  the  consump- 
tion of  dutiable  merchandise.  Since  that  time  so  sudden  and  great  a  change  has 
occurred  in  the  financial,  commercial,  and  political  relations  of  the  several  States  as 
to  render  any  well-grounded  estimate  of  the  amount  of  dutiable  merchandise  which 
will  be  entered  for  consumption  before  the  30th  of  June,  1861,  entirely  imprac- 
ticable. Although  the  amount  of  merchandise  entered  for  consumption  will 
for  long  periods  of  time  be  governed  by  permanent  causes,  it  may  for  short 
periods  depend  almost  entirely  on  public  confidence,  which  fluctuates  with  every 
disturbance  of  the  ordinary  political  or  commercial  condition  of  the  country.  This 
has  been  strikingly  exemplified  in  the  revenue  from  customs  during  the  quarter 
ending  December  31,  1860.  Instead  of  amounting  to  fifteen  millions,  as  was  reason- 
ably and  confidently  expected  in  October,  the  returns,  so  far  as  received,  indicate 
that  it  fell  below  eight  millions.  At  the  port  of  New  York  alone  more  than  six 
millions  of  the  merchandise  imported  during  the  single  month  of  December,  instead 
of  being  entered  for  consumption,  were  placed  in  warehouse,  and  nothing  was  re- 
alized upon  them  to  the  Treasury. 

So  greatly  is  the  amount  of  our  customs  revenue  dependent  on  political  and 
monetary  changes,  on  which  at  the  present  time  no  reliable  calculation  can  be 
made,  that  the  receipts  from  this  source  during  the  remainder  of  the  fiscal  year 
must  be,  so  far  as  regards  this  department,  the  subject  of  conjecture.  At  present, 
from  all  the  light  that  I  am  able  to  obtain,  it  would  seem  that  sixteen  millions  will 
be  a  liberal  estimate  for  the  revenue  from  customs  between  January  1  and  June  30, 
1861,  This,  with  the  amount  received  from  that  source  during  the  quarter  ending 
December  31,  1860,  will  make  more  than  one  half  the  aggregate  receipts  estimated 
in  the  annual  report. 

The  receipts  from  the  public  lands  for  the  three  quarters  from  October  1,  1860, 
to  June  30,  1861,  were  estimated  in  the  Annual  Report  at  $2,250,000.  So  far  as 
returns  have  been  received  for  the  quarter  ending  December  31,  1860,  the  amount 
realized  from  that  source  appears  to  have  been  about  $250,000.  Should  no  chauge 
be  made  during  the  present  session  of  Congress  in  the  existing  laws  in  regard  to 
acquiring  public  lands  by  individuals,  the  amount  that  may  be  expected  from  that 
source  may,  between  January  1  and  June  30,  1861,  reach  $1,000,000.  This  would 
be  one  half  of  the  amount  estimated  in  the  Annual  Report,  and  at  this  time  will 
probably  be  regarded  as  a  large  estimate  from  that  source,  and  to  be  realized  only 
under  favorable  circumstances. 

The  receipts  from  miscellaneous  sources  for  the  three  quarters  between  Octo- 
ber 1,  1860,  and  June  30,  1861,  were  estimated  in  the  Annual  Report  at  $750,000. 
For  the  quarter  ending  31st  ultimo,  these  receipts  fell  short  of  $200,000,  and  cannot 
be  expected  to  realize  more  than  $400,000  during  the  remainder  of  the  current  fiscal 
year  to  June  80,  1861. 

Under  the  views  herein  set  forth,  the  aggregate  receipts  from  ordinary  sources 
of  revenue,  during  the  half  year  from  January  1  to  June  30,  1861,  may  be  thus 
stated : 

From  customs $16,000,000  00 

From  public  lands 1,000,000  00 

From  miscellaueous  sources 400,000  00 

$17,400,000  00 
AddinE^  to  these  the  balance  of  Treasury  notes,  authorized  by  Act  of  December 

IV,  I860 5,000,000  00 

crakes  the  amount  of  means  for  the  half  year _ $22,400,000  00 

The  estimated  demands  on  the  Treasury,  under  existing  laws,  during  the  half 
year,  as  before  stated,  including  the  redemption  of  $9,211,400  of  Trea- 
sury notes,  is 44,077,524  63 

Showing  the  amount  required,  in  addition  to  the  five  millions  of  Treasury 
notes  and  the  current  revenue,  to  »»ay  outstanding,  current  and  accruing 
dues  before  the  close  of  the  current  fiscal  year,  to  be $21,677,524  63 


ox  THE  LOAX  OF  TWENTY-FIVE  MILLION"  DOLLARS.  19 

This  amount  may  be  reduced  to  $7,689,524.63,  if  the  balance  of  the  loan  author- 
ized by  act  of  June  22,  1860,  being  $13,978,000,  should  be  made  available  to  the 
Treasur3\ 

Allow  me  to  state  tbat  the  materials  of  tbis  letter  were  prepared  under  the 
direction  of  my  predecessor;  and  the  presentation  of  them  to  you  in  their  present 
form  is  among  my  first  official  acts. 

Before  closing  tbis  communication,  I  wish  to  call  your  attention  to  the  fact  tbat 
there  are  deposited  witb  twenty-six  of  the  States,  for  safe  keeping,  over  twenty- 
eight  millions  of  dollars  belonging  to  the  United  States,  for  the  repayment  of  which 
the  faith  of  these  States  is  pledged  by  written  instruments  on  file  in  this  Department. 

The  annual  statements  of  receipts  and  expenditures  for  tbe  year  ending  June 
30,  1860,  represents  tbis  amount  as  a  part  of  the  "balance  in  tbe  Treasury"  on  tbat 
day.  It  was  subject  when  deposited  to  the  draft  of  the  Secretary  of  the  Treasury, 
whenever  required  "  for  the  purpose  of  defraying  any  wants  of  tbe  public  treasury," 
as  will  be  seen  by  tbe  13th  section  of  tbe  act  of  June  23,  1836,  entitled,  ''  An  Act  to 
regulate  tbe  deposits  of  the  public  money;  "  but  by  tbe  act  of  Oct.  2, 1837,  chap.  I., 
tbe  deposit  remains  with  these  States  "  until  otherwise  directed  by  Congress." 

I  refer  to  tbis  financial  resource  as  an  available  one,  should  tbe  public  exigencies 
demand  it.  It  is  not  doubted  tbat  tbe  greater  portion  of  tbe  amount  so  deposited 
would  be  promptly  and  cheerfully  repaid,  should  an  exigency  arise  involving  the 
public  honor  or  safety.  If,  instead  of  calling  for  these  deposits,  it  should  be  deemed 
advisable  to  pledge  them  for  tbe  repayment  of  any  money  tbe  Government  might 
find  it  necessary  to  borrow,  a  loan  contracted  on  sucb  a  basis  of  security,  superadding 
to  tbe  plighted  faitb  of  tbe  United  States  tbat  of  tbe  individual  States,  could  hardly 
fail  to  be  acceptable  to  capitalists. 

I  have  the  honor  to  be 

Your  obedient  servant, 

JOHN  A.  DIX. 
Secretary  of  Treasury. 

Hon.  John  Sherman,  Chairman  Committee  of  Ways  and  Means,  ^ 

House  of  Kepresentatives. 


ON  THE  LOAK  OF  TWEKTY-FIYE    MILLION  DOLLAES. 

IN  THE  HOUSE  OF  REPRESENTATIVES,  FEBRUARY  2,  1861. 

Ok  tbe  2d  of  February  Mr.  Sherman  introduced  a  bill  aatborizing  a  loan  of 
$25,000,000,  to  pay  ordinary  expenses  and  to  redeem  Treasury  notes,  the  stock  to 
bear  interest  not  to  exceed  six  per  cent,  per  annum,  and  to  be  redeemed  in  not  less 
than  ten  nor  more  than  twenty  years.  The  bill  coming  before  tbe  House  for  con- 
sideration, February  2,  1861,  Mr.  Phelps  spoke  briefly  in  opposition  to  it,  and  Mr. 
Sherman  replied  as  follows : 

Mk.  Speaker  :  I  am  somewliat  surprised  that  my  friend  from  Mis- 
souri should  oppose  a  measure  intended  to  pay  off  the  existing  debts 
made  by  this  Administration.  I  have  here  a  communication  from  the 
Secretary  of  the  Treasury,  stating  that  there  will  be  an  actual  deficit 
in  the  revenue  of  $21,677,524 ;  the  deficiency  bill  appropriates  between 
two  and  three  million  dollars  ;  so  that  there  is  an  admitted  deficiency 
of  about  $24,000,000  to  be  now  provided  for.  The  amount  in  t'ne 
Treasury  on  the  first  day  of  January  was  $2,233,220,  while  it  requires 
at  least  $5,000,000  in  the  Treasury  to  carry  on  the  daily  operations 


20  SPEECHES  AND  KEPORTS  OF  JOHN  SHEPvMAN. 

of  the  Treasury  Department.  So  that  a  deficieiiej  of  not  less  than 
$25,000,000  exists,  now  to  be  provided  for  by  loan.  I^ow,  Mr.  Speaker, 
under  these  circumstances,  while  the  Opposition  side  of  the  House 
brings  forward  a  bill  to  place  in  the  power  of  the  Secretary  of  the 
Treasury  money  to  pay  off  all  the  existing  liabilities,  it  seems  strange  to 
me  that  any  opposition  should  come  from  the  other  side  of  the  House. 
All  of  this  money  will  be  required  to  pay  off  existing  liabilities.  By 
the  law  of  the  22d  of  June  last,  we  authorized  a  loan  of  $20,000,000. 
A  portion  of  that  loan  was  taken.  The  balance  could  not  be  sold  under 
the  terms  of  the  law.  In  last  December,  at  the  pressing  instance  of 
Mr.  Secretary  Cobb,  we  authorized  the  issue  of  $10,000,000  Treasmy 
notes,  with  the  specific  pledge  of  the  balance  of  the  loan  of  June  22d 
for  the  redemption  of  these  Treasury  notes.  And  now  it  is  j^rojDOsed 
to  take  that  loan,  thus  specifically  pledged  for  the  redemption  of  these 
notes,  and  apply  it  to  the  current  expenses  of  the  Government.  I  say 
that  it  would  be  a  violation  of  the  public  faith  for  this  Congress  to 
pass  the  law  now  proposed  by  the  gentleman  from  Missouri.  The 
moneyed  men  of  New  York  would  say  the  credit  of  the  Government 
had  been  violated,  because,  when  they  took  the  Treasury  notes  under 
the  law  of  December  last,  it  was  with  a  specific  pledge,  with  a  mort- 
gage in  fact,  upon  the  loan  of  the  22d  June  last,  for  their  redemption. 

The  pul)lic  lands  were  pledged  for  the  redemption  of  a  very  small 
portion  of  the  public  debt,  and  nearly  all  that  to  which  it  applied 
has  been  paid  off.  But  here  is  a  specific  pledge,  made  only  a  little 
more  than  a  month  ago,  that  the  balance  of  the  loan  of  June  last 
should  he  applied  to  the  redemption  of  these  Treasury  notes ;  and  now 
it  is  suggested  that  we  take  the  loan  thus  set  aside  for  a  particular 
purpose  and  aj)ply  it  to  the  ordinary  current  expenses  of  the  Govern- 
ment. 

Why,  Mr.  Speaker,  the  plain  English  of  this  matter  is,  that  there 
is  $25,000,000  of  debts  due,  and  no  money,  no  revenues,  to  pay  them 
with.  We  have  got  to  resort  to  the  credit  of  the  Gov^ernment.  I 
suppose  the  $25,000,000  provided  for  in  this  bill  will  be  sufiicient  to 
settle  up  the  accounts  of  this  Administration. 

The  tariff  bill,  if  it  becomes  a  law,  will  probably  not  take  effect 
until  July  next,  when  it  will  become  necessary  to  provide  by  law  for  a 
deficiency  that  will  accrue  in  the  next  fiscal  year.  That  tariff  bill  will 
probably  contain  a  provision  for  a  temporary  loan,  necessary  to  meet 
the  deficiencies  for  the  next  fiscal  year.  This  loan  bill  is  for  a  present 
deficiency,  and  therefore  its  necessity  will  not  be  obviated  even  if  the 
tariff  bill  becomes  a  law. 

If  the  tariff  bill  provides  a  revenue  sufficient  to  meet  the  current 
expenses  of  the  Government,  it  will  not  become  necessary  to  negotiate 
the  loan  provided  in  it.  I  certainly  hope  that  the  tariff  bill  will  pro- 
duce a  revenue  sufficient  to  meet  all  the  expenses  of  the  Government. 
If  so,  the  loan  bill  which  accompanies  that  law  will  lapse,  and  that 
will  be  the  end  of  it.  The  ordinary  revenues  of  the  Government 
should  always  be  sufficient  to  meet  its  expenses,  except  in  time  of  war. 
For  the  last  three  years,  and  during  every  session,  the  Chairman  of  the 
Committee  of  Ways  and  Means  has  been  compelled  to  come  in  here 


ox   THE   LOAN   OF   TWENTY-FIVE  MILLION   DOLLARS.  21 

witli  a  loan  bill,  to  supply  tlie  deficiencies  in  tlie  revenues  of  the  Gov- 
ernment for  cui'rent  expenses.  I  trust  such  an  event  may  never  occur 
ao-ain  in  a  time  of  peace.  But  it  is  necessary  now  that  we  should 
make  provision  to  pay  off  existing  liabilities. 

Whether  these  liabilities  have  accrued  through  maladministration 
of  the  Government,  or  through  other  causes,  no  man  can  doubt  our 
obligation  to  make  provision  for  papng  them.  And  here  let  me  say 
a  word  to  my  friends  on  this  side  of  the  House.  I  ask  them,  when  we 
are  compelled  to  come  in  here  with  loan  bill  after  loan  bill  to  enable 
the  Goverment  to  meet  its  expenses,  if  it  is  not  time  to  pause  in  the 
appropriations  we  are  making  :  certainly  those  made  for  the  benefit  of 
moonshine  speculations,  for  rights  within  the  jurisdiction  of  a  foreign 
Government  ? 

I  now  move  the  previous  question  upon  this  bill. 

The  motion  was  seconded,  and  the  biU  passed  the  House.  In  the  Senate  an 
amendment  was  added  providing  for  the  repeal  of  the  loan  act  of  June  22,  1860 
On  the  concurrence  of  the  House  in  this  amendment  Mr.  Sherman  said : 

Me.  Speaker:  I  hope  the  amendment  of  the  Senate  will  not  be 
concurred  in ;  and  if  I  can  have  the  attention  of  the  House  for  two 
minutes,  I  think  I  can  give  ample  reasons  why  it  should  not  be  con- 
curred in. 

This  seems  to  be  to  some  extent  a  party  measure,  an  attempt  to 
throw  upon  the  incoming  Administration  all  the  indebtedness  incurred 
by  this,  if  possible.  Now,  all  I  ask  is,  that  this  Administration  shall 
pay  off  its  own  debts,  or  provide  for  the  payment  of  them,  and  not 
throw  them  over  upon  the  incoming  Administration.  I  do  believe 
that,  imder  the  tariff  act  now  pending  in  the  other  branch  of  Congress, 
if  it  becomes  a  law,  the  revenues  of  this  Government  will  be  sufficient 
to  meet  the  expenses  under  the  incoming  Administration.  I  believe 
that  it  is  the  duty  of  that  Administration  to  reduce  the  expenses  of  the 
Government  to  the  standard  of  the  revenues  of  the  Government. 
l^ow,  what  is  the  condition  of  the  Treasury  at  this  time  ?  The  Secre- 
tary of  the  Treasury  says  he  shall  need  a  loan  of  $25,000,000  to  meet 
the  expenses  of  the  Government  up  to  the  1st  of  July  next.  This 
bill  provides  a  loan  to  that  amount  to  pay  off  the  debts  of  the  present 
Admmistration  up  to  that  time.  Then,  in  addition  to  that,  there  is 
another  debt  to  pay.  This  Administration,  in  December  last,  issued 
$10,000,000  of  Treasury  notes,  at  twelve  per  cent.  Those  notes  are 
due  next  December.  For  the  redemption  of  those  Treasury  notes  the 
remaining  portion  of  the  loan  of  June  last  was  specifically  pledged. 
Yet  it  is  now  proposed  to  repeal  that  loan  of  June  last,  in  express 
violation  of  the  law  of  December  last,  in  pursuance  of  which  the  faith 
of  the  Government  was  directly  pledged  to  apply  that  loan  to  the 
redemption  of  Treasury  notes,  leaving  no  means  for  the  retirement  of 
the  Treasury  notes  of  last  December.  Now,  that  is  the  condition  in 
which  the  matter  stands.  If  the  amendment  of  the  Senate  be  con- 
curred in,  then,  in  December  next,  when  the  $10,000,000  of  Treasury 
notes  become  due,  there  will  be  no  means  provided  whatever  for  their 
retirement.     They  will  go  on  bearing  interest  at  the  rate  of  twelve 


22  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

per  cent.,  to  the  disgrace  of  the  Government.  'No  government,  and 
indeed  no  individual,  can  afford  to  pay  twelve  per  cent,  interest  for  any 
length  of  time. 

The  effect  of  the  course  proposed  would  be  to  throw  the  burden  of 
providing  the  means  for  the  payment  of  these  Treasury  notes,  when 
they  become  due,  on  the  incoming  Administration,  and  to  leave  it 
with  the  responsibihty  of  providing  the  means  of  paying  its  current 
expenses  together  with  $10,000,000  of  the  debts  of  the  present  Ad- 
ministration. 

But,  sir,  the  gentleman  refers  to  the  Pacific  Railroad  bill.  I  do  not 
know  whether  that  bill  will  pass  or  not ;  but  if  it  does  pass,  no  money 
will  have  to  be  paid  under  it  probably  for  years  to  come.  ISTo  money  can 
be  paid,  or  liabilities  incurred,  until  lif  ty  miles  of  the  road  are  completed. 

If  the  tariff  bill  passes,  I  believe  revenue  enough  will  be  raised 
under  it  to  defray  the  ordinary  expenses  of  the  Government.  The  loan 
bill  attached  to  it  is  only  intended  to  provide  for  some  unforeseen 
emergency.  By  the  terms  of  the  tariff  bill,  the  money  to  be  raised 
under  it  cannot  be  applied  to  a  redemption  of  Treasury  notes.  On  the 
contrary,  it  is  specifically  provided  that  the  loan  shall  be  devoted  to 
the  meeting  of  any  deficiency  in  the  current  revenues  of  the  Govern- 
ment. It  is  true  that  that  may  be  changed.  In  the  next  place,  if  we 
should  only  give  place  to  one  loan  by  another,  then  we  might  reduce 
the  loan  provided  in  the  tariff  bill  to  $10,000,000. 

I  do  not  anticipate  any  deficiency ;  but  I  do  say  that  it  is  wise  to 
provide  against  any  contingency  which  may  arise.  The  sum  we  have 
here  to  do  is  not  beyond  the  capacity  of  the  youngest  boy  in  an  arith- 
metic class.  Here  we  have  a  debt  of  $25,000,000,  and  how  are  we 
going  to  pay  it  ?  You  have  $10,000,000  of  Treasury  notes,  bearing 
twelve  per  cent,  interest,  which  are  due  next  December.  How  are 
you  going  to  pay  them  ?  By  the  loan  in  the  tariff  bill  ?  But  there  is 
already  a  loan  bill  upon  our  statute-books  under  which  these  Treasury 
notes  can  be  withdrawn  when  they  become  due.  Why,  then,  rej)eal 
one  law,  to  give  place  to  another,  unless  it  be  to  show  that  the  new 
Administration  has  borrowed  $21,000,000  to  pay  the  liabilities  of  the 
Government  ?  I  say  to  you,  gentlemen  on  the  other  side,  pay  your 
own  liabilities,  or  pledge  the  Government  credit  for  enough  money  to 
pay  them.  I  hope  the  incoming  Administration  will  conform  its  ex- 
penses to  the  revenues  raised  from  the  ordinary  sources.  If  the  reve- 
nues shall  fall  short,  and  be  reduced  to  even  less  than  the  amount  now 
realized,  it  will  be  the  duty  of  the  incoming  Administration  to  reduce 
the  expenses  to  that  extent. 

Now,  Mr.  Speaker,  I  do  hope  gentlemen  on  both  sides  of  the  House 
will  permit  us  to  make  provision  for  paying  the  debts  of  the  present 
Administration,  and  not  saddle  those  debts  upon  the  incoming  Admin- 
istration. I  repeat  tliat  the  $25,000,000  loan  provided  for  in  this  bill 
is  required  to  pay  the  debts  of  the  Government  up  to  July  next ;  and 
that  if  this  amendment  of  the  Senate  is  concurred  in,  there  will  still 
remain  the  sum  of  $10,000,000  of  outstanding  Treasury  notes  for  which 
no  provision  will  have  been  made.  We  ask  for  nothing  more  than 
that  this  Administration  should  make  provision  for  the  settlement  of 


ISSUE  OF  UmXED  STATES   N'OTES.  23 

its  own  accounts ;  and  it  seems  to  me  that  nothing  less  than  that  should 
be  granted. 

The  bill  became  a  law  February  8,  1861,  and  the  session  closed  on  the  3d  of  the 
following  month.  Of  this  loan,  bearing  six  per  cent,  interest  and  having  twenty 
years  to  run,  the  Secretaiy  sold  as  soon  as  possible  $18,415,000  at  the  rate  of  89.10 
per  $100. 


ISSUE   OF  UNITED   STATES   KOTES. 

IN  TEE  SENATE,  FEBRUARY  13,  1862. 

The  first  session  of  the  Thirty-seventh  Congress  convened  July  3,  1861.  Mr. 
Chase,  Senator  from  Ohio,  having  been  called  to  the  Treasury  by  President  Lincoln, 
Mr.  Sherman  succeeded  him  in  the  Senate.  The  first  session  closed  August  6,  1861, 
and  the  second  session  convened  December  2,  1861,  Mr.  Sherman  serving  upon  the 
Finance  Committee,  of  which  Mr.  Fessenden  was  chairman. 

The  Senate,  as  in  Committee  of  the  Whole,  resumed  the  consideration  of  the 
bill  to  authorize  the  issue  of  the  United  States  notes,  and  for  the  redemption  and 
funding  thereof,  and  for  funding  the  floating  debt  of  the  United  States.  Mr.  Sher- 
man said : 

Me.  Pkesident  :  The  general  views  of  the  Committee  on  Finance 
have  been  so  ably  stated  by  its  chairman,  that  it  wiU.  not  be  necessary 
for  me  to  discuss  the  features  of  this  bill,  upon  which  we  agree.  As  it 
came  from  the  House  it  was  evidently  imperfect ;  but  the  amend- 
ments adopted,  on  the  recommendation  of  the  Committee  on  Finance, 
have  so  improved  it  as  materially  to  change  its  character. 

The  motion  of  the  Senator  from  Vermont  now  for  the  first  time 
presents  to  the  Senate  the  only  question  upon  which  the  members  of 
the  Committee  on  Finance  had  any  material  difference  of  opinion,  and 
that  is,  whether  the  notes  provided  for  in  this  bill  shall  be  made  a  legal 
tender  in  payment  of  j)ublic  and  private  debts.  Upon  this  point  I  will 
commence  the  argument  where  the  Senator  from  Maine  left  it. 

He  says  he  is  not  satisfied  that  this  provision  is  necessary,  and  until 
so  satisfied  he  will  not  support  it.  He  does  not  present  the  constitu- 
tional question,  but  doubts  whether  it  is  necessary  to  give  these  notes 
the  sanction  of  a  legal  tender.  I  agree  that  this  measure  can  only  be 
justified  on  the  ground  of  necessity.  I  do  believe  there  is  a  pressing 
necessity  that  these  demand  notes  should  be  made  a  legal  tender  if  we 
want  to  avoid  the  evils  of  a  depreciated,  dishonored  paper  currency. 
I  do  believe  we  have  the  constitutional  power  to  pass  such  a  provision, 
and  that  the  public  safety  now  demands  its  exercise.  Is  there  such  a 
necessity  ? 

In  the  first  place,  I  will  say,  almost  every  recognized  organ  of 
financial  opinion — if  that  is  a  correct  expression — in  this  country  agrees 


24  SPEECHES  AND  EEPOETS   OF  JOHN  SHEPvMAK 

tliat  tliere  is  such  a  necessity  in  case  we  authorize  the  issue  of  demand 
notes.  Tou  commence  with  the  Secretary  of  the  Treasury,  who  has 
given  this  subject  the  most  ample  consideration.  He  declares  not  only 
in  his  official  communications  here,  but  in  his  private  intercourse  with 
the  members  of  the  committee,  that  this  clause  is  indispensably  neces- 
sary to  the  security* and  negotiability  of  these  demand  notes.  We  all 
know  from  his  antecedents,  from  his  peculiar  opinions,  that  he  would 
be  probably  the  last  man  among  the  leading  politicians  of  our  country 
to  yield  to  the  necessity  of  substituting  paper  money  for  coin.  He  has 
examined  this  question  in  all  its  length  and  breadth.  He  is  in  a  posi- 
tion where  he  feels  the  necessity.  He  is  a  statesman  of  admitted 
ability,  and  distinguished  in  his  high  position.  Pie  informs  us  that 
without  this  clause  the  attempt  to  circulate  as  money  tlie  proposed 
amomit  of  demand  notes  of  the  United  States  will  prove  a  fatal  ex- 
periment. 

In  addition  to  his  opinion  we  have  the  concurring  opinion  of  the 
Chamber  of  Commerce  of  the  city  of  I^ew  York.  With  almost  entire 
unanimity  they  have  passed  a  resolution  on  the  subject  after  full  debate 
and  consideration.  That  resolution  has  been  read  by  your  Secretaiy. 
You  have  also  the  opinion  of  the  Committee  on  Public  Safety  of  the 
city  of  I^ew  York,  composed  of  distinguished  gentlemen,  nearly  all  of 
whom  are  good  financiers,  who  agi'ee  fully  in  the  same  opinion.  I  may 
say  the  same  in  regard  to  the  Chambers  of  Commerce  of  the  city  of 
Boston  and  the  city  of  Philadelphia.  They  have  said  to  us  in  the 
most  solemn  fonn  that  this  measure  was  indispensably  necessary  to 
maintain  the  credit  of  the  Government,  and  to  keep  these  notes  any- 
where near  par.  In  addition,  we  have  the  deliberate  judgment  and 
vote  of  the  House  of  Representatives.  After  a  full  debate,  in  which 
the  constitutionality,  expediency,  and  necessity  of  this  measure  were 
discussed,  in  which  all  the  objections  that  have  been  made  here  and 
many  more  were  urged,  the  House  of  Representatives,  by  a  large  vote, 
declared  that  it  was  necessary  to  issue  demand  notes,  and  that  this 
clause  was  indispensable  to  their  negotiation  and  credit. 

ISTow,  Mr.  President,  I  know  very  well  that  the  Senate  is  not  gov- 
erned by  authority ;  nor  should  it  be.  As  a  high  political  body,  our 
opinions  ought  not  to  be  affected  entirely  by  the  opinions  of  others. 
But  allow  me  to  repeat  what  is  admitted  by  all,  that  very  few  members 
of  this  body  are  f amihar  with  financial  subjects  ;  very  few  of  us  have 
been  called  upon  to  study  such  questions ;  and  therefore  it  is  that,  when 
a  question  of  this  kind  is  before  the  Senate,  the  opinion  of  men  who 
have  devoted  their  lives  to  this  subject  ought  to  be  fairly  considered. 
Upon  the  question  of  the  constitutionality  of  this  measure  the  opinion 
of  the  Senator  from  Vermont  and  other  Senators  around"  me  is  worth 
much  more  than  that  of  commercial  men ;  but  upon  the  question  of 
the  necessity  of  this  measure,  to  give  your  demand  notes  negotiability, 
security,  value,  in  the  money  market,  their  opinion  is  Avorth  more  than 
that  of  any  individual  Senator. 

But  I  do  not  intend  to  rest  here.  I  desire  to  show  the  necessity  of 
it  from  reason.  We  have  to  raise  and  pay  out  of  the  Treasury  of  the 
United  States  befoi-e  the  1st  day  of  July  next,  according  to  the  esti- 


ISSUE   OF  UNITED  STATES  XOTES.  25 

mate  of  the  Committee  of  Ways  and  Means,  the  sum  of  $343,235,00^. 
Of  this  sum,  $100,000,000  is  now  due  and  payable  to  your  soldiers  ;  to 
contractors  ;  to  the  men  who  have  furnished  provisions  and  clothing  for 
your  Army  ;  and  to  your  officers,  judges,  and  civil  magistrates.  AVhere 
will  you  get  this  money  ?  A  question  of  hard  necessity  presses  you. 
We  know  very  well  that  it  cannot  be  obtained  of  the  banks.  They 
have,  with  a  patriotic  feeling  not  usually  attributed  to  money  corpora- 
tions, which  are  supposed  to  have  neither  souls  nor  bodies,  already  ex- 
hausted their  means.  The  aggregate  capital  of  the  banks  of  the  three 
principal  cities  of  the  United  States  is  but  $105,000,000,  and  they  have 
taken  more  than  their  capital  in  the  bonds  of  the  United  States.  It  is, 
therefore,  idle  to  look  to  them  for  relief.  They  can  lend  you  no  more 
money.  You  must  look  to  other  sources.  The  men  who  have  thus  loaned 
you  money,  and  enabled  you  to  carry  on  the  war  thus  far,  are  the  very 
men  who  now  beg  you  for  this  measure  of  financial  aid.  They  ask 
this  currency  to  enable  them  to  assist  you  further  in  carrying  on  the 
Government.  Among  others,  the  cashier  of  the  Bank  of  Commerce, 
the  largest  bank  corporation  in  the  United  States,  and  one  that  has 
done  much  to  sustain  the  Government,  appeared  before  the  Committee 
on  Finance,  and  stated  explicitly  that  the  Bank  of  Commerce,  as  well 
as  other  banks  of  'New  York,  could  not  further  aid  the  Government 
unless  your  proposed  currency  was  stamped  by  and  invested  with  the 
legal  fonn  and  authority  of  lawful  money,  which  they  could  pay  to 
others  as  well  as  receive  themselves. 

Another  thing  must  be  considered.  We  cannot  get  the  needed  sum 
by  taxation  for  six  months  at  least.  We  are  to  pay  out  over  three 
hundred  milhons  before  next  July  with  but  small  revenue.  The 
Committee  of  Ways  and  Means  of  the  House  of  Representatives  have 
already  been  two  months  in  framing  a  tax  bill,  and  it  is  not  yet  done. 
It  has  to  go  through  the  ordeal  of  the  House  of  Representatives  ;  it 
has  to  come  here,  and  pass  through  all  the  forms  of  legislation.  If  it 
should  assume  the  form  of  law  by  the  1st  day  of  June  next,  it  will  be 
as  much  as  we  can  expect,  so  that  it  is  useless  to  look  to  taxation  for 
any  portion  of  this  money. 

I  ask  you,  then,  Mr.  President,  where  will  you  get  it  ?  You  must 
borrow  it.  The  most  direct  way  would  be  to  put  your  bonds,  based 
upon  the  credit  of  the  United  States,  in  the  money  markets  of  the 
world,  and  sell  them  for  what  they  will  bring.  This  has  been  done  by 
the  most  powerful  Government  in  Europe.  In  the  struggle  of  Great 
Britain  with  Kapoleon  that  power  sold  £-120,000,000  of  "securities  for 
£2(i0,000,000.  She  contracted  a  debt  of  £173  for  every  £100  received 
by  her.  It  was  only  by  such  sacrifices  that  she  was  able  to  cope  with 
and  eventually  overcome  her  adversary.  But  even  such  enormous  sac- 
rifices would  not  have  produced  the  money  needed  had  she  not  adopted 
a  national  currency  of  paper  money — practically,  if  not  legally,  made  a 
legal  tender — and  had  not  used  this  currency  as  a  medium  of  exchange 
with  which  she  facilitated  the  payment  of  taxes  and  the  negotiation 
of  loans.  You  are  compelled  by  your  necessities  to  pursue  the  same 
course.  It  is  not  claimed  by  any  one  that  these  demand  notes  will 
satisfy  youi-  wants.     You  here  provide  only  for  $100,000,000,  and  have 


26  SPEECHES  AKD  EEPORTS  OF  JOHN  SHERMAN. 

yet  large  sums  to  provide  for.  After  these  notes  are  exhausted  we 
must  sell  the  bonds  of  the  United  States. 

But  suppose  you  put  the  bonds  now  on  the  market,  what  will  they 
bring  \  It  is  said  to  us  by  the  leading  financiers  of  this  country,  whose 
opinions  are  entitled  to  respect,  whose  j^atriotism  cannot  be  questioned, 
that  these  bonds,  if  now  forced  upon  the  market  in  large  quantities, 
would  be  depreciated  to  something  like  sixty  cents  on  the  dollar  ;  and 
why  ?  IS^ot  because  financiers  do  not  consider  them  good,  not  because 
any  one  doubts  that  they  will  be  paid  eventually,  but  because  there  is 
no  money  with  which  to  buy  them.  By  the  laws  of  the  United  States, 
the  Secretary  of  the  Treasury  can  receive  nothing  in  payment  for 
bonds  but  gold  and  silver  coin.  Where  will  the  purchaser  of  your 
bonds  get  the  gold  and  silver  coin  ?  It  is  now  driven  out  of  circula- 
tion. There  is  no  such  thing  as  gold  and  silver  coin  circulating  in  the 
country  to  any  large  amount.  It  is  stowed  away.  The  very  moment 
the  banks  suspended  in  the  city  of  ISTew  York,  that  moment  gold  and 
silver  ceased  to  be  the  circulating  medium  of  this  country.  There  is 
not  now  in  active  cu'culation  nearly  enough  gold  to  pay  your  existing 
debt.  Ij;  is  therefore  clear  you  cannot  sell  your  bonds  for  gold  and 
silver  under  existing  circumstances.  If  any  man,  however  patriotic, 
deshed  to  purchase  them,  he  could  not  pay  you  in  the  only  coin  that 
you  dare  take,  because  he  cannot  get  it.  He  must  go  to  a  broker  first 
and  buy  the  gold  before  he  can  find  a  medium  of  exchange  with  which 
he  can  legally  pay  for  them. 

It  may  be  said,  and  I  know  the  Senator  from  Rhode  Island  said, 
that  there  is  an  easy  remedy  for  this  difliculty.  He  would  repeal  the 
Sub-Treasury  law,  and  receive  the  paper  money  of  the  banks.  In  other 
words,  he  would  at  once  install  as  the  national  currency,  as  the  standard 
of  values,  the  inflated  currency  of  all  the  local  banks  in  the  United 
States  :  banks  over  which  we  have  no  control,  which  we  cannot  regulate 
or  govern  in  the  slightest  degree.  We  should  have,  then,  the  circula- 
tion of  these  banks  substituted  for  gold ;  and  what  would  be  the  effect  ? 
Suppose  such  paper  money  issued  by  banks  in  every  State,  by  banks 
that  Avould  have  every  inducement  to  inflate,  because  they  do  not  pre- 
tend to  pay  specie,  were  received  for  bonds,  and  paid  out  to  our  sol- 
diers, how  long  would  it  be  before  we  should  have  all  the  evils  of  an 
inflated  currency,  of  an  iiTedeemable  currency  of  the  worst  character, 
and  in  the  most  dangerous  form  ? 

It  is  easy  to  criticise  this  bill.  I  dislike  to  vote  for  it.  I  prefer 
gold  to  paper  money.  But  there  is  no  other  resort.  We  must  have 
money  or  a  fractured  Government.  If  Senators  can  show  me  how  they 
can  raise  money  except  in  the  way  proposed,  I  wiU  join  them  in  de- 
nouncing paper  money.  I  listened  with  great  attention  to  the  remarks 
made  by  the  Senator  from  Vermont ;  but  when  he  got  through,  I  should 
have  been  glad  to  have  him  inform  me,  if  we  cannot  issue  these  demand 
notes,  what  we  shall  do.  Shall  we  surrender  the  Government  ?  shall 
we  refuse  to  pay  our  soldiers  ?  shall  we  refuse  to  pay  our  contractors  ? 
No,  Mr.  President,  we  have  agreed  to  pay  our  debts  in  money.  The 
chairman  of  the  Committee  on  Finance  gave  us  a  very  handsome  lec- 
ture, a  very  able  discourse  upon  the  importance  of  preserving  the  pub- 


ISSUE   OF  UNITED   STATES   NOTES.  27 

lie  faith  ;  and  lie  desired  to  impress  upon  iis — and  did  impress  upon  me 
— the  necessity  of  not  affecting  the  obligation  of  contracts.  We  must 
not  in  any  emergency,  under  any  stress  of  circumstances,  affect  the  ob- 
ligation of  contracts  between  private  indi\dduals.  Did  that  Senator 
overlook  the  first  contract,  the  contract  between  the  Government  and 
the  soldier,  the  Government  and  the  man  who  feeds  and  clothes  your 
armies  ?  We  must  pay  the  soldier  in  money ;  we  must  pay  the  con- 
tractor in  money.  There  is  a  contract,  an  obligation  between  the  con- 
tractor and  the  soldier  and  the  Government  that  must  be  observed. 
The  obligation  of  good  faith  rests  upon  us  to  pay  every  dollar  that  is 
due  from  us  to  our  own  creditors,  as  well  as  not  to  impair  the  obliga- 
tion of  contracts  between  others.  How  can  we  do  it  ?  I  have  shown 
that  we  cannot  do  it  in  gold ;  I  have  shown,  that  we  ought  not  to  do  it 
in  the  inilated  paper  money  of  the  country.  How  else  can  we  do  it  ? 
There  is  no  other  way,  except  to  issue  to  our  creditor  the  note  of  the 
United  States,  in  such  form,  with  such  sanctions,  as  will  enable  him  to 
use  it  as  money.  If  we  can  beKeve  the  testimony  of  others  and  the 
light  of  reason,  the  only  way  we  can  do  this  is  by  stamping  it  with  the 
same  national  sanction  as  that  with  which  we  stamp  om'  gold  and  silver 
coin. 

Having  thus  stated  the  necessity  of  this  measure,  I  must  consider 
our  constitutional  power  to  pass  it.  The  Senator  from  Yermont,  whose 
opinion  is  certainly  entitled  to  the  highest  consideration,  and  who  sup- 
ports it  with  an  able  argument,  contends  that  this  measure  is  uncon- 
stitutional. I  confess,  if  I  did  not  feel  its  necessity,  I  would  shield  my- 
self behind  his  conviction  and  vote  against  it.  But,  sir,  the  more  I  re- 
iiect  upon  the  subject  the  more  I  am  convinced  that  Congress  can 
authorize  the  issue  of  paper  money,  stamped  as  a  national  currency,  as 
a  medium  of  exchange.  Such  a  currency  is  a  necessary  and  proper 
means  to  enable  the  national  Government  to  exercise  its  expressly  dele- 
gated power  to  borrow  money,  to  regulate  commerce,  to  support  armies 
and  navies.  It  may  be  a  power  subject  to  abuse  ;  it  may  be  a  danger- 
ous power,  only  to  be  resorted  to  in  extreme  cases ;  but  when  I  am 
convinced  its  exercise  is  necessary  and  proper  to  enable  Congress  to 
execute  its  high  powers,  I  cannot  shrink  from  assuming  my  share  of 
the  responsibility. 

The  Senator  from  Yermont  has  read  extracts  from  the  debates  in 
the  ISTational  Convention  and  from  Story's  "  Commentaries,"  tending 
to  show  that  Congress  cannot  authorize  the  issue  of  bills  of  credit.  But 
I  submit  to  him  that  this  question  has  been  settled  by  the  practice  of 
the  Government.  We  issued  such  bills  during  the  war  of  1812,  during 
the  war  with  Mexico,  and  at  the  recent  session  of  Congress.  We  re- 
ceive them  now  for  our  services ;  we  pay  them  to  our  soldiers  and  our 
creditors.  These  notes  are  payable  to  bearer ;  they  pass  from  hand  to 
hand  as  currency  ;  they  bear  no  interest.  If  the  argument  of  that  Sen- 
ator is  true,  then  all  these  notes  are  unauthorized.  "The  Senator  admits 
that  when  we  owe  a  debt  and  cannot  pay  it,  we  can  issue  a  note.  But 
where  does  he  find  the  power  to  issue  a  note  in  the  Constitution? 
Where  does  he  find  the  power  to  prescribe  the  terms  of  the  note,  to 
make  it  transferable,  receivable  for  public  dues  ?     He  draws  all  these 


28  SPEECHES  AND  EEPOETS  OF  JOHN  SHERMAN". 

powers  as  incidents  to  tlie  power  to  borrow  money.  According  to  his 
argument,  when  we  pay  a  soldier  a  ten-dollar  demand  bill  we  borrow 
ten  dollars  from  the  soldier ;  when  I  apply  to  the  Secretary  of  the  Sen- 
ate for  a  month's  pay,  I  loan  the  United  States  $250.  This  certainly 
is  not  the  view  we  take  of  it  when  we  receive  the  money.  On  the 
other  hand,  we  recognize  the  fact  that  the  Government  cannot  pay  us 
in  gold.  We  receive  notes  as  money.  The  Government  ought  to  give 
and  has  the  power  to  give  to  them  all  the  sanction,  authority,  and  value 
necessary  and  proper  to  enable  it  to  borrow  money.  The  power  to 
fix  the  standard  of  money,  to  regulate  the  medium  of  exchanges,  must 
necessarily  go  with,  and  be  incident  to,  the  power  to  regulate  commerce, 
to  borrow  money,  to  coin  money,  to  maintain  armies  and  navies.  All 
these  high  powers  are  expressly  prohibited  to  the  States,  and  also  the 
incidental  power  to  emit  bills  of  credit  and  to  make  anything  but  gold 
and  silver  a  legal  tender. 

But  Congress  is  expressly  invested  with  all  these  high  powers,  and, 
to  remove  all  doubt,  is  expressly  authorized  to  use  all  necessary  and 
proper  means  to  carry  these  powers  into  effect.  Congress  is  not  pro- 
hibited from  emitting  bills  of  credit  or  from  making  a  standard  of 
value,  nor  are  these  powers  expressly  conferred.  Congress  has  repeat- 
edly issued  bills  of  credit ;  it  has  fixed  gold  and  silver  as  the  standard 
of  value,  and  made  them  a  legal  tender.  Certainly  gold  and  silver 
coin  is  the  best  standard  of  value,  for  it  has  inherent  value  in  all  com- 
mercial countries  ;  but  if,  in  the  course  of  events,  gold  and  silver  can- 
not be  had  in  quantities  sufficient  to  fonii  a  medium  of  exchange  for 
the  increased  wants  of  the  country,  then  Congress  may  establish  an- 
other medium  of  exchange — another  standard  of  value.  This  was 
twice  done  by  establishing  a  Bank  of  the  United  States.  I  much  pre- 
fer the  credit  of  the  United  States,  based  as  it  is  upon  all  the  produc- 
tions and  property  of  the  United  States,  to  the  issues  of  any  corpora- 
tion, however  well  guarded  and  managed. 

The  Senator  from  Vermont  says  that  we  may  issue  our  notes,  and 
of  course  our  creditor  must  take  them  ;  but  we  must  not  make  his 
creditor  take  them— the  loss  must  fall  entirely  upon  our  creditor.  I 
have  shown  that  by  yielding  the  power  to  issue  a  note  at  all,  and 
especially  to  issue  a  note  payable  to  bearer  without  interest,  he  has 
yielded  his  constitutional  argument.  But,  I  ask,  is  not  his  proposition 
manifestly  unjust  ?  He  will  compel  our  immediate  creditor  to  take 
the  note  or  get  nothing.  It  is  a  moral  compulsion,  it  is  tnie,  but  it  is 
effectual.  It  is  that  or  nothing.  If  we  can  compel  one  citizen  to  take 
this  j)aper  money,  why  not  another  and  another  ?  Is  it  any  less  the 
violation  of  contract  in  the  one  case  than  in  another  ?  Do  not  all  citi- 
zens hold  their  property  subject  to  our  unlimited  power  of  taxation  ? 
Do  not  all  share  in  the  blessings  of  government,  and  should  not  all 
share  in  its  burdens  ?  Shall  we  "inflict  a  loss  only  on  those  who  trust 
and  labor  for  the  Government,  and  relieve  the  selfish,  avaricious,  idle, 
unpatriotic  citizen,  who  will  neither  fight  for,  lend  to,  nor  aid  the 
Government  '^  Sir,  to  make  all  these  share  in  the  burden  of  the  war, 
and  to  relieve  those  who  risk  life  and  property  in  its  defense,  I  would 
waive  a  constitutional  doubt. 


ISSUE   OF   UNITED   STATES   NOTES.  29 

But,  sir,  the  Senator  from  Maine,  as  well  as  tlie  Senator  from  Ver- 
mont, alleges  that  it  is  unjust  to  insert  the  legal-tender  clause,  because 
it  will  impair  the  obligation  of  contracts.  He  says,  if  a  man  holds  my 
note  for  $1,000,  it  is  unjust  for  Congress  to  pass  a  law  that  will  enable 
him  to  pay  it  with  less.  I  confess  that  it  would  be  unjust  and  uncon- 
stitutional for  Congress  to  comjDcl  him  to  take  a  less  sum  of  money. 
But  Congress  every  day  passes  laws  that  affect  the  value  of  property 
and  of  money,  and  therefore  incidentally  the  value  of  contracts.  The 
other  day  the  Senator  from  Iowa  [Mr.  Grimes]  introduced  a  bill  to 
establish  a  street  railroad  in  the  city  of  Washington.  We  were  all  in 
favor  of  it ;  but  did  any  Senator  dream  that  by  doing  that  he  was 
impairing  the  obligation  of  contracts  ?  And  yet  we  affected  the  value 
of  the  omnibuses  that  now  run  on  the  streets  of  Washington.  Every 
act  that  you  pass,  almost  every  event  in  our  political  history  now, 
impairs  the  value  of  property.  Although  it  may  not  change  the  terms 
of  a  contract,  Congress  every  day  changes  the  value  of  money,  the 
value  of  property. 

The  Senator  from  Tennessee  [Mr.  Johnson]  has  been  distinguished 
for  urging  forward  the  homestead  bill ;  and  yet  everybody  knows  that 
the  effect  of  the  passage  of  that  bill  would  be  to  change  largely  the 
value  of  one  class  of  property.  The  Senator  from  Iowa  owns  a  large 
amount  of  wild  land  in  the  West.  If  that  bill  should  pass,  this  land 
will  be  worth  fifty  per  cent,  less  than  it  is  now.  He  may  have  sold 
some  of  that  land  to  another  at  high  prices,  but  we  know  very  well 
that  if  the  homestead  bill  passes,  it  might  prevent  the  purchaser  of 
that  land  from  paying  for  it.  It  might  almost  destroy  the  value  of 
his  purchase,  and  yet  we  never  stop  for  considerations  of  this  kind.  I 
submit,  therefore,  that  the  argument  of  injustice  to  creditors  should 
not  defeat  this  measure. 

On  the  other  hand,  Mr.  President,  I  believe  that  if  we  fail  to  pass 
this  bill,  in  the  present  critical  condition  of  piiblic  affairs,  we  do  gross 
injustice  to  our  public  creditors.  Let  us  look  for  a  moment  at  the 
practical  effect  of  it.  If  you  now  issue  to  your  creditors  paper  money 
which  has  no  sanction,  which  every  man  may  refuse  to  take,  what  will 
be  the  result  I  In  every  bank  in  the  United  States  it  will  at  once  be 
rejected,  not  because  the  banks  are  not  ]3atriotic,  but  because  they 
cannot  afford  to  take  it.  I  have  here  a  letter  from  a  banker  in  Kew 
York,  addressed  to  the  honorable  Senator  from  Maine,  in  which  the 
writer  states  : 

My  acquaintance  with  that  class  of  men  [bankers]  here  is  quite  extensive,  and 
the  view  of  all,  almost  without  exception,  is  that  it  will  be  fatal  to  pass  the  bill 
without  making  the  notes  a  legal  tender.  Views  differ  widely  as  to  the  expediency 
of  this  mode  of  meeting  the  present  wants  of  the  Treasury.  Though  I  think  a 
large  majority  are  o^)posed  in  theory  to  the  use  by  the  Government  of  a  large 
amount  of  demand  notes,  they  are  nevertheless  satisfied  that  this  is  the  least  of 
several  evils  which  threaten  ;  but  all,  however  differing  upon  the  original  question, 
unite  upon  this,  that  if  we  have  the  notes,  we  must  have  the  benefit  of  a  provision 
that  they  shall  be  a  legal  tender  in  payment  of  debts.  This,  I  know,  is  the  opinion 
of  a  number  of  persons. 

He  proceeds  to  name  them,  but  I  need  not  do  so.  He  says  that 
this  is  the  opinion  of  "  the  leading  bank  men,  and  also  of  the  most 


30  SPEECHES  AND  EEPOETS  OF  JOHN  SHERMAN. 

earnest  financiers  connected  with  the  banks."  The  reason  is  that  with- 
out such  provision,  the  banks  in  New  York,  Boston,  and  Philadelphia 
cannot  take  them,  and  thej  cannot  take  them  simply  because  they  can- 
not use  them  if  they  do.  It  is  not  a  question  of  willingness  or  of  de- 
sire to  sustain  the  Government.  They  cannot  pay  out  these  notes  to 
those  who  are  not  obKged  to  receive  them,  however  they  might  wish 
to  do  so. 

If  you  strike  out  this  legal-tender  clause,  you  do  it  with  the  knowl- 
edge that  these  notes  will  fall  dead  upon  the  money  market  of  the 
world  ;  that  they  will  be  refused  by  the  banks  ;  that  they  will  be  a  dis- 
graced currency,  that  will  not  pass  from  hand  to  hand ;  that  they  will 
have  no  legal  sanction  ;  that  any  man  may  decline  to  receive  them,  and 
thus  discredit  the  obligations  of  the  Government.  I  ask  again  if  that 
is  just  to  the  men  to  whom  you  have  contracted  to  pay  debts  ?  When 
you  issue  demand  notes,  and  announce  your  purpose  not  to  pay  anj- 
more  gold  and  silver  coin,  you  tender  to  those  who  have  furnished  pro- 
visions and  services  this  paper  money.  What  can  they  do  ?  They 
cannot  pay  their  debts  with  it,  they  cannot  support  their  families  with 
it,  without  a  depreciation.  The  whole,  then,  depends  upon  the  promise 
of  the  Government  to  pay  at  some  time  not  fixed  on  the  face  of  the  note, 
and  you  bring  about  an  era  of  irredeemable,  depreciated  paper  money. 

Not  only  justice  to  our  creditors  demands  this  measure,  but  I  anti- 
cipate from  it  very  beneficial  effects  in  regulating  our  currency.  If 
you  issue  $150,000,000  of  Treasury  notes,  you  then  for  the  first  time, 
at  least  since  the  Bank  of  the  United  States,  have  a  national  cm'rency 
stamped  with  all  the  credit,  with  all  the  power  of  the  Government  of 
the  United  States.  It  is  a  national  currency  that  cannot  be  abused. 
It  is  not  controlled  by  a  corporation ;  it  is  not  controlled  by  inter- 
ested parties ;  it  is  not  controlled  by  men  who  desire  to  make  money 
out  of  the  circulation ;  but  it  is  a  national  circulation,  for  the  redemp- 
tion of  every  dollar  of  which  the  national  credit  and  all  the  prop- 
erty of  all  the  people  of  the  United  States  are  pledged.  If  you  issue 
these  $150,000,000  of  currency,  it  will  permeate  this  whole  coun- 
try ;  it  will  be  the  blood  of  the  whole  system ;  it  will  enable  men  to 
carry  on  their  business  and  make  their  exchanges  all  over  the  country. 

But  that  is  not  all.  The  circulation  of  this  large  amount  of  demand 
notes  will  enable  capitalists  to  buy  our  bonds.  If  it  were  not  for  this 
reason,  I  would  not  vote  for  this  bill  myself.  Now  they  cannot  do  it, 
because  there  is  no  currency  in  which  they  can  pay  for  them.  You 
refuse  to  take  the  circulation  of  the  banks,  and  they  cannot  get  you 
gold,  and  so  cannot  buy  your  bonds.  If  you  give  them  a  circulating 
medium,  ample  and  not  too  great,  well  secured,  sanctioned  by  all  the 
power  of  the  Government,  you  may  then  be  able  to  ;'each  the  purse  of 
the  capitalist,  you  may  be  able  to  reach  the  stocking  of  the  poor  but 
patriotic  citizen,  you  may  be  able  to  gather  in  from  all  this  broad  extent 
of  country  the  savings  of  your  people.  But  you  cannot  do  it  other- 
wise. As  long  as  you  have  your  present  system,  without  any  medium 
of  exchange  except  gold  and  silver,  you  cannot  reach  the  real  capital  of 
this  country,  because  the  people  cannot  pay  you  in  that  which  circulates 
among  them,  and  they  cannot  get  gold  and  silver. 


ISSUE  OF  UNITED  STATES  NOTES.  31 

Tlie  only  objection  to  tliis  issue  of  paper  money  is  that  too  mnch 
may  be  issned.  There  is  the  only  danger  in  it.  I  do  not  believe  the 
issue  of  $150,000,000  will  do  any  harm ;  but  if  you  continue  to  issue 
other  sums,  you  will  at  once  depreciate  the  credit  of  these  demand 
notes  and  destroy  their  value.  If  you  confine  it  to  the  amount  limited 
by  this  bill,  I  believe  the  effect  will  be  healthy  in  all  the  business  rela- 
tions of  the  country. 

After  all,  Mr.  President,  this  is  a  mere  temporary  expedient.  It  is 
manifest  that  we  must  rely  upon  some  other  source  of  obtaining  money. 
We  dare  not  repeat  this  experiment  a  second  time.  If  we  do,  we  enter 
on  the  same  course  that  was  followed  in  the  French  Revolution,  and 
also  by  our  American  ancestors.  But  if  in  our  Revolutionary  War  the 
amount  of  Revolutionary  scrip,  and  if  in  the  French  Revolution  the 
amount  of  assignats,  had  been  confined  to  a  small  sum  in  proportion  to 
the  wealth  of  the  country,  if  for  instance  it  had  been  limited  to  less 
than  one  tenth  of  the  annual  production  of  the  country,  there  would 
have  been  no  danger.  It  is  idle  to  attempt  to  alarm  me  by  saying  that 
this  will  expand  the  currency  of  the  country  too  much.  The  annual 
productions  of  this  country  are  over  nineteen  hundred  millions  of  dollars. 
I  have  on  my  desk  a  carefully-prepared  table  made  by  the  Superinten- 
dent of  the  Census,  showing  the  aggregate  production  of  all  the  States 
of  the  Union,  and  it  amounts  to  over  nineteen  hundred  millions  of  dol- 
lars. By  this  bill  you  propose  to  furnish  a  currency  to  the  extent  of 
less  than  one  tenth  of  your  annual  production.  Do  you  tell  me  that 
this  will  create  an  inflation  of  prices  ?  I  do  not  think  so.  If  you 
should  follow  this  issue  by  another,  you  might  create  a  disturbance  in 
your  financial  operations ;  but  I  think  this  will  not. 

The  only  true  way,  it  seems  to  me,  to  establish  a  financial  system  in 
this  country — and  I  do  not  believe  we  ever  shall  establish  one  until  the 
necessity  of  the  hour  drives  us  to  it — is,  first,  to  ascertain  how  much 
money  we  can  afford  to  expend  in  the  prosecution  of  this  war,  and  then 
collect  at  least  one  half  of  that  by  taxation,  and  the  other  half  by 
loans.  It  seems  to  me  that  while  your  expenditure  amounts  to  $600,- 
000,000  a  year  you  will  be  driven  to  all  sorts  of  expedients.  If  gentle- 
men want  to  get  at  the  true  measure  of  reform,  if  they  do  not  want 
simply  to  adopt  the  expedients  that  are  forced  on  us,  they  must  reduce 
the  public  expenditures  to  a  point  at  which  the  Government  can  main- 
tain itself.  If  the  amount  were  fixed  at  $400,000,000,  it  would  be 
easy  to  collect  one  half  of  that  by  taxation,  anticipating  the  taxation 
by  an  issue  of  demand  notes,  never  to  be  exceeded  under  any  cii'cum- 
stances,  and  the  other  half  by  the  sale  of  bonds.  Many  financiers  have 
told  me  that  the  capital  of  the  large  cities  could  easily  absorb  $200,- 
000,000  of  Government  bonds  from  the  annual  interest  now  paid 
there.  I  have  no  doubt  the  Government  could  readily  collect  $200,- 
000,000  more  by  taxation.  By  doing  this,  and  anticipating  taxation  by 
the  issue  of  demand  notes,  we  should  have  no  difficulty  in  getting 
money.  As  it  is  now  we  have  no  fixed  system ;  we  go  along  without 
any  fixed  lights  or  guides. 

I  have  thus,  Mr.  President,  endeavored  to  reply  to  the  constitu- 
tional argument  of  the  Senator  from  Vermont.     Our  arguments  must 


32  SPEECHES  AND  EEPORTS   OF  JOHN  SHERMAN. 

be  submitted  finally  to  the  arbitration  of  the  courts  of  the  United 
States.  When  I  feel  so  strongly  the  necessity  of  this  measure,  I  am 
constrained  to  assume  the  power,  and  refer  our  authority  to  exercise  it 
to  the  courts.  I  have  shown,  in  reply  to  the  argument  of  the  Senator 
from  Maine,  that  we  must  no  longer  hesitate  as  to  the  necessity  of  this 
measure.  That  necessity  does  exist,  and  now  presses  upon  us.  I  rest 
my  vote  upon  the  proposition  that  this  is  a  necessary  and  proper  meas- 
ure to  furnish  a  currency — a  medium  of  exchange — to  enable  the  Gov- 
ernment to  borrow  money  to  maintain  an  army  and  to  support  a  nayy. 
Believing  this,  I  find  ample  authority  to  authorize  my  vote.  We  have 
been  taught  by  recent  fearful  experience  that  delay  and  doubt  in  this 
time  of  revolutionary  activity  are  stagnation  and  death.  I  have  sworn 
to  raise  and  support  our  armies  ;  to  provide  for  and  maintain  our  navy  ; 
to  borrow  money ;  to  uphold  our  Government  against  all  enemies,  at 
home  and  abroad.  That  oath  is  sacred.  As  a  member  of  this  body,  I 
am  armed  with  high  powers  for  a  holy  purpose,  and  I  am  authorized — 
nay,  required — to  vote  for  all  laws  necessary  and  proper  for  executing 
these  high  powers  and  for  accomplishing  that  purpose.  This  is  not  the 
time  when  I  would  limit  these  powers.  Rather  than  yield  to  revolu- 
tionary force,  I  would  use  revolutionary  force.  Here  it  is  not  neces- 
sary, for  the  framers  of  the  Constitution  did  not  assume  to  foresee  all 
the  means  that  might  be  necessary  to  maintain  the  delegated  powers  of 
the  national  Government.  Regarding  this  great  measure  as  a  neces- 
sary and  proper  one,  and  within  our  power  to  enact,  I  see  plain  before 
me  the  path  of  duty,  and  one  that  it  is  easy  to  tread. 

This  bill  became  the  act  of  February  25,  1862. 


TAXATION    OF    BAKK   BILLS. 

I^  TEE  SENATE  OF  THE  UNITED  STATES,  JANUARY  8,  1863. 

The  Senate  having  proceeded  to  the  consideration  of  tlie  bill  taxing  bank  bills 
and  all  fractional  currency,  Mr.  Sherman  said : 

Me.  President  :  I  know  it  is  difficult  in  the  midst  of  exciting  events 
to  gain  the  attention  of  the  Senate  to  a  dry  question,  full  of  difficulty 
and  details ;  yet  everything  afiecting  the  currency  of  the  country  is 
now  so  sensitively  felt,  and  involves  so  intimately  tlie  safety  and  wel- 
fare of  the  country,  that  I  know  the  Senate  will  pardon  me  for  dis- 
cussing the  policy  of  taxing  the  circulation  of  bank  bills.  The  subject 
has  been  twice  submitted  to  us  by  the  Secretary  of  the  Treasury.  He 
regards  the  measure  as  of  the  highest  importance.  In  his  annual  I'eport 
one  year  ago,  and  also  in  his  recent  report,  he  has  stated  his  view  of  it. 
He  believes  that  the  existing  bank  circulation  prevents  or  embarrasses 
the  process  of  funding,  by  which  alone  the  bonds  of  the  United  States 
can  be  absorbed,  and  by  which  alone  money  can  now  be  obtained  from 
the  people.  I  will  not  read  the  extracts  from  his  report,  because  they 
are  familiar,  no  doubt,  to  Senators. 


TAXATION  OF  BAJs^K  BILLS.  33 

At  the  last  session  of  Congress  I  submitted  a  measure  somewhat 
similar  to  this,  in  the  form  of  an  amendment  to  the  revenue  bill,  but 
it  was  postponed  rather  than  defeated.  The  bill  I  now  introduce  con- 
tains but  two  sections  :  the  first  proposes  to  levy  a  tax  of  two  per  cent, 
on  the  circulation  of  all  bank  bills ;  the  second  provides  for  a  tax  of 
ten  per  cent,  on  all  fractional  currency  under  one  dollar,  issued  by  cor- 
porations or  by  individuals.  I  propose,  in  the  first  place,  to  examine 
this  proposition  purely  as  a  question  of  taxation,  before  stating  its 
effect  upon  the  currency  of  the  country. 

In  the  outset,  it  is  necessary  for  us  to  remember  the  distinction 
between  the  ordinary  process  of  banking  and  the  issuing  of  bank  bills. 
The  business  of  banking  proper  consists  in  loaning  money,  discounting 
bills,  facilitating  exchanges  of  productions  by  the  agency  of  commer- 
cial paper,  and  in  receiving  and  disbursing  the  deposits  of  individuals. 
The  issue  of  bank  bills  is  an  exclusive  privilege,  conferred  only  upon 
comparatively  few  corporations.  It  is  a  privilege  that  an  individual 
cannot  enjoy.  No  person  can  issue  his  bills  in  the  form  of  paper  money 
without  an  express  corporate  franchise,  granted  to  him  either  by  a  gen- 
eral banking  law  or  by  an  act  of  incorporation.  All  the  business  of 
banking  may  be  exercised  by  private  individuals,  except  this  franchise. 
There  is  no  reason  why  any  one  may  not  carry  on  all  the  business  in- 
cident to  banking,  except  this  one  of  issuing  bills  to  circulate  as  money. 
Indeed,  the  largest  banking  houses  in  this  country  and  in  the  world  do 
not  exercise  the  privilege  of  issuing  bills.  AVe  know  that  the  Roth- 
schilds, the  Barings,  Mr.  Peabody,  one  of  onr  own  distinguished  citi- 
zens in  England,  and  our  heaviest  banks  in  this  country,  do  not  exer- 
cise it.  The  Bank  of  Commerce  of  ISTew  York,  with  a  capital  of 
$9,000,000,  has  now  less  than  $2,000  of  circulation  ;  and  nearly  all  the 
leading  banks  of  the  city  of  'New  York,  comprising  the  majority  of  the 
banking  capital  of  the  State  of  jSTew  York,  issue  a  comparatively  small 
amount  of  bills.  It  is  also  true  that  the  strongest  banks  issue  the  least 
number  of  bills,  and  the  weakest  banks  support  themselves  and  make 
profit  by  issuing  the  largest  quantity  of  bills.  Mr.  Chase,  in  his  report, 
states  this  proposition  very  plainly.     I  will  read  an  extract  from  it : 

Circulation  commonly  is  in  the  inverse  ratio  of  solvency.  Well-foimded  insti- 
tutions, of  large  and  solid  capital,  have  in  general  comparatively  little  circulation  ; 
while  weak  corporations  almost  invariably  seek  to  sustain  themselves  by  obtaining 
from  the  people  the  largest  possible  credit  in  this  form.  Under  such  a  system,  or 
rather  lack  of  system,  great  fluctuations  and  heavy  losses  in  discounts  and  exclianges 
are  inevitable ;  and  not  unfrequently,  through  failures  of  the  issuing  institutions, 
considerable  portions  of  the  circulation  become  suddenly  worthless  in  the  hands  of 
the  people. 

In  the  "West,  where  capital  is  not  abundant,  we  have  suffered  more 
from  a  system  of  banking  operations  than  from  any  other  financial 
cause.  Banks  have  been  i'ounded  often  upon  no  capital,  or  upon  ficti- 
tious capital ;  sometimes  upon  bonds  purchased  on  credit ;  and  then, 
after  they  have  spread  their  notes  all  over  the  country,  filling  the  pock- 
ets of  the  people  with  a  worthless  currency,  they  suddenly  explode, 
and  the  note-holders  suffer  the  entire  loss.  It  is  true  that  in  the  older 
States,  where  capital  is  more  abundant,  they  have  a  better  system  of 
3 


34  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

banking  ;  but,  after  all,  it  will  be  found  that  tlie  weakest  banks  issue 
the  most  notes.  The  strongest  banks  do  without  this  privilege,  or  use 
it  lightly.  All  the  leading  banks  in  this  country  which  have  ample 
caj^ital  may  dispense  with  tlie  privilege  of  issuing  bank  bills  with  but 
little  inconvenience  ;  while  those  of  small  capital,  dependent  upon  their 
circulation,  may  very  properly  give  way  to  private  bankers,  who  carry 
on  their  oj)erations  entirely  with  other  currency  and  uj)on  individual 
responsibility. 

The  business  of  banking  proper  is  very  heavily  taxed  by  our  excise 
law.  It  will  be  found  by  reference  to  the  tax  bill  that  all  commercial 
paper — checks,  drafts,  orders,  bills  of  exchange,  foreign  and  inland, 
protests,  certificates,  bonds,  powers  of  attorney — every  instrument  that 
is  used  in  the  ordinary  process  of  banking — is  heavily  taxed,  while 
bank  bills  are  not  taxed  at  all.  This  is  a  discrimination,  it  seems  to 
me,  that  is  very  unjust. 

When  a  private  banker  undertakes  to  do  business,  he  has  first  to 
apply  for  a  license  to  carry  on  the  ordinary  operations  of  banking,  and 
for  that  license  he  pays  $100.  But  a  bank  of  circulation  is  expressly 
exemjjted  from  the  necessity  of  procuring  a  license.  While  all  the 
ordinary  functions  of  bankmg,  all  those  that  are  useful  to  the  people, 
and  which  are  purely  voluntary — the  operations  of  loans,  discounts, 
exchanges,  and  deposits — are  taxed  for  license,  the  business  of  issuing 
paper  money,  which  may  alone  be  done  by  corporations  chartered  un- 
der general  or  special  laws,  pays  no  license.     I  will  read  the  clause  : 

Bankers  shall  pay  $100  for  each  license.  Every  person  shall  be  deemed  a 
banker  within  the  meaning  of  this  act  who  keeps  a  place  of  business  where  cred- 
its are  opened  in  favor  of  any  person,  firm,  or  corporation,  by  the  deposit  or  col- 
lection of  money  or  currency,  and  the  same  or  any  part  thereof  shall  be  paid  out 
or  remitted  upon  the  draft,  check,  or  order  of  such  creditor,  but — 

Mark  you — 

liut  not  to  include  incorporated  "banlcs  or  other  tanlcs  legally  authorized  to  issue 
notes  as  circulation. 

All  other  banks  and  bankers,  whether  they  are  incorporated  or  not, 
whether  they  are  associated  together  or  not,  have  to  get  a  license ;  and 
there  is  an  express  reservation  and  exception  in  favor  of  banks  author- 
ized to  issue  paper  money.  ISTow,  why  is  this  ?  Is  there  any  reason 
for  it  ?     I  think  there  is  none. 

Again,  sir,  take  the  stamp  taxes.  Every  commercial  instrument  must 
be  stamped.  If  I  issue  my  note  for  $100,  I  must  place  on  that  note  a 
stamp  in  order  to  make  it  valid.  I  then  must  pay  interest  on  that  note. 
If  I  invest  the  proceeds  in  any  kind  of  business,  I  must  pay  a  tax  upon 
that  business,  first  in  the  form  of  a  license,  and  then  in  the  form  of  a 
tax  upon  the  production.  After  that,  I  must  pay  a  tax  upon  my  profit. 
The  stamp  tax  attaches  to  every  form  of  commercial  instrument.  Why 
should  it  not  attach  to  a  bank  bill  ?  And  yet,  by  another  provision  of 
the  revenue  law,  which  I  will  read,  banks  of  issue  are  expressly  ex- 
empted from  this  tax.  In  the  section  providing  for  stamp  duties 
occurs  this  clause  : 


TAXATION  OF  BANK  BILLS.  35 

Bill  of  exchange  (inland),  draft,  or  order  for  the  payment  of  any  sum  of  money 
exceeding  twenty  and  not  exceeding  one  hundred  dollars,  otherwise  than  at  sight 
or  on  demand,  or  any  promissory  note,  except  lanlc  notes  issued  for  circulation,  for 
a  sum  exceeding  twenty  and  not  exceeding  one  hundred  dollars,  five  cents  ;  exceed- 
ing one  hundred  dollars  and  not  exceeding  two  hundred  dollars,  ten  cents,  etc. 

]^ow,  why  should  there  be  this  discrimination  ?  I,  as  an  individual, 
must  pay  these  stamp  duties  ;  a  banker  doing  business  must  pay  them  ; 
a  person  who  has  embarked  his  credit  in  the  most  necessary  pursuit, 
having  no  special  privileges  whatever,  must  attach  a  stamp  to  his  note 
when  he  issues  it  in  any  form,  whether  in  the  form  of  a  certificate,  a 
promissory  note,  a  bill  of  exchange,  or  in  any  of  the  multiplied  forms 
of  commercial  paper.  There  is  no  way  in  which  he  can  issue  his  note, 
whether  bearing  interest  or  not,  whether  ^^ayable  on  demand  or  not,  in 
which  it  is  not  taxed  'by  the  Government ;  and  yet  a  note  issued  by  a 
bank  incorporated  with  special  privileges  is  expressly  exempted  from 
the  operations  of  this  law.  Why  is  this,  Mr.  President  1  There  is  no 
reason  for  it. 

The  only  tax  levied  by  this  act  on  banks  of  circulation  is  the  tax  of 
three  per  cent,  on  the  net  income,  and  that  tax  is  deducted  from  the 
dividend  to  the  stockholders.  I  venture  the  assertion  that  there  is  no 
interest  in  this  country  so  lightly  taxed  as  banks  of  circulation.  Three 
per  cent,  on  the  net  income  :  how  much  is  that  ?  It  is  only  fifteen 
cents  on  $100  of  circulation.  Contrast  the  tax  imposed  on  an  ordinary 
manufacturer  with  the  tax  imposed  on  a  bank.  A  man  is  engaged  in 
the  business  of  production,  that  which  adds  to  the  wealth  of  the  coun- 
try ;  he  is  converting  the  raw  material  into  something  necessary  to 
sustain  life  :  what  process  of  taxation  is  he  subjected  to  (and  very 
properly,  for  I  do  not  object  to  the  taxes)  ?  He  first  has  to  get  a 
license  for  his  employment ;  he  then  invests  his  capital  in  real  estate 
or  machinery,  which  is  taxed.  If  he  issues  his  note,  check,  or  other 
commercial  paper,  he  must  attach  a  stamp  to  it ;  he  must  then  pay 
three  per  cent,  on  the  entire  product  of  his  business — not  three  per 
cent,  on  his  profits,  but  three  per  cent,  on  his  entire  production,  often 
greater  than  his  capital ;  and  if  he  should  make  any  profits,  he  must 
pay  three  per  cent,  on  his  profits.  That  is  the  process  of  taxation  to 
which  we  compel  a  manufacturer  to  submit. 

How  is  it  with  the  bank  of  circulation  ?  The  bank  of  circulation 
carries  on  its  mammoth  business  without  paying  any  license ;  it  issues 
its  note  without  paying  any  stamp-duty  ;  it  circulates  that  note  without 
interest ;  it  does  not  pay  that  note  in  specie  ;  it  does  not  pay  three  per 
cent,  on  its  production,  its  manufactured  article  of  papei-  money.  It 
only  pays  three  per  cent,  on  its  profits.  IS'or  is  that  all.  It  is  not  three 
23er  cent,  on  the  gross  profits  of  the  bank,  but  three  per  cent,  on  the  net 
profits  of  the  bank ;  after  every  expense  that  may  be  conjured  up,  sala- 
ries, fees,  employments,  is  deducted  from  the  profits,  the  balance  is 
subjected  to  the  insignificant  tax  of  three  per  cent.  This  is  all  the 
revenue  paid  by  such  banks  on  their  exclusive  franchise.  Even  that 
little  tax,  by  the  express  provisions  of  the  law,  may  be  deducted  from 
the  dividend  of  the  stockholder ;  and  the  stockholder  does  not  pay  the 
tax  twice,  because  this  is  deducted  from  his  own  income  tax. 


36  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

Mr.  President,  I  can  nin  this  comparison  fui'tlier,  and  show  that  in 
all  the  employments  of  life  there  is  a  discrimination  in  favor  of  the 
bank  of  circulation.  It  is  not  in  favor  of  corporations,  because  corpo- 
rations are  heavily  taxed  by  this  law.  Let  us  look.  Kailroad  compa- 
nies pay  three  per  cent,  on  the  gross  receipts  from  passengers.  The 
receipts  of  a  road  for  passengers  are  sometimes  one-fifth  of  its  capital 
stock.  Railroad  companies  pay  three  per  cent,  on  the  gross  receipts 
from  passengers,  without  any  deduction.  Insurance  companies  pay  one 
per  cent,  on  their  gross  receipts,  and,  as  was  stated  in  debate  here  last 
spring,  the  annual  receipts  of  an  insurance  company  are  often  equal  to 
the  capital  out  of  which  they  have  to  pay  their  losses.  So  here  is  a 
tax  on  insurance  companies,  confessedly  among  the  most  useful  institu- 
tions in  the  country,  of  one  j)er  cent,  on  their  gross  receipts,  which  is 
equivalent  to  ten  per  cent,  on  their  profits.  Then  how  is  it  as  to  sala- 
ries ?  We,  as  Senators,  receive  $3,000  a  year,  and  we  pay  a  tax  of 
three  per  cent,  on  our  gross  salary  ;  and  there  is  no  deduction  made  for 
our  very  necessary  expenses,  though  I  suppose  most  of  us  have  none  of 
the  $3,000  left  when  we  go  home.  The  tax  is  levied  on  the  gross 
salary. 

'No'w,  how  is  it  with  a  private  citizen  ?  After  payment  of  the  taxes 
assessed  upon  property  and  employments,  the  taxes  on  stamps  and 
licenses,  there  must  still  be  paid  a  tax  of  from  three  to  five  per  cent, 
on  gross  incomes  over  $600.  And  yet,  although  all  classes  of  the  com- 
munity— corporations,  citizens,  men,  women,  and  children — bear  with 
patience  this  heavy  rate  of  taxation,  banks  of  circulation  having  exclu- 
sive privileges,  having  the  franchise  of  making  money  and  issuing 
promises  to  pay  without  paying  interest  upon  them,  pay  but  three  per 
cent,  on  their  net  profits  from  circulation,  and  even  that  is  deducted 
from  dividends  to  the  stockholders.  This  is  an  unequal,  unjust  system 
of  taxation,  and  should  be  corrected. 

There  are  reasons  which,  to  my  mind,  are  very  potent  why  the  taxes 
on  banks  of  circulation  should  be  heavier  instead  of  lighter  than  those 
on  other  employments.  The  force  of  them,  I  think,  will  be  j^erceived 
when  I  state  them.  We  know  very  well  that  the  profits  on  the  issue 
of  bank  notes  are  now  vastly  increased.  I  have  a  statement  before  me 
which  shows  that  the  average  profits  of  the  banks  of  the  State  of  JSTew 
York  in  the  last  year  were  twelve  and  a  half  per  cent. — a  very  heavy 
profit.  This  profit  is  this  year  greater  than  usual.  We  all  know  that 
the  business  created  by  the  war,  the  unusual  activity  in  commercial 
credits,  has  been  very  profitable  to  the  banks. 

But  that  is  not  all.  The  burdens  imposed  upon  the  banks  by  their 
charters  have  been '  lessened  by  the  suspension  of  specie  payments. 
When  a  bank  had  to  keep  in  its  vaults  coin  to  the  amount  of  one  third 
of  its  circulation  in  order  to  redeem  that  circulation,  when  it  was  liable 
at  any  day  to  be  called  upon  for  the  redemption  in  gold  and  silver  of 
every  dollar  of  it,  that  was  a  burden  which  very  much  lessened  the  profits. 
But  now  there  is  no  such  liability,  and  there  is  no  such  responsibility. 
Whether  right  or  wi'ong,  we  know  that  all  these  banks  have  suspended 
specie  payments,  and  now  practically  put  upon  the  people  their  currency 
without  paying  either  principal  or  interest.     I  say,  therefore,  they  ought 


TAXATION  OF  BANK  BILLS.  37 

to  be  tcaxed  more  lieavilj  than  other  employments  in  life.  Why,  sir,  I 
remember  very  well — and  some  of  the  Senators  here  remember  it  also 
— an  interview  which  was  sought  by  the  bankers  of  our  chief  commer- 
cial cities — all  of  them  intelligent  and  patriotic  men — with  the  Secre- 
tary of  the  Treasury,  to  which  they  invited  the  financial  committees  of 
the  two  Houses  to  hear  their  proposition  for  carrying  on  the  financial 
operations  of  this  Government.  We  all  went  to  the  oflice  of  the  Sec- 
retary of  the  Treasury,  and  the  proposition  was  there  made  that  the 
United  States  should  issue  no  paper  money  whatever ;  that  the  specie 
clause,  as  it  is  called,  of  the  Sub-Treasury  law  should  be  repealed ;  and 
that  we  should  carry  on  the  war  upon  the  basis  of  the  paper  money  of 
the  banks,  legalizing  the  suspension  of  specie  payments,  and  that  the 
Government  should  issue  no  paper  except  upon  an  interest  of  six  per 
cent.,  or  higher,  if  the  money  markets  of  the  world  demanded  more. 
That  was  their  plan  of  finance — the  plan  substantially  adopted  in  the 
war  of  1812,  and  which  has  been  condemned  by  every  statesman  since 
that  time — a  plan  of  carrying  on  the  operations  of  this  great  Govern- 
ment by  an  association  of  banks  over  which  we  had  no  control,  and 
which  could  issue  money  witliout  limit  so  far  as  our  laws  affected  it. 
That  was  the  scheme  presented  to  us  by  those  very  intelligent  gentlemen. 

But,  Mr.  President,  what  are  the  objections  to  this  tax  ?  for  this  sub- 
ject has  been  conversed  about,  and  I  bring  the  matter  to  the  attention 
of  the  Senate  now,  in  order  that  we  may  anticipate  these  objections, 
and  excite  others,  if  they  exist.  It  is  objected  that  this  tax  interferes 
with  vested  rights.  If  I  understand  it,  all  the  taxes  that  are  now  levied 
by  the  Government  are  to  maintain  vested  rights  in  property,  liberty, 
and  life.  They  are  not  to  interfere  with  vested  rights.  Why,  sir, 
every  private  citizen  holds  his  property  subject  to  the  power  of  taxa- 
tion, and  Congress  must  designate  the  objects  of  taxation.  When,  after 
a  man  buys  a  farm,  a  new  tax  is  imposed  upon  it,  as  a  matter  of  course 
that  impairs  to  some  extent  the  value  of  the  farm.  And  is  the  franchise 
of  a  coi-poration  more  sacred  property  than  the  franchise  of  an  indi- 
vidual, the  right  which  he  possesses  under  the  laws  to  hold  his  land  as 
property  ?  K ot  at  all.  All  these  corporate  franchises  are  held  subject 
to  the  power  of  taxation  in  Congress,  which  is  sometimes  necessary  to 
be  exercised  in  the  most  potent  manner  in  order  to  maintain  the  Gov- 
ernment. The  States  cannot  by  an  act  of  incorporation  place  their 
property  beyond  the  power  of  Congress.  A  State  may,  by  law,  make 
a  contract  with  individuals  which  it  cannot  impair  by  taxation ;  but  it 
cannot  thus  affect  the  power  of  Congress. 

But  it  is  said  this  tax  discriminates  against  banks.  Every  tariff  and 
revenue  act  discriminates  in  the  objects  of  taxation.  The  law  that  we 
passed  at  the  last  session  discriminates  between  the  various  employ- 
ments of  life ;  it  has  a  multitude  of  taxes,  some  higher,  some  lower. 
The  only  limitation  upon  the  power  of  Congress  on  that  subject  is,  that 
the  taxes  must  be  uniform ;  that  is,  a  tax  that  applies  in  Vermont  must 
also  apply  in  Louisiana ;  a  tax  that  is  imposed  on  the  people  of  Ohio 
must  also  be  imposed  on  the  people  of  I^^ew  York  ;  but  the  objects  of 
taxation  may  be  selected  by  Congress  according  to  its  wisdom,  and 
taxes  may  be  higher  on  one  business  and  lower  on  another. 


38  SPEECHES  AND  REPOETS  OF  JOHN  SHEPvMAN. 

The  only  question  witli  me  in  this* matter  is  what  rate  of  taxation 
ought  to  be  adopted.  Is  two  per  cent,  too  high  1  I  think  it  is  not,  be- 
cause it  is  only  one  third  of  the  profit  derived  from  the  issue  of  paper 
money  without  interest,  the  principal  of  which  is  not  now  paid  in  coin. 
The  tax  on  fractional  currency  is  upon  a  different  basis.  By  an  act 
passed  at  the  last  session  it  was  made  a  crime  for  individuals  and  cor- 
porations to  issue  fractional  currency,  and  yet  we  know  this  statute 
cannot  be  enforced.  It  ought  to  be  repealed.  One  of  the  judges  of 
the  Supreme  Court  of  the  United  States  has  cast  doubts  upon  its  con- 
stitutionality. I  will  not  discuss  that  question  now,  but  certain  it  is 
that  a  law  which  is  openly  violated  with  impunity  by  all  classes  of  citi- 
zens ought  not  to  remain  upon  the  statute  book.  Yet  how  are  we  to 
check  the  issue  of  this  fractional  currency  except  by  taxation  ?  Every- 
body knows  that  the  issue  of  shinplasters,  as  they  are  commonly  and 
ignominiously  but  very  properly  called,  is  injurious  in  every  sense  and 
ought  to  be  abolished.  Now,  however,  all  kinds  of  corporations  are 
issuing  them.  We  ought  to  get  rid  of  them,  but  how  can  it  be  done 
except  by  taxation  ?  The  tax  proposed  by  this  bill  is  ten  per  cent,  on 
fractional  currency,  which  is  ]3robably  about  as  much  as  or  more  than 
any  one  can  make  out  of  it,  and  will  amount  really  to  a  prohibition. 
This  is  a  tax  that  can  easily  be  collected.  Fractional  currency  is  issued 
either  by  corporations  or  by  wealthy  bankers  scattered  over  the  coun- 
try. If  they  violate  the  law  by  issuing  it,  they  usually  have  prop- 
erty, for  without  property  their  shinplasters  would  not  be  taken ; 
and,  if  they  have  property,  we  can  very  easily,  through  the  machinery 
we  have  now  organized,  collect  the  tax,  even  if  it  is  a  high  one.  Un- 
der the  operations  of  this  bill  you  will  have  a  simple  remedy,  and  I 
think  an  efficient  one,  to  cure  the  issue  of  fractional  currency,  and  at 
the  same  time  to  levy  a  reasonable  contribution  on  banks  of  circula- 
tion. 

Mr.  President,  I  have  thus  stated  this  question  simply  as  a  question 
of  taxation ;  but  I  should  not  be  candid,  I  should  not  state  my  real 
purpose,  if  I  did  not  say  frankly  that  I  have  another  and  a  much  high- 
er object  than  this  to  accomplish.  The  purpose  of  this  bill  is  to  induce 
the  banks  of  the  United  States  to  withdraw  their  bank  paper,  in  order 
to  substitute  for  it  a  national  currency,  or  rather  the  national  currency 
we  have  already  adopted.  This,  sir,  is  not  a  new  object.  I  might 
read  to  you  from  volumes  of  speeches  of  our  greatest  statesmen,  from 
the  foundation  of  this  Government,  to  show  you  that  the  establishment 
of  a  national  currency,  based  upon  the  laws  of  Congress,  either  of  gold, 
or  silver,  or  in  some  other  form,  has  ever  been  regarded  as  indispensa- 
ble to  the  prosperity  of  the  country.  When  the  currency  can  be  regu- 
lated by  a  number  of  States,  and  under  a  multitude  of  laws,  it  is  impos- 
sible to  have  it  uniform,  stable,  and  sound.  The  first  Bank  of  the 
United  States  was  expressly  advocated  upon  this  ground  by  Mr.  Hamil- 
ton and  all  those  who  sujjported  it ;  as  was  also  the  second  Bank  of 
the  United  States  by  Mr.  Madison,  from  whose  message  of  December 
5,  1815,  I  will  read  a  short  extract  to  show  you  that  the  statesmen  of 
that  time  regarded  the  establishment  of  a  uniform  national  currency  as 
the  highest  object  of  legislation.     Mr.  Madison  said : 


TAXATION   OF  BANK   BILLS.  39 

It  is,  however,  essential  to  every  modification  of  tlie  finances  that  the  benefits 
of  a  uniform  national  currency  should  be  restored  to  the  community.  The  absence 
of  the  precious  metals  will,  it  is  beheved,  be  a  temporary  evil ;  but,  until  they  can 
again  be  rendered  the  general  medium  of  exchange,  it  devolves  on  the  wisdom  of 
Congress  to  provide  a  substitute  which  shall  equally  engage  the  confidence  and 
accommodate  the  wants  of  the  citizens  throughout  the  Union. 

This  is  a  statement  of  the  whdle  matter.  When  coin,  the  l)est 
national  currency,  is  driven  out  of  circulation  by  the  existence  of  war 
or  extraneous  circumstances,  then  it  is  the  duty  of  Congress  to  provide 
a  substitute.  Congress  did  at  that  time  provide  a  substitute  by  estab- 
lishing the  Bank  of  the  United  States.  All  the  State  banks  shortly 
afterward  exploded,  and  almost  the  entire  issue  outstanding  at  the  time 
this  message  was  written  fell  as  a  loss  to  the  people  of  the  United 
States.  The  Bank  of  the  United  States  did  furnish,  for  a  while,  a 
stable  currency.  After  its  charter  expired,  the  controversy  was  between 
gold  and  silver  as  a  national  currency  and  paper  money.  Nearly  all 
the  statesmen  of  that  time  believed  that  it  was  necessary  to  have  a 
national  currency  in  some  form,  but  there  was  a  party  in  the  country 
that  believed  the  only  true  national  currency  was  bullion — gold  and 
silver  coin.  After  a  controversy  that  I  will  not  review,  because  it  is 
familiar,  we  know  that  the  Sub-Treasury  system  was  finally  adopted. 
The  Government  had  no  occasion  to  appeal  to  the  people  for  credit ; 
its  debt  was  paid  off,  and  there  was  a  large  surplus  in  the  Treasury, 
which  was  distributed  among  the  States.  The  agency  of  a  United 
States  Bank  was  no  longer  necessary  to  sustain  the  public  credit.  The 
object  then  was  to  establish  a  stable  national  currency.  The  State 
banks  had  failed  to  accomplish  the  purposes  for  which  they  were  in- 
tended ;  their  notes  were  mostly  lying  dead  in  the  hands  of  the  people, 
entirely  worthless,  useless  either  as  a  currency  or  as  an  investment. 
Therefore,  I  think  wisely,  the  Sub-Treasury  system  was  adopted,  and 
gold  and  silver  coin  was  made  the  only  national  currency.  I  believe 
that  is  the  true  policy.  If  peace  were  restored  to  this  country,  we 
ought  as  soon  as  possible  to  go  back  to  the  basis  of  gold  and  silver  coin  ; 
but,  in  the  mean  time,  we  must  meet  the  exigencies  of  the  hour.  Paper 
money  is  now  a  necessity.  Gold  and  silver  are  hoarded.  War  always 
has  led,  and  always  will  lead,  to  the  hoarding  of  the  precious  metals. 
Gold  and  silver  flee  from  a  state  of  war.  Every  nation  in  modern 
times,  since  paper  money  has  been  recognized  as  an  agency,  has  resorted 
to  it  in  times  of  trial,  it  was  the  old  continental  cuiTency  that  carried 
our  fathers  through  the  Eevolution;  and,  although  it  was  afterward 
depreciated  and  d'ishonored,  I  could  show  you,  by  the  opinions  of  the 
eminent  statesmen  of  the  time,  that  but  for  that  paper  money  the  colo- 
nies would  have  been  entirely  overwhelmed  by  the  British  power.  It 
was  only  by  the  use  of  paper  money  that  England  maintained  her 
gigantic  wars  with  Kapoleon.  At  several  periods  during  the  wars  of 
England  with  Napoleon,  gold  and  silver  were  at  a  greater  premium  in 
England  than  they  are  now  in  this  country.  It  was  only  by  paper 
money  issued  substantially  by  the  Government,  or  by  the  Bank  of 
England,  which  is  but  an  agent  of  the  Government,  that  those  wars 
were  maintained. 


40  SPEECHES  AND  EEPOETS  OF  JOHN  SHEEMAN. 

There  can  be  no  doubt  about  the  power  of  Congress  on  this  sub- 
ject ;  and,  in  order  to  fortify  my  oj)inion  and  show  that  the  whole 
question  has  been  examined  by  much  wiser  men,  I  will  read  an  extract 
from  the  report  of  Mr.  Dallas,  in  December,  1815.  I  read  this  short 
extract  to  show  that  never  was  the  exclusive  power  of  Congress  over 
the  currency  denied  even  by  those  gentlemen  who  were  in  favor  of 
gold  and  silver  as  the  standard  of  all  values.  Mr.  Dallas,  in  his  famous 
report  made  in  December,  1815,  says  : 

By  the  Constitution  of  the  United  States,  Congress  is  expressly  vested  with 
t1je  power  to  coin  money,  to  regulate  the  value  of  domestic  and  foreign  coins  in 
circulation,  and  (as  a  necessary  implication  from  positive  provisions)  to  emit  bills 
of  credit;  while  it  is  declared  by  the  same  instrument  that  " no  State  shall  coin 
monej%  or  emit  bills  of  credit."  .  .  .  The  Constitutional  authority  to  emit  bills 
of  credit  has  also  been  exercised  in  a  qualified  and  hmited  manner.  During  the 
existence  of  the  Bank  of  the  United  States,  the  bills  or  notes  of  the  corporation 
were  declared  by  law  to  be  receivable  in  all  payments  to  the  United  States ;  and 
the  Treasury  notes,  which  have  been  since  issned  for  the  services  of  the  late  war, 
have  been  endowed  with  the  same  quality.  .  .  . 

The  constitutional  and  legal  foundation  of  the  monetary  system  of  the  United 
States  is  thus  distinctly  seen;  and  the  power  of  the  Federal  Government  to  insti- 
tute and  regulate  it,  whether  the  circulating  medium  consist  of  coin  or  of  bills  of 
credit,  must,  in  its  general  policy,  as  well  as  in  the  terms  of  its  investment,  be 
deemed  an  exclusive  power.  It  is  true  that  a  system  depending  upon  the  agency 
of  the  precious  metals  will  be  affected  by  the  various  circumstances  which  diminish 
their  quantity  or  deteriorate  their  quality.  The  coin  of  a  State  sometimes  vanishes 
under  the  influence  of  political  alarms,  sometimes  in  consequence  of  the  explosion 
of  mercantile  speculations,  and  sometimes  by  the  drain  of  an  unfavorable  course  of 
trade.  But,  whenever  the  emergency  occurs  that  demands  a  change  of  system,  it 
seems  necessarily  to  follow  that  the  authority  which  was  alone  competent  to  estab- 
lish the  national  coin  is  alone  competent  to  create  a  national  substitute. 

These  extracts  from  a  document  of  great  ability  state  the  whole 
question  in  a  few  words.  Congress  has  the  power  to  regulate  com- 
merce ;  Congress  has  the  power  to  borrow  money,  which  involves  the 
power  to  emit  bills  of  credit ;  Congress  has  the  power  to  regulate  the 
value  of  coin.  These  powers  are  exclusive.  When,  by  the  force  of 
circumstances  beyond  our  control,  the  national  coin  disappears,  either 
because  of  war  or  of  other  circumstances.  Congress  alone  must  furnish 
the  substitute.  No  State  has  the  power  to  interfere  with  this  exclu- 
sive power  in  Congress  to  regulate  the  national  currency,  or,  in  other 
words,  to  provide  a  substitute  for  the  national  coin. 

I  think,  Mr.  President,  it  is  possible  that  the  specie  standard 
might  have  been  maintaine'd  in  this  country  ;  but,  in  order  to  do  it,  we 
should  have  had  to  resort  to  very  desperate  measures.  This  war  might 
have  been  carried  on  with  such  a  standard ;  but,  in  order  to  do  it,  it 
would  have  been  necessary  to  reduce  every  expense  to  the  lowest  possi- 
ble amount.  Instead  of  raising  the  pay  of  our  soldiers,  we  should  have 
had  to  reduce  it.  We  should  have  had  to  depend  upon  conscription 
laws.  Kecognizing  the  great  difficulties  that  surrounded  us,  we  should 
have  had  to  regard  the  whole  property  of  the  people  of  the  United 
States  and  all  their  physical  energy  as  the  proper  means  to  put  down 
the  rebellion,  and  we  should  have  had  to  seize  them  by  force.  I  am 
not  sure  now  but  that  it  would  have  been  better  to  meet  this  struggle 
at  the  outset  by  the  use  of  these  strong  measures — by  a  frank  appeal 


TAXATION  OF  BANK  BILLS.  41 

to  the  people ;  by  tlie  passage  of  a  strict  conscription  law,  founded 
upon  just  principles,  something  after  the  model  of  the  French  law ;  by 
the  reduction  of  all  salaries ;  by  an  appeal  to  force  ;  and  by  hurling  the 
vast  power  of  the  loyal  people  of  the  United  States  against  the  rebels 
in  arms  against  their  authority. 

But,  Mr.  President,  we  know  that  that  was  not  in  accordance  with 
the  sense  of  our  constituents ;  it  was  not  in  accordance  with  the  sense 
of  either  House  of  Congress.  They  preferred,  on  the  other  hand,  to 
pay  liberally  to  all ;  and  instead  of  reducing,  in  almost  every  case  they 
increased  the  salaries  of  officers  of  the  Government,  and  wasted,  I  fear 
lavishly,  much  of  the  money  of  the  people  at  the  outset  of  this  war. 
We  were  driven  to  the  use  of  paper  money ;  we  have  to  resort  to  it 
now ;  we  must  depend  upon  it ;  we  cannot  get  along  without  it.  All 
we  can  do  is,  in  making  use  of  it,  to  throw  around  it  every  guard  and 
check,  to  make  the  amount  issued  as  small  as  possible,  and  to  drive  out 
of  circulation  that  which  tends  to  depreciate  and  destroy  its  value. 

The  question  then,  Mr.  President,  is  not  between  coin  and  paper, 
because  I  have  shown  that  we  cannot  resort  to  coin.  The  question  is 
between  a  national  currency  and  a  cuiTency  issued  by  State  corpora- 
tions, or  a  mixture  of  both. 

Now,  I  wish  to  state  very  briefly  the  objections  to  local  banks, 
which  are  obvious.  Senators  will  recognize  them  and  feel  their  force 
when  I  state  them. 

The  first  is  the  great  number  and  diversity  of  bank  charters.  There 
are  sixteen  hundred  and  forty-two  banks  in  the  United  States,  estab- 
lished by  the  laws  of  twenty-eight  different  States,  and  these  laws  are 
as  diverse,  I  was  about  to  say,  as  the  human  countenance.  They  are 
established  upon  different  bases.  We  have  the  State  bank  system  with 
its  branches.  We  have  the  independent  system,  sometimes  secured  by 
bonds,  sometimes  State  bonds,  sometimes  by  real  estate,  sometimes  a 
mixture  of  both.  We  have  every  diversity  of  the  bank  system  in  this 
country  that  has  been  devised  by  the  wit  of  man,  and  all  these  banks 
have  the  power  to  issue  paper  money.  With  this  multiplicity  of  banks, 
depending  upon  different  organizations,  it  is  impossible  to  have  a  uniform 
national  currency,  for  its  value  is  constantly  affected  by  their  issues. 
There  is  no  common  regulator ;  they  are  dependent  on  different  sys- 
tems. The  clearing-house  system  adopted  in  the  city  of  New  York 
applies  only  to  that  city.  There  is  no  check  or  control  over  these 
banks.  There  is  a  want  of  harmony  and  concert  among  them.  When- 
ever a  failure  occurs,  such  as  that  of  the  Ohio  Life  Insurance  and  Trust 
Company,  it  operates  like  a  panic  in  a  disorganized  army  ;  all  of  them 
close  their  doors  at  once  and  suspend  specie  payments. 

There  is  another  objection  to  these  local  banks,  and  it  is  one  which 
we  cannot  disregard,  and  that  is  their  unequal  distribution  among  the 
States.  In  New  England  the  circulation  of  the  banks  is  now  about 
$50,000,000,  while  in  Ohio,  a  State  with  three-fourths  of  the  popula- 
tion of  all  New  England,  it  is  but  $9,000,000.  When  you  make  the  con- 
trast with  other  States,  it  is  still  more  marked.  According  to  a  recent 
statement,  which  I  have  before  me,  the  circulation  of  banks  in  the 
Eastern  States  has   now  reached   about   $130,000,000;    and   of  that 


42  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

amount  one-third  is  computed  to  be  in  the  western  country.  I  have  no 
doubt  that  we  are  now  circulating  in  the  "West  $40,000,000  of  paper- 
money  issued  by  the  banks  of  the  East ;  and  we  are  paying  to  the  East 
the  interest  on  this  $40,000,000,  which  we  would  much  rather,  in  these 
times  of  difficulty,  pay  to  the  United  States.  The  western  people 
would  be  better  satislied  now  if  they  had  the  notes  of  the  United  States 
instead  of  these  eastern  bank  bills.  Much  of  this  money  seeks  the 
West  as  a  medium  of  exchange  for  our  agricultural  productions,  and 
the  banks  are  deriving  a  profit  of  the  interest  on  it.  If  this  paper  were 
driven  out  of  circulation,  and  United  States  notes  were  substituted,  it 
would  make  a  contribution  to  the  Treasury  of  the  United  States  of 
$2,400,000,  for  the  mere  interest  of  a  currency  which  we  do  not  prefer, 
but  are  now  comj)elled  to  use.  Losses  to  the  people  by  counterfeiting 
can  never  be  avoided  when  you  have  such  a  multitude  of  banks.  It 
requires  experts  now  to  detect  counterfeits.  People  have  made  this 
business  of  counterfeiting  so  j)erfect  that  it  is  difficult  for  the  best  ex- 
perts to  detect  a  counterfeit.  When  a  stranger  presents  a  bank  bill,  the 
person  about  to  receive  it  looks  rather  at  the  man  who  presents  it  to 
see  whether  his  face  is  honest,  than  at  the  bill  to  detect  whether  it  is 
counterfeit  or  not ;  so  that  more  depends  on  the  general  appearance  of 
the  person  presenting  a  bill,  than  on  the  appearance  of  the  bill  itself,  as 
to  its  genuineness.  It  is  imjDossible  to  prevent  counterfeiting.  Bank 
experts  may  save  the  banks,  but  loss  still  falls  upon  the  people.  You 
cannot  prevent  the  joeople  from  suffering  largely  from  counterfeiting 
when  you  have  sixteen  hundred  different  banks,  issuing  each  of  them 
several  different  kinds  of  bills,  under  the  laws  of  twenty-eight  different 
States.  On  the  other  hand,  by  the  substitution  of  the  national  cur- 
rency we  substantially  lose  nothing  by  counterfeiting.  When  the  notes 
are  few  in  kind,  only  three  or  four  of  them,  all  issued  by  the  United 
States,  all  of  a  uniform  character,  they  cannot  be  counterfeited,  because 
their  faces  will  become  so  familiar  that  every  man  will  know  a  genuine 
note ;  he  will  detect  it  in  a  moment  as  the  countenance  of  a  familiar 
friend.  But,  when  he  has  to  decide  on  the  issues  of  sixteen  hundred  banks, 
how  is  it  possible  for  an  ordinary  citizen  to  detect  the  counterfeit  ? 

The  loss  to  the  people  of  the  United  States  by  bills  of  broken  banks 
is  computed  to  be  equivalent  to  five  per  cent,  of  all  the  bills  issued. 
Every  twenty  years,  it  is  supposed,  the  entire  bank  circulation  ceases 
to  exist  or  deteriorates.  Some  banks  pass  through  the  storm  and  their 
notes  are  good,  but  probably  two  or  three  are  successively  scattered  as 
wrecks  along  the  wayside,  until  it  is  now  computed  by  intelligent 
bankers  that  the  loss  to  the  people  of  the  United  States,  over  and  above 
the  loss  of  interest,  by  broken  bank  bills,  is  five  per  cent,  per  annum. 
This  cannot  be  guarded  against  by  laws.  Why,  sir,  when  the  system 
of  free  banking  was  established  in  the  western  country,  those  who  were 
friendly  to  banks  said :  "  Now  we  have  a  stable  issue ;  we  have  bank 
bills  based  upon  the  bonds  of  the  States,  and  it  is  not  possible  that 
these  bonds  will  ever  deteriorate  in  value  and  the  people  lose  money." 
And  yet,  sir,  within  two  years  from  the  establishment  of  the  system, 
by  the  depreciation  of  the  bonds,  or  by  fraud,  these  notes  became  de- 
preciated, and  in  some  cases  entirely  worthless.     In  some  cases  the 


TAXATION   OF  BANK  BILLS.  43 

bonds  were  abstracted  ;  in  some  cases  frauds  were  committed  by  bank 
officers.  From  some  cause  or  other  the  value  of  these  notes  that  we 
all  supposed  to  be  upon  a  stable  basis  disappeared  like  snow  before  the 
summer's  sun.  The  people  are  constantly  losing  by  them,  and  you  can- 
not by  the  wisdom  of  man  guard  against  the  frauds  and  peculations, 
the  genius  of  rascality  to  which  men  engaged  in  this  business  sometimes 
resort.  I  wish  to  cast  no  reflection  whatever  on  persons  engaged  in 
banking,  but  rogues  will  naturally  resort  to  this  business,  because  it  is 
one  in  which  they  may  sometimes  by  deception  issue  worthless  prom- 
ises to  pay  without  punishment  or  exposure. 

The  loss  of  exchange  by  local  currency  is  very  great.  Ordinarilj', 
the  exchange  from  the  West  to  the  East  is  one  per  cent.  This  loss  is 
usually  made  a  gain  to  themselves  by  the  bankers  and  shavers.  In  the 
western  country  you  cannot  buy  a  draft  without  paying  this  exchange ; 
and  I  have  known  it  as  high  as  ten  per  cent.  This  difference  of  ex- 
change is  a  common  cover  for  usurious  interest.  Plain  farmers  wishing 
to  borrow  money  are  required  to  draw  drafts  on  New  York,  by  which 
contrivance  they  pay  usurious  interest.  All  this  is  a  loss  to  the  people. 
Even  in  the  most  favorable  time,  in  a  favorable  state  of  trade  between 
the  East  and  the  West,  an  exchange  of  one  per  cent,  is  demanded  for 
drafts  and  bills  of  exchange,  simply  because  the  notes  of  the  East  are 
worth  more  than  those  of  the  West.  With  a  national  currency,  uni- 
form and  equal  throughout  the  country,  this  cost  of  exchange  to  the 
people  would  not  exist. 

There  is  a  still  more  serious  objection  to  this  paper  money.  With 
a  system  of  local  banks  there  is  no  power  to  control  over-issues  and 
consequent  depreciation  of  currency.  By  enlarging  the  volume  of  cur- 
rency, the  value  of  United  States  notes  is  depreciated ;  and  even  now, 
when  the  United  States  have  issued  $250,000,000  of  notes,  the  banks 
have  increased  their  circulation. 

I  have  before  me  a  table  which  has  been  carefully  prepared,  show- 
ing that  on  the  1st  of  January,  1862,  in  the  loyal  States,  there  was  a 
circulation  of  $129,000,000.  Now  it  is  $167,000,000.  What  power 
have  you  over  this  ?  How  can  you  prevent  this  increase  ?  You  cannot 
do  it  except  by  taxation.  The  banks  are  governed  by  the  local  laws  of 
the  States  in  which  they  are  situated.  Those  local  laws  are  beyond 
your  power ;  you  have  no  way  to  reach  them  except  by  a  system  of 
taxation.  They  may  go  on  making  this  increase  from  $167,000,000  to 
$500,000,000,  until  all  the  values  in  this  country  are  destroyed,  depend- 
ing upon  a  baseless  issue,  the  redemption  of  which  you  cannot  guaran- 
tee. I  have  here,  from  the  "  Bankers'  Magazine,"  a  statement  showing 
where  this  large  increase  has  occurred.  In  the  city  of  New  York,  since 
the  1st  of  January,  there  has  been  an  increase  of  19^\  per  cent. ;  in 
the  State  of  Massachusetts  there  has  been  an  increase  of  4:1-^^  per 
cent. ;  in  the  State  of  New  Hampshire  there  has  been  an  increase  of 
27-i-|^  per  cent. ;  in  the  city  of  Philadelphia  there  has  been  an  increase 
of  1.38y3J!g-  per  cent.,  until  the  sagacity  of  the  bankers  began  to  notice 
the  increase  and  suspected  the  money  of  the  banks  issuing  the  large 
increase.  In  the  western  country,  for  local  reasons  that  I  need  not 
mention,  on  account  of  the  existence  of  the  limitations  in  the  chartei-s 


U  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

of  the  banks  of  Oliio  and  Indiana,  tliis  increase  lias  not  gone  on  so 
rapidly ;  but  even  in  Ohio  there  has  been  an  increase,  and  a  considera- 
ble one,  of  the  paj)er  money. 

And,  sir,  the  system  of  local  bank  paper  destroys  all  hope  of  a 
national  currency,  and  defeats  a  plain  provision  of  the  Constitution. 
It  is  difficult  to  resist  the  conviction  that  notes  issued  by  State  corpora- 
tions are  bills  of  credit  prohibited  by  the  Constitution  of  the  United 
States.  I  know  that  these  banks  have  existed  for  long  years,  have  been 
acquiesced  in,  and  have  been  regarded  as  established  constitutionally 
by  the  States.  I  therefore  shall  not  give  my  own  opinion  merely,  but 
shall  fortify  it  by  the  history  of  the  clause  of  the  Constitution  forbid- 
ding States  to  emit  bills  of  credit ;  I  shall  show  you  that  it  was  the 
intention  of  the  framers  of  the  Constitution  to  destroy  absolutely  all 
paper  money,  except  that  issued  by  the  United  States.  In  the  Consti- 
tution as  originally  framed,  the  States  had  power  to  emit  bills  of  credit 
and  to  make  them  a  tender  in  payment  of  debts  if  Congress  loould 
consent.  The  prohibition  was  not  absolute.  That  was  the  condition 
of  the  draft  of  the  Constitution  on  the  28th  of  August,  1787,  when  it 
appears  from  the  "  Madison  Papers  "  that 

Mr.  "Wilson  and  Mr.  Sherman  moved  to  insert,  after  the  words  "  to  coin  money," 
the  words,  "  nor  emit  bills  of  credit,  nor  make  anything  but  gold  and  silver  coin  a 
tender  in  payment  of  debts ;  "  making  these  prohibitions  absolute,  instead  of  making 
the  measures  allowable,  as  in  the  thirteenth  article,  with  the  consent  of  the  Legisla- 
ture of  the  United  States. 

Mr.  Gorham  thought  the  purpose  would  be  as  well  secured  by  the  provision 
of  article  thirteen,  which  makes  the  consent  of  the  General  Legislature  necessary, 
and  that  in  that  mode  no  opposition  would  be  excited ;  whereas  an  absolute  prohi- 
bition of  paper  money  would  rouse  the  most  desperate  opposition  from  its  partisans. 

Mr.  Sherman  thought  this  a  favorable  crisis  for  crushing  fafer  money.  If  the 
consent  of  the  Legislature  could  authorize  emissions  of  it,  the  friends  of  paper 
money  would  make  every  exertion  to  get  into  the  Legislature  in  order  to  license  it. 

The  question  being  divided — on  the  first  part,  "  nor  emit  bills  of  credit  "  : 

New  Hampshire,  Massachusetts,  Connecticut,  Pennsylvania,  Delaware,  North 
Carolina,  South  Carolina,  Georgia,  aye — 8  ;  Virginia,  no — 1 ;  Maryland,  divided. 

The  remaining  part  of  Mr.  Wilson's  and  Mr.  Sherman's  motion  was  agreed  to, 
nem.  con. 

ISTow,  Mr.  President,  I  show  you  here  that  this  prohibition  was  made 
absolute  after  consideration  and  debate,  and  upon  the  distinct  ground 
that  it  was  important  to  crush  paper  money  ;  and  therefore  the  States 
were  forbidden,  under  any  circumstances,  to  emit  bills  of  credit.  The 
same  debate  shows  that  it  was  considered  that  the  United  States  had 
the  power  to  emit  bills  of  credit  under  the  general  authority  to  borrow 
money.  That  is  undoubtedly  true.  Where  an  authority  is  conferred 
to  borrow  money,  the  securities  for  that  money  may  be  issued  in  any 
form  that  the  Legislature  prescribes  ;  and  the  States,  under  their  gen- 
eral authority  to  borrow  money,  could  emit  bills  of  credit  but  for  the 
positive  prohibition  contained  in  the  Constitution  against  that  emission. 
Thus  I  show  you,  sir,  that  in  the  outset  of  this  controversy  it  was  the 
intention  of  tlie  framers  of  the  Constitution  to  prohibit  all  paper 
money,  and  to  allow  none  whatever  unless  it  was  issued  by  Congress 
under  the  power  of  borrowing  money. 

I  will  read  also  an  extract  from  Story  on  the  Constitution,  to  show 


TAXATION   OF  BANK  BILLS.  45 

his  view  of  this  subject,     lu  the  third  vohime  of  his  "  Commentaries," 
in  discussing  this  jDrovision  of  the  Constitution,  Mr.  Story  says : 

The  prohibition  to  "  emit  bills  of  credit "  cannot,  perhaps,  be  more  forcibly- 
vindicated  tlian  by  quoting  the  glowing  language  of  the  "  Federalist,"  a  language 
justified  by  that  of  almost  every  contemporary  writer,  and  attested  in  its  trutli  by 
facts  from  which  the  mind  involuntarily  turns  away  at  once  with  disgust  and  indig- 
nation. "  This  prohibition,"  says  the  "  Federalist,"  "  must  give  pleasure  to  every  citi- 
zen in  proportion  to  his  love  of  justice,  and  his  knowledge  of  the  true  springs  of 
public  prosperity.  The  loss  which  America  has  sustained  since  the  peace  from  the 
pestilent  etfects  of  paper  money  on  the  necessary  confidence  between  man  and  man, 
on  tlie  necessary  confidence  in  the  public  councils,  on  the  industry  and  morals  of 
the  people,  and  on  the  character  of  republican  government,  constitutes  an  enormous 
debt  against  the  States  chargeable  with  this  unadvised  measure,  which  must  long 
remain  unsatisfied ;  or  rather,  an  accumulation  of  guilt,  which  can  be  expiated  no 
otherwise  than  by  a  voluntary  sacrifice  on  the  altar  of  justice  of  the  power  which 
has  been  the  instrument  of  it.  In  addition  to  these  persuasive  considerations,  it 
may  be  observed  that  the  same  reasons  which  show  the  necessity  of  denying  to  the 
States  the  power  of  regulating  coin  prove  with  equal  force  that  they  ought  not  to 
be  at  liberty  to  substitute  a  paper  medium  instead  of  coin." 

Again  he  says : 

It  was,  therefore,  the  object  of  the  prohibition  to  cut  up  the  whole  mischief  by 
the  roots,  because  it  had  been  deeply  felt  throughout  all  the  States,  and  had  deeply 
affected  the  prosperity  of  all.  The  object  of  the  prohibition  was  not  to  prohibit 
the  thing  when  it  bore  a  particular  name,  but  to  prohibit  the  tiling  whatever  form 
or  name  it  might  assume.  If  the  words  are  not  mere  empty  sounds,  the  prohibition 
must  comprehend  the  emission  of  any  paper  medium  by  a  State  government  for  the 
purposes  of  common  circulation. 

I  have  one  or  two  other  authorities  to  show  that  it  was  the  inten- 
tion of  the  framers  of  the  Constitution  to  destroy  entirely  this  system 
of  paper  money  issued  by  States ;  but  the  general  principle  is  laid  down 
sufficiently  by  Mr.  Story. 

!N^ow,  the  question  occurs,  if  the  States  cannot  emit  bills  of  credit, 
can  the  States  authorize  corporations  to  do  it  ?  Can  a  State  authorize 
that  to  be  done  by  another  which  it  cannot  do  itself  ?  Is  not  paper 
money  issued  by  a  State  corporation  a  bill  of  credit  ?  Certainly  it  is  a 
promise  to  pay  on  demand,  issued,  and  intended  to  be  issued,  as  paper 
money,  to  be  circulated  as  money.  Its  whole  existence  is  based  upon 
the  authority  of  the  State  government.  It  only  claims  this  exclusive 
franchise  by  virtue  of  an  act  of  the  State  Legislature.  Now,  I  ask,  can 
a  State  authorize  a  corporation  of  its  citizens  to  do  that  which  it  cannot 
in  its  own  power  do  itself  ?  Wliy,  sir,  the  thing  is  absm'd ;  but  by  uni- 
versal acquiescence — a  phrase  which  I  catch  from  the  honorable  gentle- 
man from  Maine  [Mr.  Fessenden] — this  infringement  has  been  passed 
along  sub  silentio,  until  these  banks  have  grown  into  a  formidable 
power,  and  now  wield,  in  conjunction  with  the  United  States,  the  dan- 
gerous power  of  making  paper  money.  In  ordinary  times,  when  the 
national  ciu-rency  was  gold  and  silver,  and  all  the  operations  of  the 
Government  were  carried  on  in  gold  and  silver,  and  these  banks  were 
mere  agencies  of  the  jieople  to  carry  on  their  private  transactions,  it 
would  not  have  been  wise  to  interfere  with  them ;  but  now,  when  it  is 
necessary  for  Congress  to  resort  to  all  the  powers  conferred  upon  it, 
when  the  country  is  involved  in  a  war  which  may  task  its  energy  and 


46  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAN. 

resources  for  years,  when  it  is  necessary  to  use  every  power  to  tlie  very 
verge  of  the  Constitution,  I  ask,  shall  we  allow  our  currency  and  our 
national  system  to  be  deranged  and  disorganized  by  that  whicli  the 
framers  of  the  Constitution  believed  they  had  guarded  against  by  a 
positive  prohibition  ? 

Mr.  President,  I  read  from  orthodox  authorities.  I  will  now  read 
from  Mr.  Webster  to  show  his  opinion  on  this  subject ;  and  I  think 
there  is  no  language  anywhere,  by  any  writer,  stronger  than  his  upon 
this  subject.  Mr.  Webster  discusses  this  whole  question  of  the  national 
currency  at  great  length,  in  a  speech  delivered  by  him  in  the  Senate  on 
the  25tli  of  May,  1832 — a  speech  I  need  not  say  of  wonderful  power, 
because  he  never  made  one  of  any  other  character,  so  far  as  I  have  read 
any  of  them.     He  says,  in  the  first  part  of  his  speech  : 

A  sound  currency  is  an  essential  and  indispensable  security  for  the  fruits  of 
industry  and  honest  enterprise.  Every  man  of  property  or  industry,  every  man 
who  desires  to  preserve  what  he  honestly  possesses,  or  to  obtain  what  he  can  hon- 
estly earn,  has  a  direct  interest  in  maintaining  a  safe  circulating  medium ;  such  a 
medium  as  shall  be  a  real  and  substantial  representative  of  property,  not  liable  to 
vibrate  with  opinions,  not  subject  to  be  blown  up  or  blown  down  by  the  breath  of 
speculation,  but  made  stable  and  secure  by  its  immediate  relation  to  that  which  the 
whole  world  regards  as  of  a  permanent  value.  A  disordered  currency  is  one  of  the 
greatest  of  political  evils.  It  undermines  the  virtues  necessary  for  the  support  of 
the  social  system,  and  encourages  propensities  destructive  of  its  happiness.  It  wars 
against  industry,  frugality,  and  economy;  and  it  fosters  the  evil  spirits  of  extrava- 
gance and  speculation.  Of  all  the  contrivances  for  cheating  the  laboring  classes  of 
mankind,  none  has  been  more  effectual  than  that  which  deludes  them  with  paper 
money.  This  is  the  most  effectual  of  inventions  to  fertilize  the  rich  man's  field  by 
the  sweat  of  the  poor  man's  brow.  Ordinary  tyranny,  oppression,  excessive  taxa- 
tion, these  bear  lightly  on  the  happiness  of  the  mass  of  the  community,  compared 
with  a  fraudulent  currency  and  the  robberies  committed  by  depreciated  paper. 
Our  own  liistory  has  recorded  for  our  instruction  enough,  and  more  than  enough,  of 
the  demoralizing  tendency,  the  injustice,  and  the  intolerable  oppression  on  the  vir- 
tuous and  well  disposed,  of  a  degraded  paper  currency,  authorized  by  law,  or  in  any 
way  countenanced  by  Government. 

That  is  what  he  says  speaking  of  the  ordinary  bank  circulation  then 
afloat  in  the  country.  He  says  further,  on  the  very  point  I  am  now 
discussing : 

It  is  further  to  be  observed  that  the  States  cannot  issue  bills  of  credit;  not 
that  they  cannot  make  them  a  legal  tender,  but  that  they  cannot  issue  them  at  all. 
Is  not  this  a  clear  indication  of  the  intent  of  the  Constitution  to  restrain  the  States, 
as  well  from  establishing  a  paper  circulation  as  from  interfering  with  the  metallic 
circulation  ?  Banks  have  been  created  by  States  with  no  capital  whatever,  their 
notes  being  put  into  circulation  simply  on  the  credit  of  the  State,  or  the  State  laAV. 
What  are  the  issues  of  such  banks  but  bills  of  credit  issued  by  the  State?  I  confess, 
Mr.  President,  that  the  more  I  reflect  on  this  subject,  the  more  clearly  does  my 
mind  approach  the  conclusion  that  the  creation  of  State  banks,  for  the  purpose  and 
with  the  power  of  circulating  paper,  is  not  consistent  with  the  grants  and  prohibi- 
tions of  the  Constitution. 

With  this  authority,  sustained  by  the  history  of  this  clause,  I  am 
willing  to  stand  upon  the  affirmation,  notwithstanding  the  long  acqui- 
escence of  our  people,  that  banks  of  circulation  authorized  by  the  States 
are  unconstitutional,  and  should  be  dispensed  with.  But  whether  this 
is  so  or  not,  even  if  the  long  acquiescence  of  our  people  has  given  them 
the  sanction  of  legal  authority,  there  is  no  doubt  that  these  banks  hold 


TAXATION  OF  BANK  BILLS.  47 

their  franchise  upon  the  same  tenure  that  people  hold  their  property, 
and  that  all  of  them  are  subject  to  the  power  of  taxation  in  Congress, 
which  should  now  be  exercised  to  maintain  and  support  the  GoverD- 
ment  in  this,  the  darkest  hour  of  its  history.  Therefore,  as  I  can  see 
that  the  gradual  reduction  or  withdrawal  of  this  paper  money,  accom- 
plished in  a  way  least  to  injure  the  interests  of  the  banks  and  of  private 
citizens,  may  strengthen  the  arm  of  this  Government,  may  give  us  a 
sound  national  currency,  may  promote  the  national  weal,  I  cannot  hesi- 
tate a  moment.  I  have  shown  you  that  Congress  has  guarded  the 
interest  of  the  banks  ;  that  it  has  exempted  them  from  the  heavy  taxa- 
tion imposed  on  the  people  ;  that  they  have  been  selected  rather  as  fa- 
vored daughters  of  the  revenue  law  than  as  those  who  have  gradually 
usurped  the  powers  conferred  only  on  Congress.  Now,  sir,  it  is  neces- 
sary to  tax  these  banks ;  to  warn  them  that  their  circulation  must  not 
be  increased,  but  must  be  withdrawn.  If  they  do  not  heed  that  warn- 
ing, then  I  am  willing  to  put  their  issues  on  the  same  footing  as  frac- 
tional issues — illegal  issues,  confessedly  so,  by  the  laws  of  the  States 
and  of  the  United  States.  I  would  prohibit  them  entirely  by  a  taxa- 
tion which  would  suspend  their  franchise.  I  do  not  think,  as  legisla- 
tors, we  ought  to  do  that  by  hasty  acts ;  but  we  can  and  should  make 
the  process  gradual.  A  tax  will  indicate  the  policy  adopted  by  Con- 
gress. 

I  know  it  has  been  said  that  if  you  drive  bank  bills  out  of  circula- 
tion you  will  disturb  all  the  business  relations  of  the  States.  I  do  not 
think  so.  The  whole  bank  issue,  as  I  have  shown  you,  was  $167,000,- 
000  in  November.  That  is  not  two  sevenths  of  the  loans  of  the  banks. 
This  circulation  could  be  gradually  withdrawn,  and  its  place  filled  with 
United  States  notes,  without  creating  a  ripple  upon  the  surface.  By 
this  withdrawal  you  would  get  rid  only  of  those  banks  which  are 
weak  and  unable  to  carry  on  the  banking  business  without  circulation. 
Why,  sir,  if  you  take  from  these  banks  the  power  to  issue  notes  for 
circulation,  do  you  not  leave  them  all  their  property  ^  Have  they  not 
their  capital  intact  ?  Have  they  not  the  power  to  carry  on  the  business 
of  exchange  and  deposit,  and  all  the  ordinary  and  usual  functions  of 
bank  agencies?  Do  you  take  anything  away  from  their  property? 
Not  at  all.  You  merely  take  away  from  them  a  franchise,  in  the  na- 
ture, it  is  true,  of  property ;  but  a  franchise  the  deprivation  of  which 
will  be  of  more  service  to  them,  and  certainly  to  the  General  Govern- 
ment, than  its  value  can  be.  If  they  would  put  their  business  upon 
the  same  footing  as  private  individuals,  they  would  gain  more  than 
they  would  lose.  If  I  owned  any  bank  of  issue  in  tliis  country  I 
would  at  once  withdraw  its  circulation,  and  stand  upon  the  same  privi- 
leges and  the  same  business  relations  that  private  individuals  do,  claim- 
ing nothing  from  corporate  privileges.  Then  the  business  of  bankers 
would  stand  like  the  business  of  other  people.  It  is  easy  now  to  excite 
a  prejudice  against  banking.  AVliy?  Simply  because  the  business 
itself  is  in  the  nature  of  an  exclusive  privilege  granted  only  to  a  select 
few,  always  sought  for  under  acts  of  the  State  Legislature ;  but,  if  you 
put  it  on  the  same  footing  as  you  do  manufacturing,  the  same  footing 
as  you  do  the  practice  of  the  law,  or  any  other  business — leave  it  open 


48  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

to  all,  and  confine  it  to  its  legitimate  operations — you  remove  all  preju- 
dice against  it.  Then  banks  would  do  here  as  tliey  do  in  Europe : 
tliey  would  carry  on  the  exchanges  of  the  country  ;  they  would  issue 
certificates  and  commercial  paper ;  they  would  aid  commerce  without 
usurping  or  exercising  any  of  that  authority  which  can  safely  be  con- 
ferred only  upon  the  Government. 

It  is  sometimes  said  that  the  experience  of  other  countries  hgs 
shown  that  banks  of  issue  are  necessary.  That  is  not  so.  The  Bank 
of  England  consists  of  two  distinct  departments — as  distinct  as  two 
dej)artments  can  be.  The  one  does  the  business  of  banking  proper, 
buys  and  sells  notes,  discounts  bills,  issues  bills  of  exchange  and  certifi- 
cates of  deposit,  receives  deposits,  and  carries  on  all  the  operations  of 
the  bank ;  the  other  department,  distinct  and  separate,  controlled  by 
law,  issues  notes  of  circulation;  and  those  notes  of  circulation  are 
based  entirely  upon  Government  securities  and  gold  and  silver.  It  is 
nothing  more  nor  less  than  this :  that  one  department  of  the  Bank  of 
England  is  an  agency  of  the  people  of  that  great  kingdom  to  issue  the 
notes  of  the  Government ;  and  that  is  all  they  are.  Every  Bank  of 
England  note  is  the  note  of  the  Government,  for  it  is  based  upon  the 
credit  of  the  Government  and  upon  gold  and  silver  coin.  It  is  regu- 
lated, controlled,  and  altered  by  the  Government.  The  bank  is  the 
agency  of  the  Government.  In  most  of  the  other  countries  of  Euroj^e 
at  present,  gold  and  silver  are  the  basis  of  all  transactions,  and  there  is 
no  difiiculty  of  carrying  on  the  largest  operations.  It  is  only  when 
people  are  compelled  to  use  unusual  resources,  when  they  are  compelled 
to  resort  to  their  credit  in  a  time  of  great  national  emergency,  that 
paper  money  is  resorted  to  in  Europe  or  is  justified  in  this  country. 

There  is  a  still  more  potent  reason,  Mr.  President,  why  this  bill 
should  be  adopted.  We  should  all  of  us  look  forward  to  the  time 
when  peace  shall  again  bless  us.  Although  this  war  must  be  continued 
to  maintain  the  national  honor,  and  I  trust  the  flag  will  never  be 
lowered  while  there  is  a  rebel  in  any  j^art  of  this  country,  yet  we  all 
hope  for  peace  ;  we  look  forward  to  that  good  time  when  our  friends 
and  kindred  shall  again  resume  the  ordinary  occupations  of  life  at 
home,  and  in  peace.  When  that  good  time  comes,  if  there  are  no 
notes  outstanding  except  the  notes  of  the  United  States,  they  would  be 
converted  into  bonds,  and  we  should  have  again  the  national  currency 
of  gold  and  silver  coin.  But,  sir,  if  you  allow  your  country  during 
this  war  to  be  flooded  with  this  paper  money,  when  peace  comes  it  will 
be  like  the  peace  with  Great  Britain  in  1815  :  it  will  only  bring  to  us 
a  commercial  war,  in  which  all  our  interests  will  be  involved  ;  the 
people  will  be  left  with  this  immense  paper  issue  upon  their  hands 
without  remedy,  and  they  will  be  compelled  to  lose  the  whole  of  it. 

If  there  was  no  money  in  this  country  but  United  States  bank  bills, 
the  process  of  funding  would  be  going  on  day  by  day.  Whenever 
there  was  too  great  an  accumulation  of  these  bills,  they  would  be  con- 
verted into  bonds ;  the  operation  would  go  on  quietly  and  silently. 
Sir,  I  say,  by  the  authority  of  the  Secretary  of  the  Treasury,  that  it  is 
his  deliberate  judgment,  after  watching  this  j^rocess  with  all  his  con- 
ceded ability,  that"  but  for  the  influence  of  this  local  bank  paper  he 


TAXATION  OF  BANK  BILLS.  49 

would  be  able  to  carry  on  this  war  without  the  issue  of  more  paper 
money  ;  that  the  currency  now  outstanding,  and  that  which  by  law  he 
is  authorized  to  issue,  would  be  sufficient  to  carry  it  on.  Such  a  cur- 
rency would  lead  to  the  conversion  of  the  notes  into  bonds,  and  by  this 
l^rocess  the  people  would  absorb  a  national  loan  and  enable  him  to 
carry  on  the  Government  without  any  sacrifice  to  them. 

Mr.  President,  you  can  see  that  the  effect  of  local  paper  money  is 
to  prevent  this  process.  What  are  the  United  States  notes?  They 
are  based  upon  the  credit  of  the  whole  people  ;  they  are  of  general 
authority  ;  they  are  receivable  in  payment  of  all  public  debts ;  they 
are  made  a  legal  tender  in  payment  of  private  deists  ;  they  may  be 
converted  at  any  time  into  six  per  cent,  bonds  ;  they  may  be  tempo- 
rarily deposited  on  interest.  They  have  all  the  priWleges,  all  the 
securities  which  the  faith  of  a  great  nation  can  give  to  them.  They 
are  eagerly  sought  for,  everywhere  taken.  They  are  only  driven  out 
of  circulation  by  the  superabundance  of  an  inferior  issue.  We  know 
it  is  a  principle  in  finance,  that  wherever  there  is  an  inferior  currency, 
it  will  fill  all  the  channels  of  circulation,  and  the  superior  will  be 
hoarded.  Why -are  gold  and  silver  now  hoarded  ?  Because  they  are 
worth  more  than  paper  money.  Why  is  United  States  paper  money 
hoarded  ?  Because  it  is  worth  more  intrinsically  than  the  local  paper 
of  the  banks,  which,  after  all,  has  only  a  local  security  and  a  local 
value  ;  and  now  all  the  channels  of  commerce  are  filled  by  this  cur- 
rency, which  the  laws  of  the  United  States  forbid  the  Secretary  of  the 
Treasury  from  taking  in  payment  of  public  dues.  If  a  patriotic  citizen 
now  desired  to  aid  the  Govermnent  with  a  loan  of  $5,000,  he  would 
have  to  sell  at  a  discount  or  exchange  the  local  currency  which'  he  has 
in  his  hands  for  United  States  paper,  in  order  to  enable  him  to  loan 
that  i^aper  to  the  Government.  I  give  it  as  my  conviction,  aided  and 
supported  by  that  of  the  Secretary  of  the  Treasury,  that  but  for  this 
intermediate  currency  the  gradual  absorption  of  the  national  debt  by 
the  common  people — the  farmers,  the  men  scattered  all  over  our  coun- 
try— would  go  on  rapidly  and  satisfactorily,  sufficiently  so,  I  think,  to 
carry  on  the  operations  of  the  Government. 

It  may  be  supposed  that  the  conflict  between  local  bank  paper  and 
United  States  notes  is  imaginary,  or  of  modern  origin.  Xow,  sir,  to 
prove  that  I  am  not  either  original  or  peculiar  in  the  views  expressed, 
I  wish  to  read  from  the  writings  of  an  eminent  statesman,  who  certain- 
ly was  not  in  favor  of  paper  money.  My  idea  upon  this  subject  is  ex- 
actly according  to  his,  years  ago  ;  and  when  I  read  these  extracts  from 
Mr.  Jefferson,  you  will  perceive  that  he,  who  during  his  whole  life  was 
so  mindful  of  the  rights  of  the  States  and  so  jealous  of  paper  money, 
in  brief  and  terse  language  designated  the  only  way  in  which  our  coun- 
try could  carry  on  war,  and  that  is  the  very  way  I  have  indicated  in 
my  remarks.  I  will  read  two  or  three  extracts  from  the  writings  of 
Mr.  Jefferson.  In  his  letter  to  Mr.  Cooper,  dated  September  10,  1814, 
just  at  the  close  of  the  war,  he  says  : 

The  banks  have  discontinued  themselves.  We  are  now  without  any  medium, 
and  necessity,  as  well  as  i)atriotism  and  confidence,  will  make  us  all  eager  to  receive 
Treasury  notes,  if  founded  on  specific  taxes. 

4 


50  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAK 

Congress  may  now  borrow  of  the  public,  and  without  interest,  all  tbe  money 
they  may  want,  to  the  amount  of  a  competent  circulation,  by  merely  issuintj  their 
own  promissory  notes  of  proper  denominations  for  the  larger  purposes  of  circula- 
tion, but  not  for  the  small.  Leave  that  door  open  for  the  entrance  of  metallic 
money.  .  .  .  Providence  seems,  indeed,  by  a  special  dispensation,  to  have  put  down 
for  us,  without  a  struggle,  that  very  paper  enemy  which  the  interest  of  our  citizens 
long  since  required  ourselves  to  put  down,  at  whatever  risk. 

The  work  is  done.  Tlie  moment  is  pregnant  with  futurity,  and  if  not  seized 
at  once  by  Congress,  I  know  not  on  what  shoal  our  bark  is  next  to  be  stranded. 
The  State  Legislatures  should  be  immediately  urged  to  relinquish  the  right  of  estab- 
lishing banks  of  discount.  Most  of  them  will  comply,  on  patriotic  principles,  under 
the  convictions  of  the  moment ;  and  the  non-complying  may  be  crowded  into  con- 
currence by  legitimate  devices. 

Remember,  this  was  written  at  a  time  when  this  local  bank  paper 
had  become  almost  worthless ;  when  it  was  worth  far  less  than  any- 
local  bank  paper  now  is. 

Again,  in  a  letter  dated  March  2,  1815,  he  says  : 

But  the  circumstances  of  the  war  draining  away  all  our  specie,  all  these  banks 
have  stopped  payment,  but  with  a  promise  to  resume  specie  exchanges  whenever 
circumstances  shall  produce  a  return  of  the  metals. 

Some  of  the  most  prudent  and  honest  will  possibly  do  this ;  but  the  mass  of 
them  never  will  or  can.  Yet,  having  no  other  medium,  we  take  their  paper,  of 
necessity,  for  purposes  of  the  instant,  but  never  to  lay  by  us. 

The  Government  is  now  issuing  Treasury  notes  for  circulation,  bottomed  on 
solid  funds,  and  bearing  interest.  The  banking  confederacy  (and  the  merchants 
bound  to  them  by  debts)  will  endeavor  to  crush  the  credit  of  these  notes ;  but  the 
country  is  eager  for  them,  as  something  they  can  trust  to,  and  as  soon  as  a  con- 
venient quantity  of  them  can  get  into  circulation,  the  bank  notes  die. 

I  will  also  read  another  extract  to  show  that  this  matter  hlled  the 
mind  of  Mr.  Jefferson.     He  says  : 

Put  down  the  banks,  and  if  this  country  could  not  be  carried  through  the 
longest  war  against  her  most  powerful  enemy,  without  ever  knowing  the  want  of  a 
dollar,  without  dependance  on  the  traitorous  classes  of  her  citizens,  without  bearing 
hard  on  the  resources  of  the  people,  or  loading  the  public  with  an  indefinite  burthen 
of  debt,  I  know  nothing  of  my  countrymen.  Not  by  any  novel  project,  not  by  any 
charlatan erie,  but  by  ordinary  and  well-experienced  means;  by  the  total  prohibition 
of  all  private  paper  at  all  times,  by  reasonable  taxes  in  war,  aided  by  the  neces- 
sary emissions  of  public  paper  of  circulating  size,  this  bottomed  on  special  taxes, 
redeemable  annually  as  this  special  tax  comes  in,  and  finally  witliin  a  moderate 
period — even  with  the  flood  of  private  paper  by  which  we  were  deluged,  would  the 
Treasury  have  ventured  its  credit  in  bills  of  circulating  size,  as  of  five  or  ten  dol- 
lars, etc.,  they  would  have  been  greedily  received  by  the  people  in  preference  to 
bank  paper. 

Mr,  President,  I  have  shown  yon  that  nnder  circnmstances  very 
similar  to  onrs,  when  the  banks  had  snspended  specie  jDayments,  when 
the  disparity  between  gold  and  silver  and  paper  money  was  getting 
marked,  Mr.  Jefferson,  in  his  retirement  at  Monticello,  in  private  cor- 
respondence with  his  friends,  with  great  sagacity  pointed  out  the  very 
mode  to  which  we  must  now  resort  if  we  would  maintain  a  national 
currency.  AYe  have  already  our  United  States  notes  precisely  of  the 
character  stated  by  him,  based  upon  taxes,  based  upon  the  credit  of 
the  United  States.  We  have  thro^vn  around  them  all  the  guards  pos- 
sible. We  have  done  just  as  he  says  we  ought  to  have  done.  All  that 
remains  for  us  is  by  wise  measures  to  induce  the  withdrawal  of  the 


NATIONAL  CURRENCY.  •  51 

local  circulation  of  tlie  banks  of  tlie  conntiy,  not  by  an  arbitrary  edict 
striking  them  dead  or  deranging  the  currency  of  the  country,  but  by  a 
tax,  reasonable  and  moderate  in  itself,  to  be  increased  if  policy  dic- 
tates ;  and  by  a  tax  to  drive  at  once  out  of  circulation  all  fractional 
currency.  This  policy  will  confine  the  banks  to  that  ordinary  business 
of  banking  known  among  all  the  commercial  nations  of  the  world. 
If  this  is  done  by  moderate  and  Avise  legislation,  as  Mr.  Jeiferson  truly 
says,  we  may  maintain  this  war  until  our  flag  floats  from  Louisiana  to 
Maine,  in  every  portion  of  our  beloved  country. 


^"ATION"AL    CUKEEA^CY. 

ly  THE  SB^UTF,  FEBRUARY  9,   1863. 

The  bill  to  provide  a  national  currency  secured  by  a  pledge  of  United  States 
stocks,  and  for  the  circulation  and  redemption  thereof,  being  before  the  Senate,  the 
following  amendment  was  offered  as  an  additional  section  by  Mr.  Powell : 

And  he  it  further  enacted,  That  each  and  every  banking  association  organized 
under  this  act  shall  be,  and  is  hereby,  rec^uired  to  keep  in  its  vaults  in  gold  and 
silver  coin,  at  all  times,  an  amount  equal  to  at  least  one  fourth  of  the  amount  of 
the  notes  it  is  authorized  to  issue. 

After  explanation  of  the  section  by  Mr.  Powell,  Mr.  Sherman  said: 

Mr.  PREsroEXT  :  When  this  bill  was  drawn,  I  did  not  expect  that 
my  friend  from  Kentucky  would  vote  for  it ;  nor  did  I  expect  that  he 
would  vote  for  any  bill  which  required  the  banks  which  might  be 
organized  under  it  to  pay  specie  from  this  moment,  because,  as  he 
knows,  that  would  be  futile.  His  amendment  would  require  these 
l)anks  to  keep  twenty-five  per  cent,  of  gold  and  silver  in  their  vaults. 
The  bill  as  reported  provides  that  they  shall  keep  twenty-five  per  cent. 
in  lawful  money  of  the  United  States  in  their  vaults.  If  the  courts 
shall  decide,  as  the  Senator  says  they  will,  that  the  paper  money  of 
the  United  States  is  worthless  trash,  illegal  and  unconstitutional,  then 
the  phrase  "  lawful  money  of  the  United  States  "  will  mean  gold  and 
silver ;  and  the  bill  will  suit  him  as  it  is  now. 

But,  Mr.  President,  while  we  are  in  war  specie  payments  are  natu- 
rally suspended,  as  they  always  will  be  and  always  have  been  in  every 
country  involved  in  a  great  war.  They  were  suspended  in  England 
during  her  wars  with  Xapoleon.  Would  it  not  have  been  singular  if 
some  man  had  stood  up  in  the  British  Parliament,  when  during  a  long 
war  specie  payments  were  suspended,  and  the  Bank  of  England  notes 
were  made  the  basis  of  currency,  and  had  denounced  the  Bank  of  Eng- 
land paper  as  worthless  trash  ?  It  would  have  been  considered  a  very 
remarkable  thing;  and  yet  that  is  done  now.  The  United  States 
money,  to  which  the  faith  of  the  United  States  is  ^^ledged,  to  which 
the  faith  of  every  State  in  the  Union  is  pledged,  to  which  aU  the  prop- 
erty of  the  United  States  is  pledged,  is  here  denounced,  in  the  Senate 


52  .     SPEECHES  AND  REPORTS   OF  JOIIX  SHERMAN. 

of  the  United  States,  as  worthless  trash.  And  yet  without  this  '"  worth- 
less trash  "  we  must  submit  to  be  oven-un  by  armed  confederates  who 
are  seeking  to  subvert  the  Government,  and  every  man  knows  it. 
Every  man  knows — none  better  than  the  Senator  from  ]ventucky — 
that  without  the  issue  of  paper  money  it  wouki  be  impossible  to  carry 
on  the  ojierations  of  the  Government,  and  there  would  be  nothing  to 
prevent  Jefferson  Davis  from  encamping  within  sight  of  New  York  citv. 
It  is  by  the  use  of  just  such  money  that  armies  are  formed  in  the  Soutn. 

Is  it  not  very  strange  that  the  Senator  should  denounce  this  paj^er 
money,  necessary  to  be  used  to  carry  on  this  war,  as  worthless  trash, 
and  discredit  the  Government  of  the  United  States  ?  It  is  very  singu- 
lar. As  a  matter  of  course,  the  amendment  cannot  be  offered  with  any 
hope  that  it  will  be  adoj)ted.  If  it  were  adopted,  it  would  be  a  defeat 
of  the  bill.  J^one  of  the  banks  of  the  United  States  now  pay  gold  and 
silver,  nor  can  they ;  it  is  impossible ;  and  tlicrefore  the  amendment 
was  moved,  I  think,  not  with  much  expectation  that  it  would  prevail, 
but  to  enable  the  Senator  to  announce  as  his  o])inion  that  the  money  of 
the  United  States — the  notes  issued  by  this  Government — is  worthless 
trash,  unconstitutional  and  unlawful,  and  that  therefore  all  the  banks 
which  might  be  founded  upon  it  would  be  unlawful. 

Sir,  the  very  moment  this  war  is  over,  the  very  moment  our  credit 
is  good,  the  very  moment  the  bonds  of  the  United  States  are  worth 
above  par,  that  moment  all  these  banks  will  be  specie-paying  banks, 
and  every  one  of  them  will  then  be  required  to  keep  the  very  amount 
of  sjDecie  in  their  vaults  that  the  Senator  provides  for — that  is,  twenty- 
five  per  cent,  of  the  lawful  money  of  the  United  States.  My  hope  is 
that  Congress  will  never  authorize  the  issue  of  more  than  8-iO(»,000,000 
of  United  States  notes,  and  that  these  will  be  made  the  basis,  during 
the  war,  of  the  currency  of  the  country,  and  that  by  this  bill  the  money 
of  the  people,  through  their  banking  associations  organized  all  over  the 
country,  may  be  combined  in  support  of  the  credit  of  the  United  States 
to  make  a  safe  and  stable  currency  which  will  give  us  during  time  of 
war  the  best  substitute  possible  for  gold  and  silver.  That,  I  believe, 
will  be  done.  There  are  but  two  species  of  lawful  money — one  gold 
or  silver  coin,  and  the  other  the  United  States  greenbacks,  as  they  are 
called.  During  the  war  the  greenbacks  are  necessary  to  carry  on  the 
Govermnent,  and  necessary  as  lawful  money.  They  are  made  so  by 
the  Government.     • 

Mr.  Collamer  of  A^erraont  gave  his  vie\rs  in  relation  to  the  general  character 
of  the  bill,  and  pointed  out  somewhat  at  length  his  objections  to  it.  Mr.  Sherman 
then  said  : 

I  shall  detain  the  Senate  but  a  few  moments  in  replying  to  some  of 
the  observations  of  the  honorable  Senator  from  Vermont.  There  is 
no  member  of  this  body  who  is  more  attentively  listened  to,  or  whose 
opinions  are  entitled  to  more  respect,  than  that  honorable  Senator.  I 
always  give  to  them  the  deference  due  to  his  jDOsition  and  his  character, 
and  I  am  always  very  sorry  to  find  myself  differing  from  him  in  opinion 
upon  any  point. 

The  Senator  has  commented  upon  the  remark  I  made  as  to  the  opin- 
ions of  the  Cabinet.     I  simply  said  that  the  Secretary  of  the  Treasury, 


NATIONAL  CUERENCY.  53 

who  had  examined  this  l)ill  in  all  its  details,  and  who  is  charged  with  tlie 
adnunistration  of  the  Treasury  Department,  approved  of  it  heartily ; 
and  that  I  also  believed  it  had  the  hearty  assent  of  every  member  of  the 
Cabinet,  and  also  that  it  had  the  assent  of  a  great  body  of  the  people ; 
that  it  was  assented  to  by  a  large  number  of  the  banks  whose  interests 
might  be  affected  by  it,  and  that  it  was  assented  to  by  the  great  body 
of  the  people  in  the  portion  of  the  country  from  which  I  come.  I  merely 
alluded  to  them  as  a  part  of  the  people  of  the  United  States.  The  hon- 
orable Senator,  however,  seems,  from  the  whole  course  of  his  argument, 
to  have  had  only  in  view  the  interests  of  local  banks  and  bankers.  If 
he  can  refer  to  their  interests,  and  appeal  to  us  in  eloquent  terms  to 
protect  them  from  the  doom  that  the  sons  of  Jacob  believed  was  about 
to  fall  upf^tn  Benjamin,  and  almost  excite  our  sympathy  to  tears  in  view 
of  the  afflictions  we  are  about  to  put  upon  them;  if  he  can  cite  the 
opinions  of  those  who  have  charge  of  them,  surely  I  may  cite  the  opin- 
ions of  grave  and  honorable  men  who  are  charged  with  tlie  responsibili- 
ties of  administering  the  Executive  Departments  of  the  Government. 
It  was  not  done  with  any  view  to  influence  our  feelings,  but  simply  to 
show  that  those  men  who  had  fully  considered  the  subject  gave  this 
bill  their  hearty  approbation. 

The  honorable  Senator  also  tries  to  prove  that  under  this  system  the 
banks  cannot  make  any  money.  If  that  is  so,  the  whole  system  will 
fall  to  the  ground. 

Mr.  C'ollamer :     I  said  they  could  not  make  money  in  my  section. 

Mr.  Sherman:  I  think  I  could  prove  to  the  honorable  Senator,  if 
I  should  take  the  time  to  do  so — but  I  will  not — that  they  can  make 
money.  But  if  his  argument  is  true,  what  then  ?  This  mammoth 
scheme,  which  is  going  to  carry  distress  into  the  mountains  and  valleys 
of  Vermont,  will  fait  dead  and  harmless,  impotent  from  the  outset. 
That  bankers  can  make  a  reasonable  profit  under  this  bill  I  have  no 
doubt.  They  have  the  benefit  of  four  per  cent,  on  the  bonds  deposited 
by  them.  They  have  the  benefit  of  interest  on  the  notes  given  them 
for  circulation.  They  have  the  benefit  of  exchange — not  the  rates  of 
exchange  formerly  paid,  but  that  incidental  exchange  wdiich  every 
bank  charges  in  drawing  a  draft,  probably  a  quarter  or  a  half  of  one 
per  cent.  They  have  the  profits  they  can  make  from  deposits.  They 
have  other  profits  from  the  ordinary  incidents  of  banking.  I  have  no 
doubt  that  from  all  these  various  profits  they  will  make  what  banks  in 
ordinary  times  under  specie  payments  could  make — that  is,  seven  or 
eight  per  cent,  a  year.  The  banks  of  the  State  of  New  York  last  year 
made  twelve  per  cent.  I  have  produced  the  official  table  to  show  it. 
They  did  it  under  the  suspension  of  specie  payments ;  and  one  half  of 
the  additional  profits  made  by  the  banks  during  the  suspension  of  specie 
payments  would  pay  the  onerous  tax  about  which  the  honorable  Sena- 
tor complains.  I  say,  therefore,  if  his  argument  is  true,  this  whole 
banking  system  will  fall  to  the  ground,  and  no  harm  will  be  done ;  but 
I  do  not  believe  it  to  be  tiiie. 

I  will  not  now  discuss  the  question  of  the  taxation  of  the  existing 
banks.  That,  the  honorable  Senator  states,  is  the  real  objection  he  has 
to  this  whole  scheme.     He  stated  in  the  outset  that  but  for  that  he 


54:  SPEECHES  AND  EEPORTS   OF  JOHN  SHERMAN. 

would  not  speak  on  the  bill.  That  proj^osition  to  tax  the  existing 
banks  is  in  another  bill.  We  have  two  propositions,  one  coming  to  ns 
from  the  House  of  Representatives,  to  which  the  Senator  does  not 
object ;  but  the  Committee  on  Finance  thought  it  proper  to  propose  as 
an  amendment  to  that  bill  that  a  tax  should  be  imposed  on  the  old 
banks  the  same  as  is  provided  for  the  new.  If  the  Senate  deem  that 
tax  onerous,  as  a  matter  of  course  they  will  change  it ;  but  that  bill  is 
not  now  under  consideration.  I  believe  the  tax  of  two  per  cent,  is 
light  enough ;  but  that  is  for  the  Senate  to  determine.  It  has,  how- 
ever, no  connection  with  this  bill. 

But,  sir,  the  principal  point  made  by  the  honorable  Senator,  and 
one  most  likely  to  influence  the  judgment  of  Senators,  is  this  :  he  asks 
what  benefit  the  United  States  derives  from  this  arrangement,  and  he 
endeavors  by  argument  to  show  that  the  United  States  derives  no 
benefit.  I  would  put  to  him  this  simple  proposition :  There  are  now 
$167,000,000  of  local  bank  circulation  in  the  country.  Suppose  we 
can  induce  through  their  interests — I  do  not  propose  to  do  it  by  any 
arbitrary  mode — the  retirement  of  $100,000,000  of  this  circulation, 
taking  the  smallest  sum  that  will  probably  be  used  in  the  course  of  a 
year ;  suppose  we  can  induce  the  banks  to  withdraw  $100,000,000  of 
their  circulation,  is  it  no  benefit  to  the  United  States  ?  Now,  the 
United  States  get  no  benefit  whatever  from  their  circulation.  The 
United  States  cannot  receive  it  in  their  ordinary  business  transactions. 
It  fills  the  channels  of  circulation  to  the  exclusion  of  the  greenbacks. 
Suppose  we  can  induce  the  banks  to  withdraw  $100,000,000  of  their 
circulation,  and  invest  that  much  money  in  our  bonds,  and  receive 
United  States  circulation,  does  not  the  honorable  Senator  see  that  we 
should  derive  a  great  advantage  from  it  ?  That  is  the  object  of  this 
bill.  The  object  is,  by  apj)eahng  to  the  patriotism  and  the  interests  of 
the  people  and  the  banks,  to  induce  the  banks  to  withdraw  their  local 
circulation  and  convert  it  into  a  national  circulation.  If  it  fails,  as  a 
matter  of  course  it  does  no  harm.  But  suppose  it  succeeds,  does  not 
the  United  States  derive  a  benefit  from  it  ?  Certainly ;  because  at  once 
a  demand  is  created  for  the  jDurchase  of  $100,000,000  of  United  States 
bonds.  We  are  anxious  to  sell  these  bonds.  They  are  now  below  par. 
The  creation  of  a  demand  for  $100,000,000  will,  as  I  showed  yesterday, 
by  the  well-knov,-n  and  recognized  laws  of  trade,  probably  create  a  de- 
mand for  $500,000,000.  There  is  the  benefit,  there  is  the  advantage 
we  seek  to  derive.  We  shall  make  a  market  at  once  for  the  sale  of 
$100,000,000  of  our  bonds,  and  the  additional  market  which  is  always 
created  by  making  a  demand  for  a  particular  commodity,  which  is  equi- 
valent at  least  to  five  times  the  amount  of  the  real  demand.  The  Gov- 
ernment of  the  United  States  is  willing  to  borrow  money  from  the 
honorable  Senator  at  six  per  cent.,  and  pay  the  interest  in  gold  coin. 
Any  person  who  desires  to  loan  money  to  the  United  States  may  re- 
ceive six  per  cent,  interest  on  it,  and  we  are  very  glad  to  sell  our  bonds 
at  that  rate  in  this  time  of  war ;  but  to  those  who  avail  themselves  of 
the  privileges  of  this  law  we  only  pay  four  per  cent.,  so  that  we  save 
one  third  of  the  interest  on  the  amount  of  our  bonds  used  for  banking ; 
and  more  than  that,  we  get  a  circulation  which,  by  the  laws  of  the 


NATIONAL  CURRENCY.  55 

United.  States,  may  be  used  in  the  collection  of  our  dues ;  and,  in  the 
ordinary  operations  of  our  Government,  these  banking  agencies  may 
be  made  useful  and  beneiicial  as  depositories. 

I  have  already  stated  the  benefits  to  the  Government ;  I  stated  them 
more  fully  yesterday,  and  will  not  enlarge  on  them  now.  The  benefit 
derived  to  the  Government  is  by  making  a  market  for  its  bonds,  by 
having  fiscal  agencies  throughout  tlie  United  States,  so  that  it  may  the 
more  readily  collect  its  debts,  and  by  saving  one  third  of  the  interest  on 
the  payment  of  its  bonds,  and  by  securing  to  the  people  of  the  country 
a  uniform  national  currency  which  can  be  passed  from  hand  to  hand  in 
all  parts  of  the  country  without  loss  by  exchange,  deterioration,  or  al- 
teration. 

But  the  honorable  Senator  says  that  the  power  granted  by  this  bill 
would  render  the  Secretary  of  the  Treasury  a  very  dangerous  person, 
or  a  very  powerful  person ;  probably  that  is  the  meaning.  lie  says 
that  this  bill  would  create  a  dangerous  political  power.  According  to 
all  experience,  if  you  invest  in  any  particular  person  the  power  to  ap- 
point men  to  office,  or  the  power  to  manage  banks  or  control  a  scheme 
of  this  kind,  it  rather  weakens  him  by  the  well-known  law  that  he  dis- 
appoints more  than  he  benefits.  Sir,  it  will  be  a  dangerous  power  in 
one  sense — not  to  the  American  people,  but  it  will  be  dangerous  to  the 
individual  who  exercises  the  power.  If  you  confer  upon  the  Secretary 
of  War  or  the  Secretary  of  the  Treasury  the  power  to  appoint  twenty 
clerks,  as  we  did  the  other  day,  there  are  five  hundi-ed  applicants  at 
once ;  and  you  disappoint  four  hundi-ed  and  eighty  and  make  them 
enemies  for  the  sake  of  gaining  twenty  friends.  No,  sir  ;  the  adminis- 
tration of  patronage,  the  power  to  select  depositories,  all  the  power  con- 
ferred by  this  bill,  the  power  of  visitation — all  these  are  powers  which 
tend  ratlier  to  decrease  the  influence  of  the  Secretary  of  the  Treasury, 
because  they  are  more  likely  to  make  him  enemies  than  friends.  But 
the  Senator  says  that  the  Secretary  of  the  Treasury  has  power  by  dis- 
tributing the  stock  to  exercise  great  influence. 

It  is  true  that  the  bill  is  not  so  sj)ecific  as  it  might  be.  One  half 
must  be  distributed  according  to  population,  the  other  half  according 
to  bank  capital  and  resources.  I  have  before  me  now  a  table  showing 
the  distribution  that  is  made  to  each  State  by  the  terms  of  the  bill  as  it 
is  understood  and  construed.  There  is  no  discretion  about  it,  and  the 
clause  was  put  in  for  the  pui"pose  of  taking  away  from  the  Secretary  of 
the  Treasury  discretionary  power.  Under  the  bill  as  it  originally  stood 
there  was  no  limit ;  the  $300,000,000  could  be  assigned  to  any  State  or 
to  any  portion  of  the  country ;  but  in  order  to  secure  to  every  State 
and  to  every  Territory  and  to  this  District  its  fair  and  just  allotment  of 
this  banking  capital,  If  there  is  any  benefit  to  be  derived  from  it,  the 
principle  was  introduced  by  the  Committee  on  Finance  that  one  half 
was  to  be  apportioned  according  to  population,  and  the  other  half  ac- 
cording to  the  present  banking  capital  and  resources.  Why  was  this 
done  'i  In  a  new  State,  or  even  in  a  State  so  old  as  Ohio,  our  capital  is 
far  less,  in  proportion  to  our  population,  than  the  capital  of  the  New 
England  States ;  they  are  older  and  richer.  The  accumulation  of  ages 
has  gathered  wealth  in  New  England,  and  has  not  yet  gathered  it  in 


56  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAN. 

Ohio.  Therefore  we  did  not  apportion  this  banking  capital  among  the 
States  according  to  poj^Lilation  merely,  but  one  half  according  to  j)opu- 
lation,  so  as  to  secure  all  something,  and  one  lialf  according  to  the  pres- 
ent banking  capital.  It  was  done  for  the  very  purpose  of  placing  it  in 
the  power  of  the  local  banks,  about  which  so  much  complaint  has  been 
made,  to  absorb  a  portion  of  this  capital  and  convert  their  State  agencies 
gradually  into  national  agencies. 

To  go  back  again — for  I  have  answered  nearly  all  the  objections  I 
desire  to  answer— the  honorable  Senator  says  that  this  bill  destroys  the 
State  banks,  and  he  endeavors  to  excite  our  sympathies  for  them.  It 
does  not  affect  the  right  of  a  single  bank.  It  does  not  impair  its  prop- 
erty ;  it  does  not  affect  it  in  the  least.  Under  the  provision  offered  by 
the  honorable  Senator  from  l^ew  York  [Mr.  Harris],  and  also  under 
the  amendment  reported  from  the  Committee  on  Finance,  there  is  not 
the  slightest  difticulty  to  hinder  any  of  the  existing  banks,  without  any 
collection  of  debts,  from  gradually  putting  themselves  under  the  opera- 
tions of  this  law  ;  and,  indeed,  under  the  amendment  offered  by  the 
Senator  from  New  York,  they  can  avail  themselves  of  the  benefit  of 
this  law  without  surrendering  their  State  organization,  if  only  the  State 
will  consent ;  but,  even  if  they  will  not  do  that,  they  are  perfectly  free 
to  go  on  in  the  banking  business.  The  banks  of  the  State  of  Vermont 
may  yet  aid  her  volunteers  ;  they  may  do  all  they  have  done  to  the 
good  peoj^le  of  that  State  ;  they  may  help  to  carry  on  the  operations  of 
the  Government  just  as  they  have  done,  except  this — that  in  considera- 
tion of  the  fact  that  during  this  time  of  war  they  do  not  pay  specie  for 
their  notes,  we  think  they  should  pay  a  j)ortion  of  their  excess  of  profits 
to  the  United  States,  and  we  propose  to  levy  two  per  cent.  If  the 
honorable  Senator  can  show  to  the  Senate  that  that  is  too  high,  as  a 
matter  of  course  he  will  have  his  own  way  ;  it  will  be  lowered  ;  and  if 
he  makes  many  pathetic  speeches — as  pathetic  as  that  he  made  to-day 
— perhaps  he  will  carry  his  point.  I  think  two  per  cent,  is  little  enough 
under  the  circumstances,  when  banks  do  not  pay  their  notes  in  gold 
and  silver.  It  is  believed  that  this  two  per  cent,  can  be  put  on  the 
new  banks,  because,  as  it  is  said,  they  derive  privileges  from  the  United 
States,  and  can  afford  to  pay  two  per  cent.,  and  therefore  I  was  in 
favor  of  imposing  that  tax  on  them.  This  does  not  destroy  the  State 
banks.  I  hope,  however,  that  in  the  end  all  those  banks  will  be  in- 
duced, by  the  benefits  conferred  by  this  general  system,  by  the  national 
objects  to  be  obtained  by  it,  by  the  well-known  patriotism  of  the  people 
among  whom  the  banks  are  located,  to  gradually  change  their  local 
system,  so  that  we  may  have  one  national  currency,  based  on  the  j^ublic 
faith  and  on  the  security  of  private  individuals.  There  are  no  com- 
j)ulsory  features  about  this  bill ;  it  is  nothing  but  a  voluntary  offer  to 
any  one  who  chooses  to  engage  in  banking. 

But — this  is  the  first  objection  with  which  the  honorable  Senator 
starts  out,  and  it  is  the  last  I  will  answer — he  says  the  operation  of  this 
bill  will  withdraw  capital  from  the  operation  of  State  taxation.  So  it 
will ;  and  to  that  extent  it  will  be  of  great  national  service.  By  the 
present  laws,  and  by  the  Constitution  indeed,  a  State  has  no  power  to 
tax  money  invested  in  United  States  bonds.      We  have  a  right  to 


NATIONAL  CURRENCY.  57 

borrow  money,  and  a  State  cannot  interfere  witli  that  right  by  taxa- 
tion. We  have  that  clear  right  to  borrow  money,  and  a  State  cannot 
interfere  with  it.  Under  our  laws,  the  State  of  Vermont  cannot  now 
levy  a  tax  npon  the  capital  in  Vermont  invested  in  the  bonds  of  the 
United  States.  I  cannot  state  how  much,  but  I  have  no  doubt  that  the 
very  loyal  people  of  Vermont  have  already  purchased  a  large  amount 
of  these  bonds  ;  I  do  not  know  to  what  extent.  The  banks  themselves 
and  individuals,  I  have  no  doubt,  are  the  holders  of  these  very  bonds. 
That  capital  is  not  taxable  by  the  State  of  Vermont.  We  only  propose 
that  they  shall  hold  a  certain  portion  of  it  in  proportion  to  their  circu- 
lation, and  deposit  it  with  the  Treasurer  here,  and  upon  it  receive  Uni- 
ted States  notes.  The  exemption  of  money  invested  in  bonds  of  the  Uni- 
ted States  from  State  taxation  is  one  of  the  inducements  we  hold  out  to 
the  people  to  buy  the  bonds,  and  is  not  an  objection  to  the  system.  The 
bonds  will  be  free  from  State  taxation,  whether  they  are  deposited  here 
or  whether  they  are  among  the  people.  If  they  are  deposited  here,  the 
United  States  takes  two  per  cent.  off.  If  they  are  among  the  people, 
we  do  not  tax  them  at  all.  The  operation  of  this  bill  is  to  bring  the 
tax  into  the  Xational  Treasury  without  taking  a  dollar  from  the  States. 

Sir,  I  do  not  believe  that  there  is  anything  in  this  scheme  so  mis- 
chievous and  dangerous  as  the  honorable  Senator  seems  to  think.  It 
may,  although  I  do  not  think  it  will,  affect  a  little  the  operations  of 
local  banks,"  if  they  should  attempt  to  come  into  it  too  hastily.  The 
new  associations  may  be,  and  probably  will  be,  first  organized  in  the 
large  cities.  I  know,  sir,  from  the  position  I  have  occupied  in  connec- 
tion with  the  bill,  that  many  capitalists  who  are  now  holders  of  the 
United  States  bonds,  and  who  will  purchase  other  bonds,  will  go  into 
this  scheme  of  banking  in  the  large  cities,  in  the  State  of  Ohio,  and  in 
several  other  States.  I  have  no  doubt,  and  I  venture  my  prediction 
with  gi-eat  diffidence  against  that  of  the  honorable  Senator,  that  within  six 
months  from  this  time,  during  which  we  are  certainly  not  likely  to  have 
peace,  fully  850,000,000  of  the  bonds  will  be  withdrawn  from  market, 
and  deposited  here  at  the  Treasury,  thus  making  way  for  another 
$50,000,000 ;  and  to  that  extent  United  States  notes  will  be  issued,^  in 
place  of  the  local  bank  currency.  This  currency  will  gradually,  quiet- 
ly supersede  the  local  money,  without  effecting  or  deranging  any  of 
the  ordinary  operations  of  life. 

The  honorable  Senator  seems  to  think  that  the  winding-up  of  these 
State  banks  will  be  a  direful  calamity.  Every  twenty  years  they  are 
wound  up.  The  experience  of  this  country  has  shown  that  in  twenty 
years  the  whole  banking  circulation  is  lost  in  the  hands  of  the  people  ; 
statistics  show  it.  In  1815  nearly  the  whole  of  it  was  swept  away. 
How  many  banks  survived  the  panic  in  those  times  ?  They  are  wound 
up  by  the  losses  and  by  the  incidents  of  the  banking  business  and  by 
bankruptcy ;  but  ordinarily  they  are  wound  up  by  the  States.  In  Ohio 
our  banking  laws  extend  to  but  twenty  years.  I  do  not  know  whether 
that  is  the  case  in  N'ew  England  or  not ;  but  in  Pennsylvania,  New 
York,  and  I  beHeve  in  many  of  the  States,  the  duration  of  a  bank  is  but 
for  twentv  years.  It  cannot  live  longer.  Here  we  provide  a  way  by 
which  these  banks  may,  at  their  own  pleasure,  taking  their  own  time 


58  SPEECHES  AND  EEPORTS  OF  JOHN"  SHERMAN. 

as  they  choose,  gradually  pass  from  one  system  into  the  other  without 
distm'bing  or  deranging  any  of  their  relations.  They  need  not  collect 
their  loans,  they  need  not  change  their  discounts ;  their  ordinary  opera- 
tions may  go  on, 

I  again  ajDpeal  to  the  Senate  to  show  me  a  better  system  before  this 
is  destroyed.  I  endeavored  to  prove  yesterday  that  there  is  no  power 
to  limit  the  issue  of  the  paper  money  of  the  Government  unless  by  the 
sale  of  bonds  and  furnishing  a  market  for  them  ;  and  you  cannot  con- 
vert them  into  money  rapidly  enough  to  cany  on  the  Government 
without  the  benefit  of  some  such  agencies  as  are  provided  by  this  bill. 
The  advantage  of  this  whole  system  is  that  if  it  fails  no  harm  is  done. 
If  it  succeeds  it  cannot  succeed  except  by  securing  the  purchase  of 
United  States  bonds,  and  that  is  just  the  very  thing  we  wish  now  to 
accomplish.  I  therefore  do  regard  this  measure  as  of  the  highest  im- 
portance to  maintain  the  national  credit,  furnish  a  market  for  our 
bonds,  furnish  our  people  with  a  national  currency ;  and  I  see  in  it  none 
of  the  dangers  to  which  the  honorable  Senator  adverts. 

This  bill  became  a  law  February  25,  1863, 


]S^ATIONAL   BAKK   CUERENCY. 

IN  TEE  SENATE  OF  THE  UNITED  STATES,  FEBRUARY  10,  1S63. 

The  special  order  of  the  day  being  the  bill  to  provide  a  national  currency, 
secured  by  a  pledge  of  United  States  stocks,  and  to  provide  for  the  circulation  and 
redemption  thereof,  Mr.  Sherman  said : 

Mr.  President  :  The  importance  of  the  subject  under  consideration 
demands  a  fuller  statement  than  has  yet  been  made  of  the  princijDles 
and  objects  of  this  bill.  I  wished  to  avoid  the  labor  of  discussing  the 
subject ;  but  its  discussion  seems  to  be  necessary,  I  shall  endeavor  to 
condense  what  I  have  to  say,  for  I  know  the  time  of  the  Senate  is  pre- 
cious, and  I  desire  to  get  a  vote  on  this  bill,  if  practicable,  to-day. 

It  is  the  misfortune  of  war  that  we  are  compelled  to  act  upon 
measures  of  grave  importance  without  that  mature  dehberation  secured 
in  peaceful  times.  We  are  now  to  act  upon  a  measure  that  will  affect 
the  property  of  every  citizen  of  the  United  States,  and  yet  our  action 
for  good  or  evil  must  be  concluded  within  the  few  days  or  weeks  of 
this  session.  We  are  about  to  choose  between  a  permanent  system, 
designed  to  establish  a  uniform  national  currency  based  upon  the  pub- 
lic credit,  limited  in  amount,  and  guarded  by  all  the  restraints  which 
the  experience  of  men  has  proved  necessary,  and  a  system  of  paper 
money  without  limit  as  to  amount,  except  for  the  growing  necessities 
of  war.  In  the  consideration  of  such  a  question  we  surely  should  sacri- 
fice all  local  interests,  all  pride  of  oj^inion  ;  and,  while  acting  promptly 
under  the  pressure  of  events,  we  should  bring  to  our  aid  all  the  wisdom 
of  united  counsels,  and  all  the  light  which  the  experience  of  former 
generations  of  men  can  give  us. 


NATIONAL  BANK  CURKENCY.  59 

It  is  fortunate  tliat  the  sclieme  presented  is  not  novel  either  in  its 
principles  or  details ;  nor  is  it  presented  to  us  at  this  session  for  the 
first  time.  In  December,  1861,  the  Secretary  of  the  Treasury  briefly 
but  clearly  stated  the  outlines  of  the  system  proposed,  and  a  bill  similar 
in  its  main  provisions  to  the  one  under  consideration  was  introduced 
in  the  House  of  Eepresentatives  at  the  last  session.  It  was  not  then 
much  discussed,  because  of  the  greater  demand  for  military  and  naval 
measures,  and  the  necessity  of  an  extensive  and  novel  law  of  internal 

taxation. 

But  while  we  were  thus  engaged,  this  system  was  discussed  among 
those  whose  lousiness  made  tliem  conversant  with  finance  and  currency  ; 
and,  sir,  I  may  safely  say  that,  though  it  ran  counter  to  the  local  inter- 
ests of  those  engaged  in  tlie  business  of  banking,  it  has  steadily  gained 
in  favor  with  all  classes  of  our  citizens.  -,     ■  i. 

The  sul)ject  was  again  presented  to  us  at  greater  length  and  with 
more  urgency  Ijv  the  Secretary  of  the  Treasury  in  his  recent  annual 
report,  in  wh'icli'the  arguments  for  and  against  the  system  are  ably  dis- 
cussed. The  bill  has  been  published  in  various  forms  and  extensively 
circulated,  so  that  opinions  on  the  subject  have  been  canvassed  and 
weighed  by  all  those  who  take  an  interest  in  it.  It  only  remains  lor 
Comn-ess  to  determine  whether  it  shall  become  a  law. 

It  must  be  remembered  that  this  bill  is  taken  up  when  our  financial 
condition  is  not  the  most  favorable.  Gold  is  at  a  premium  of  between 
fifty  and  sixtv  per  cent.,  and  is  substantially  banished  from  circulation. 
^Ve  are  in  the  midst  of  war,  when  the  necessities  of  the  Government 
require  us  to  have  large  sums  of  money.  We  cannot  choose  as  to  the 
mode  in  which  we  shall  get  that  money.  If  we  pm*sue  the  ordinary 
course,  the  course  that  has  been  sufficient  in  times  of  peace  to  raise 
money,  of  i)utting  our  bonds  into  market  and  selling  them  for  what 
they  will  bring,  it  would  be  at  a  great  sacrifice.  We  know  tins  from 
the  history  of  other  nations  and  from  our  own  experience.  We,  there- 
fore, must  look  to  some  system  of  finance  that  will  give  us  all  the  aid 
possible  either  in  the  form  of  paper  money  or  by  the  agencies  of  asso- 
ciated banks.  We  know  very  well  that  after  this  war  is  over,  the  Crov- 
ernment  will  still  be  largely  in  need  of  money ;  that  when  the  i-ebellion 
is  subdued,  the  condition  of  society  in  the  Southern  States  will  be  dis- 
turbed ;  that  it  will  be  necessary  to  maintain  for  some  time  considerable 
armies  in  order  to  preserve  peace  ;  and  that  in  any  aspect  of  affaire  this 
Government  must  undertake  responsibihties  and  incur  debts  and  liabil- 
ities of  which  we  have  had  no  example  in  our  previous  history. 

The  financial  measures  heretofore  adopted  are  necessary  to  be  con- 
sidered before  I  proceed  to  examine  the  features  of  this  biU.  After 
the  war  broke  out  we  were  able  to  borrow  money  upon  the  credit  ot 
the  United  States  until  December,  1861.  The  amount  of  demand 
notes  previously  issued  was  comparatively  small.  In  December,  Ibbl, 
by  the  suspension  of  specie  payments  gold  was  withdrawn  from  circula- 
tion, and  there  was  nothing  left  but  the  paper  of  local  banks,  which  by 
the  laws  of  the  United  States  could  not  be  used  m  Government  trans- 
actions. We  were  then  in  the  peculiar  condition  of  a  nation  involved 
in  war  without  any  currency  whatever  which  by  law  could  be  used  m 


GO  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

the  ordinary  transactions  of  tlie  public  business.  Gold  was  withdrawn 
bj  the  suspension  of  specie  ]3ajments  ;  the  money  of  the  banks  could 
not  be  used  because  the  laws  of  the  United  States  forbade  it ;  and  we 
were  without  any  currency  whatever. 

Under  these  circumstances  Congress  wisely  authorized  the  issue  of 
a  considerable  sum  of  United  States  notes.  That  this  measure  was 
wise  but  few  will  controvert.  We  were  compelled  by  a  necessity  as 
urgent  as  could  be  imposed  upon  any  legislature  to  issue  these  notes. 
To  the  extent  to  which  tlie}^  were  issued  they  were  useful.  They  were 
eagerly  sought  by  our  people.  They  were  taken  by  our  enemies  in  the 
South,  by  our  friends  in  the  I^orth.  They  were  taken  in  the  East  and 
in  the  West.  They  furnished  the  best  substitute  for  gold  and  silver 
that  could  then  be  devised ;  and  if  we  would  limit  the  United  States 
notes  to  the  amount  now  authorized  by  law,  they  would  form  a  stable 
and  valuable  currency. 

But,  sir,  we  know,  not  only  by  our  own  experience,  but  by  the  ex- 
perience of  other  nations,  that  when  a  government  issues  paper  money 
in  very  large  amounts,  and  without  connecting  it  in  any  way  with  the 
private  operations  of  the  people,  it  inevitably  depreciates,  and,  if  car- 
ried to  excess,  deranges  the  values  of  all  property.  Still  necessity 
presses  us  for  money,  and  most  of  the  great  nations  of  modern  times 
have  during  war  been  compelled  by  necessity  to  resort  to  some  form  of 
paper  money.  It  has  always  been  the  most  difficult  problem  of  war  to 
maintain  the  Government's  credit  and  yet  to  procure  the  very  large 
sums  indisj^ensable  for  its  prosecution.  We  have  but  four  expedients 
from  wdiich  to  choose :  first,  to  repeal  the  Sub-Treasury  act,  and  use 
the  paper  of  local  banks  as  a  currency  ;  secondly,  to  increase  largely 
the  issue  of  United  States  notes ;  thirdly,  to  organize  a  system  of  na- 
tional banking ;  or,  fourthly,  to  sell  the  bonds  of  the  United  States  in 
the  open  market. 

Some  three  or  four  weeks  ago  I  discussed  at  some  length  the  pro- 
priety of  a  repeal  of  the  Sub-Treasury  clause,  as  it  is  called,  and  en- 
deavored to  show  that  local  banks  cannot  be  made  to  furnish  a  national 
currency.  The  losses  in  various  ways  from  the  use  of  their  money,  its 
deterioration  in  value,  the  want  of  security,  the  want  of  uniformity, 
and  many  other  objections  to  that  paj)er  money,  make  it  inexpedient 
to  resort  to  it.  United  States  notes  are  in  every  respect  a  better  form 
of  currency  than  bank  paper  ;  but  we  have  to  examine  now  the  objec- 
tions that  may  be  made  to  the  further  use  of  Government  paper  money. 
These  objections  are  briefly  but  very  plainly  stated  by  the  Secretary  of 
the  Treasury.     I  will  read  them  : 

The  principal  objections  to  such  a  circulation  as  a  permanent  system  are:  1, 
the  fiicility  of  excessive  expansion  when  expenditures  exceed  revenue;  2,  the  dan- 
ger of  lavish  and  corrupt  expenditure,  stimulated  by  facility  of  expansion ;  3,  the 
danger  of  fraud  in  management  and  supervision ;  4,  the  impossibility  of  providing 
it  in  sutBcient  amounts  for  the  wants  of  the  people  whenever  expenditures  are  re- 
duced to  equality  with  revenue  or  below  it. 

The  danger  of  over-issue  is  constantly  pressing  upon  us.  It  is 
shown  by  the  experience  of  other  nations,  and  its  effect  in  inflating 
values  is  felt  by  every  one.     The  mere  introduction  of  a  bill  in  the 


NATIOXAL  BANK  CURREI^CY.  61 

House  to  authorize  tlie  issue  of  $300,000,000  additional  United  States 
notes  operated  like  magic.  I  have  here  a  statement  showing  the  effect 
of  this  proposition.  On  the  day  that  bill  was  introduced  gold  com- 
manded a  premium  of  thirty-six  and  a  half  per  cent.  The  next  day 
it  rose  to  thirty-eight ;  witliin  three  days  it  rose  to  forty-one ;  on  the 
15th  of  January,  six  days  afterward,  it  rose  to  forty-eight  and  a  half ; 
and  from  that  time  to  tlds  it  has  been  continually  rising.  It  did  not 
suffer  a  decline  until  there  was  a  disposition  evinced  in  the  Senate  to 
check  the  over-issue  of  this  kind  of  paper  money.  We  have  here  a 
striking  illustration  of  the  effect  of  even  a  proposed  over-issue  of  this 
paper  money.  In  one  week  it  changed  values  over  ten  per  cent.,  and 
in  three  or  four  weeks  it  changed  them  nearly  thirty  per  cent.  The 
proposition  of  the  Senate  to  chfeck  this  over-issue  at  once  reduced  it 
some  four  or  five  per  cent.  I  have  no  doubt  the  passage  of  the  bill  re- 
ported from  the  Committee  on  Finance  will  still  further  reduce  the 
relative  value  of  gold. 

Another  effect  of  an  over-issue  of  paper  money  is  to  increase  the 
compensation  of  employees.  The  expense  of  living  is  now  considera- 
bly greater  than  before  the  war.  We  have  had  more  propositions 
within  the  last  month  to  increase  the  salaries  of  officers  than  we  had 
w^ithin  the  two  years  preceding.  It  is  now  said  by  nearly  every  clerk 
in  the  Departments,  by  nearly  every  officer  in  Washington,  by  nearly 
every  officer  of  the  Government,  that  his  salary  is  inadequate  to  pay 
his  expenses.  We  find  our  expenses  are  largely  increased  by  the  de- 
terioration of  paper  money.  This  deterioration  will  go  on  as  it  has 
gone  on  in  the  history  of  other  nations,  unless  Congress  check  it  by 
stopping  further  issues.  Over-issue  increases  the  expenses  of  the  Gov- 
ernment in  various  waj's.  The  price  of  provisions  and  clothing  is  in- 
creased ;  and  all  the  money  that  we  now  borrow  to  defray  the  expenses 
of  the  Government,  and  all  the  increased  expense  occasioned  by  this 
inflation  of  prices,  must  be  paid  eventually  by  the  people  of  the  United 
States  with  compound  interest  in  gold. 

Another  practical  objection  to  these  United  States  notes  is,  that 
there  is  no  mode  of  redemption.  They  are  safe,  they  are  of  uniform 
value ;  but  there  is  no  mode  pointed  out  by  which  they  are  to  be  re- 
deemed. ISTo  one  is  bound  to  redeem  them.  They  are  receivable,  but 
not  convertible.  They  are  debts  of  the  United  States,  but  they  cannot 
be  presented  anywhere  for  redemption.  No  man  can  present  them, 
except  for  the  purpose  of  funding  them  into  the  bonds  of  the  United 
States.  They  are  not  convertible ;  they  lack  that  essential  element  of 
any  currency. 

Another  objection  is,  that  they  can  only  be  used  during  the  war. 
The  very  moment  that  peace  comes,  all  this  circulation  that  now  fills 
the  channels  of  commercial  operations  will  be  at  once  banished.  They 
will  be  converted  into  bonds ;  and  then  the  contraction  of  prices  will 
be  as  rapid  as  the  inflation  has  been.  The  issue  of  Government  notes 
can  only  be  a  temporary  measure,  and  is  only  intended  as  a  temporary 
measure  to  provide  for  a  national  exigency. 

Another  serious  objection  to  these  notes  is,  that  they  are  made  the 
basis  of  bank  issues.     Under  the  operation  of  the  act  declaring  them 


62  SPEECHES  AND  REPORTS   OF  JOUN  SHERMAN. 

to  be  a  legal  tender,  the  bank  circulation  has  increased  from  8120,000,- 
000  to  $167,000,000.  The  banks  have  sold  their  gold  at  a  large  pre- 
mium, and  placed  in  their  vaults  United  States  notes  with  which  to 
redeem  their  own  notes.  That  cannot  be  avoided.  As  we  have  made 
them  a  legal  tender,  banks  are  bound  to  take  them  in  payment  of  debts 
due  to  them,  and  they  therefore  have  the  light  to  hold  them  to  pay 
their  debts  with.  The  consequence  has  been  that,  wliile  the  Govern- 
ment has  been  issuing  its  paper  money,  some  of  the  banks  have  also 
been  inflating  the  currency  Ijy  issuing  paper  money  on  the  basis  of 
United  States  money.  This  inflation  may  be  illustrated  by  the  state- 
ment of  a  bank  in  T*ennsylvania,  sent  to  me  ^^tli  a  view  to  show  how 
much  tax  it  would  have  to  pay  under  the  bill  reported  from  the  Com- 
mittee on  Finance.  It  has  a  capital  stock  of  $200,000,  and  a  circula- 
tion of  $589,600 ;  there  was  due  to  depositors  $55,125  ;  proflt  and  loss, 
$36,294 ;  and  to  other  banks,  $23,959.  The  circulation  is  $589,600. 
Now,  what  have  they  got  to  pay  -it  with  ?  Gold  and  silver  coin, 
$18,326,  not  one  thirtieth  j^art  of  the  circulation  ;  bills  and  checks, 
$27,128  ;  banking  house  and  lot,  $4,000  ;  due  from  other  banks,  $146,- 
879.  The  assets  on  hand  would  but  little  more  than  pay  depositors 
and  current  debts  to  banks,  leaving  the  whole  circulation  secured  by 
loans  and  discounts.  The  whole  of  that  circulation  has  no  other  basis 
except  loans  and  discounts,  and  the  circulation  is  three  times  the 
amount  of  the  capital  stock. 

It  is  very  easy  to  prove  that  such  a  system  of  l^anking  is  a  bad  one, 
and  w^ould  destroy  and  demoralize  any  country.  There  is  no  basis  for 
it  except  loans  and  discounts ;  and  we  know  by  experience  that  they 
cannot  be  drawn  in  rapidly  enough  to  redeem  a  circulation.  I  have  no 
doubt  that  the  statement  sent  me  of  this  bank  is  only  an  illustration  of 
many  more.  Indeed,  I  have  looked  at  the  published  statements  of 
some  of  the  banks  of  New  York,  Pennsylvania,  and  other  States,  and 
many  of  them  show  the  same  inflation — a  bank  circulation  without  any 
basis  whatever  except  loans  outstanding,  which  cannot  be  called  in 
rapidly  enough  to  liquidate  it. 

The  practical  difliculty  is,  how  to  check  inflation  by  banks.  The 
attempt  to  do  so  by  taxation  has  given  rise  to  nearly  all  the  objections 
to  this  banking  system.  How  can  over-issues  by  banks  be  checked  ? 
If  Senators  can  point  out  any  way  in  which  this  can  be  done,  I  should 
be  very  glad  to  adopt  it.  But  there  is  no  way.  It  has  been  proposed 
to  tax  them  two  per  cent.,  or  one  third  of  their  profits  on  the  circula- 
tion ;  and  we  know  what  an  opposition  this  has  created,  although  I  be- 
lieve that  the  tax  is  entirely  defensible.  There  is  no  tax  in  this  bill 
on  local  banks  ;  local  banks  are  not  mentioned  in  it,  except  that  they 
are  required  to  make  certain  reports,  which  they  can  readily  do  without 
any  trouble. 

There  is  but  one  other  mode  proposed  to  check  this  increase,  but  I 
would  not  assent  to  it  because  it  is  too  harsh.  Under  the  provisions  of 
our  laws,  United  States  notes  are  made  a  legal  tender  in  the  payment 
of  debts.  We  might,  if  we  choose,  except  banks  from  the  operation  of 
that  provision ;  but  I  believe  that  would  be  harsh  and  unjust,  because, 
as  we  require  them  to  receive  these  notes  in  payment  of  debts  due  to 


NATIO^^AL  BANK  CURRENCY.  63 

tliem,  it  would  be  very  unjust  for  us  to  require  tliem  to  pay  out  any- 
thinff  else  but  United  States  notes  for  their  own  notes ;  so  that  the  issue 
of  United  States  notes  by  the  Government  and  the  making  them  a 
legal  tender,  both  of  which  measures  were  clearly  necessary,  have  been 
the  encouragement  and  basis  of  an  inflated  bank  circulation  in  the 
country,  and  there  is  no  way  to  check  this  except  by  uniting  the  inter- 
est of  the  Government,  the  banks,  and  the  people  together  by  one 
uniform,  common  system. 

It  would  be  very  easy  for  me  to  prove  that  during  war  local  banks 
are  the  natural  enemies  of  a  national  currency.  They  were  in  the  war 
of  1812.  Whenever  specie  payments  are  suspended,  the  power  to  issue 
a  bank  note  is  the  same  as  the  power  to  coin  money.  If  you  give  to 
an  individual  or  a  corporation  the  power  to  issue  his  note  as  money  at 
a  time  when  he  is  not  restrained  by  the  necessity  of  paying  in  gold  and 
silver,  you  give  him  practically  the  power  to  coin  money.  Kajjoleon, 
in  the  midst  of  his  campaign  at  Austerlitz,  complained  that  this  power 
existed  in  the  Bank  of  France,  and  insi^^ted  that  it  should  be  restrained. 
I  may  say  that  there  is  not  a  single  difficulty  we  are  now  encountering 
in  the  finances  of  this  Government  that  has  nut  been  discussed  and  en- 
countered in  France  and  England  during  the  long  wars  of  the  French 
Revolution.  Na])oleon,  in  a  letter  which  I  find  in  the  fifth  volume  of 
Bignon,  in  sjieaking  of  the  power  gi-anted  to  the  Bank  of  France  to 
issue  paper  money  when  specie  payments  were  suspended,  says : 

The  evil  originates  in  the  bank  havinfi;  transgressed  the  law.  What  has  the 
law  (lone?  It  has  given  the  privilege  of  coining  money  in  the  form  of  paper  to  a 
particular  company.  But  what  did  it  intend  by  so  doing?  Assuredly  that  the  cir- 
culation thus  created  shoidd  be  based  on  solid  credit.  The  bank  appears  to  have 
adopted  a  most  erroneous  principle,  which  is  to  discount  to  individuals,  not  in  pro- 
portion to  their  real  capital,  but  to  the  number  of  shares  of  its  capital  stock  which 
they  possess.  That,  however,  is  no  real  test  of  solvency.  How  many  persons  may 
be  possessed  of  fifty  or  a  hundred  such  shares,  and  yet  be  so  embarrassed  that  no 
one  would  lend  them  a  single  farthing!  The  paper  of  the  bank  is  thus  issued  in 
many,  perhaps  a  majority  of  cases,  not  on  real  credit,  but  on  a  delusive  supposition 
of  wealth.  In  one  word,  in  discounting  after  this  manner  the  bank  is  coining  false 
money.  So  clearly  do  I  see  the  dangers  of  such  a  course,  that,  if  necessary,  I  Avould 
stop  the  pay  of  niy  soldiers  rather  tlian  persevere  in  it.  I  am  distressed  beyond 
measure  at  the  necessities  of  my  situation,  which,  by  compelling  me  to  live  in  camps 
and  engaging  me  in  distant  expeditions,  withdraw  my  attention  from  what  would 
otherwise  be  the  chief  object  of  my  anxiety,  the  first  wish  of  my  heart — a  good 
and  solid  organization  of  aU  that  concerns  the  interest  of  banks,  manufactures,  and 
commerce. 

Surely,  when  Kapoleon  was  so  jealous  of  the  power  of  the  Bank  of 
France,  as  William  Pitt  was  of  the  Bank  of  England,  which  were  insti- 
ttitions  of  a  national  character,  under  the  control  of  the  national  legis- 
lature, and  carefully  watched  by  executive  power,  to  coin  mone;^,  or, 
which  is  the  same  thing  when  specie  payments  are  suspended,  to  issue 
paper  monev,  we  should  be  jealous  of  the  power  exercised  by  a  multi- 
tude of  local  banks  chartered  by  twenty-eight  States,  ^\hose  issues  are 
not  secured  by  any  uniform  standard  and  are  not  restrained  by  the 
obligation  to  redeem  in  coin. 

This  idea  expressed  by  J^apoleon  Bonaparte  embodies  the  real  ob- 
jection to  bank  paper  money  issued  in  time  of  war  when  specie  payments 


64  SPEECHES  AND   REPORTS   OF  JOHN  SHERMAN. 

are  suspended.  It  is  a  power  that  ouglit  ;iever  to  be  exercised  except 
by  the  Government,  and  only  when  the  State  is  in^  danger.  ^  It  is  the 
power  to  coin  money ;  because  when  a  bank  issues  its  bill  without  the 
restraint  of  specie  j^ayments,  it  substantially  coins  money,  and  false 
money.  Sir,  this  is  a  privilege  that  no  nation  can  safely  surrender  to 
individuals  or  banks. 

Mr.  Burke  says  that  the  revenue  of  the  State  is  the  State,  and  the 
currency  aifects  and  controls  the  revenue.  Now,  sir,  under  our  present 
system  we  cannot  receive  the  reveime  in  the  currency  common  among 
the  people.  Local  banks  beyond  our  power  regulate  the  currency  estab- 
lished by  the  Government.  We  cannot  have  a  good  currency  until 
these  banks  are  reduced  to  a  common  system.  Upon  this  point,  I  ven- 
ture to  refer  to  an  authority  which  I  do  not  like  to  quote,  because  it  is 
not  friendly  to  our  country ;  yet  it  is  a  paper  conducted  with  eminent 
ability — the  "  London  Times."  In  a  recent  article  on  the  subject  of  ■'* 
this  bill,  it  says : 

By  the  want  of  a  paper  currency  that  would  be  taken  in  every  State  of  the 
Union  at  its  nominal  value  the  Americans  have  suffered  severely.  The  different 
States  were,  as  to  their  bank  notes,  so  many  foreign  nations,  each  refusing  the  paper 
of  the  others,  except  at  continually  varying  rates  of  discount.  Frequently  there 
was  a  greater  loss  on  paper  taken  or  sent  from  an  Eastern  to  a  Western  State  than 
on  English  bank  notes  converted  into  Austrian  money  in  Vienna.  Only  adepts  and 
regular  money-changers  could  tell  whether  a  note  was  current  or  not,  the  paper  of 
broken  or  suspended  banks  remaining  in  circulation  long  after  their  value  had  de- 
parted. The  Federal  Government  avoided  loss  by  refusing  all  paper  of  every  kind. 
Its  import  duties  were  taken  only  in  gold,  and  inland  revenue  it  had  none.  The  first 
appearance  of  a  department  for  collecting  that  kind  of  taxation  is  in  the  present  bill 
proposed  by  Mr.  Chase.  But  the  difficulties  of  the  Government  have  compelled  it 
to  issue  a  paper  that  will  pass  current  in  any  part  of  the  territory.  Through  the 
evils  of  war  the  people  will  at  least  gain  that  deliverance  from  the  previous  confu- 
sion of  their  currency  w^hich  to  Europeans  appeared  a  barbarism.  If  the  social 
storm  sweeps  away  the  "  wild-cat "  and  "  bogus  "  banks  of  the  Union,  it  will  have 
left  some  small  compensation  for  the  wreck  of  better  things.  The  best  part  of  Mr. 
Chase's  plan  is  the  suggestion  that  will  probably  excite  the  least  attention. 

Sir,  while  I  believe  that  no  system  of  paper  money  should  depend 
alone  upon  banks,  I  am  far  from  objecting  to  their  agency.  They  are 
useful  and  necessary  mediums  of  exchange,  indispensable  in  all  com- 
mercial countries.  The  only  power  they  derive  from  incorporation, 
not  granted  to  all  citizens,  is  the  power  to  issue  notes  as  money,  and 
this  power  is  not  necessary  for  their  business  or  essential  to  their  profit. 
Their  business  connects  them  with  the  currency ;  and  whether  it  be 
gold  or  paper,  they  are  deeply  interested  in  its  credit  and  value.  Is  it 
not  then  possible  to  preserve  to  the  Government  the  exclusive  right  to 
issue  paper  money,  and  yet  not  injuriously  affect  the  interests  of  the 
local  banks  ? 

Tills  is  the  object,  of  this  bill.  But  it  is  asked,  why  look  at  all  to 
the  interests  of  the  banks  ?  why  not  directly  issue  the  notes  of  the  Gov- 
ernment, and  thus  save  to  the  people  the  interest  on  the  debt  rej^re- 
sented  by  the  notes  in  circulation  ? 

The  only  answer  to  this  question  is,  that  history  teaches  us  that  the 
public  faith  of  a  nation  alone  is  not  sufficient  to  maintain  a  paper  cur- 
rency.    There  must  be  a  combination  between  the  interests  of  private 


NATIONAL  BANK  CURRENCY.  (55 

individuals  and  tlie  Goyernment.  As  this  is  an  important  principle,  I 
venture  to  refer  more  fully  to  examples  of  depreciated  Government 
paper  money. 

Our  Eevolutionary  currency,  Continental  money,  depreciated  until  it 
became  worthless.  I  have  here  a  table  showing  its  gradual  deprecia- 
tion. When  it  was  first  emitted,  June  23, 1775,  it  was  at  par  with  gold. 
The  last  issue  of  $10,000,000  on  the  29th  of  November,  1779,  sold  for 
$259,7-13,  or  as  one  to  thirty-eight  and  a  half,  and  afterward  it  went 
down  in  the  hands  of  the  people.  Over  $380,000,000  of  Continental 
scrip  were  issued.  The  first  issue  was  good.  If  our  Eevolutionary 
fathers  had  been  able  to  confine  the  amount  to  something  like  ten  or 
twelve  millions,  which  would  have  been  about  the  same  proportion  as 
$500,000,000  to  our  present  condition,  it  would  have  maintained  its 
credit,  and  would  have  been  redeemed  by  the  United  States.  So  it 
was  with  the  assignats  of  France,  They  were  issued  at  first  based  upon 
the  national  domain,  amply  secured,  but  they  declined  at  a  fearful  rate 
as  the  issue  increased.  I  will  read  a  short  extract  to  show  the  precise 
history  of  those  Government  assignats,  to  warn  Senators  against  tread- 
ing the  same  downward  course  : 

In  April,  1790,  when  the  assignats  were  first  circulated,  their  amount  was  stip- 
ulated at  400,000,000  francs  (between  fifteen  and  sixteen  millions  sterling) ;  in 
September  following  their  issue  was  extended  to  1,200,000,000;  in  January,  1793, 
they  amounted  to  3,626,000,000;  in  September,  1794,  to  8,817,500,000;  in  1795, 
9,699,500,000  ;  and  lastly,  in  September,  1796,  to  45,579,000,000  francs,  a  sum  far 
too  enormous  to  be  expres=!ed  even  in  British  money,  were  not  all  degrees  of  com- 
parison lost  in  the  extent  of  the  amount.  At  the  period  of  their  ceasing  to  constitute 
part  of  the  currency  of  France,  an  assignat  of  100  francs  (about  £4)  was  exchanged 
for  three  and  a  half  sous  (about  l^d.  sterling)  in  specie. 

The  issue  of  assignats  was  sustained  by  the  same  arguments  that  we 
hear  now  in  favor,  of  a  continuous  and  unlimited  issue  of  paper  money. 
Precisely  the  same  kind  of  arguments  were  enforced  with  all  the  power 
and  eloquence  of  Mirabeau  ;  and  yet  all  these  assignats  depreciated 
from  the  very  date  of  his  speech,  day  after  day ;  and  on  every  fresh 
issue  they  went  still  further  downward  and  downward.  The  very 
moment  you  pass  beyond  the  amount  necessaiy  for  a  circulating 
medium,  at  that  very  moment  the  depreciation  will  commence,  until  it 
destroys  the  standard  of  values  and  all  the  rights  to  property. 

In  Austria  the  same  effect  was  produced.  The  Wie)ie?'  WciJirungoi 
that  country  passed  through  the  same  history  of  depreciation  as  the 
assignats  of  France,  showing  an  invariable  law  which  cannot  be  disre- 
garded by  any  nation.  This  country  can  maintain  an  issue  of  about 
$100,000,000  of  United  States  demand  notes,  and  no  more ;  and  when 
you  go  beyond  the  proper  limit — a  limit  fixed  by  the  laws  of  finance, 
which  are  irrepealable — that  moment  you  endanger  your  whole  system. 
As  a  matter  of  course,  you  must  during  a  time  of  war  issue  a  certain 
amount  of  paper  money  as  the  basis  of  circulation  or  banking  ;^  but  that 
amount  must  be  limitecl  by  the  demand  for  a  circulating  medium. 

Mr.  President,  I  have  thus  endeavored  to  show  that  Government 
paper  money,  unsupported  by  private  capital,  cannot  be  maintained  as 
a  currency  in  time  of  war.  '^I  have  also  endeavored  to  show,  and  did 
5 


QQ  SPEECHES   AND   REPORTS   OF  JOHN  SHERMAN. 

show  on  a  former  occasion,  tliat  the  issuing  of  notes  by  a  diversity  of 
private  banks  under  State  authority,  and  unchecked  by  specie  payments, 
is  inexpedient,  destructive,  and,  in  my  opinion,  unconstitutional.  The 
two  systems  cannot  exist  together.  They  will  inevitably  induce  infla- 
tion and  ultimate  bankruptcy.  A  good  national  currency  as  a  substitute 
for  gold  and  silver  can  only  exist  by  combining  the  two  systems ;  so 
that  the  Government  may  issue  notes  of  uniform  nature  properly  secured, 
and  the  banks  may  redeem  and  maintain  their  credit. 

I  have  a  very  curious  diagram  here  that  can  only  be  instructive  by 
being  seen.  It  purports  to  be  a  diagram  showing  the  progress  of  bank 
capital,  bank  circulation,  bank  deposits,  and  bank  loans  in  different 
periods  of  our  national  history.  It  shows  very  clearly  that  the  very 
moment  the  circulating  medium  of  the  country  passes  beyond  the  true 
boundary  line,  that  very  moment  everything  else  is  inflated  in  propor- 
tion— loans,  discounts,  and  deposits ;  and  this  inflation  goes  on  rapidly 
until  some  sudden  unforeseen  event  checks  the  whole  system,  and  it 
falls  like  a  bubble  to  the  ground.  We  were  instructed  in  our  boyish 
days  by  diagrams  showing  the  height  of  mountains  and  the  length  of 
rivers ;  but  this  diagram  is  more  instructive  than  any  of  that  class.  It 
shows  that  in  1837,  the  first  jDeriod  of  inflation  in  this  country  since 
1815,  the  loans  and  discounts  rose  to  the  enormous  sum  of  $540,000,- 
000  ;  the  bank  circulation  rose  to  something  like  $340,000,000.  This 
was  after  the  Bank  of  the  United  States  had  ceased  to  exist.  Every- 
thing else  became  inflated  ;  and  within  one  year  from  that  time  there 
was  a  general  collapse  and  disaster  all  over  the  whole  country ;  the 
price  of  everything  fell ;  and  the  great  body  of  this  currency  fell  dead 
on  the  hands  of  the  people  and  was  lost.  Much  of  the  deposits  of 
individuals  in  the  hands  of  the  banks  was  also  lost ;  and  more  than 
one  half  of  all  the  paper  money  then  in  circulation  was  substantially 
worthless  to  the  community.  The  rapid  change  from  a  high  period  of 
inflation  to  a  serious  depression  was  almost  as  rapid  as  the  rise  of 
prices.  In  1857  the  same  rise  occurred,  but  to  a  limited  extent.  The 
loans  and  stocks  had  then  risen  to  $710,000,000,  mostly  on  railroad 
securities.  The  collapse  of  a  bank  in  the  State  of  I^ew  York,  the 
Ohio  Life  Insurance  and  Trust  Company,  at  once  created  a  derange- 
ment in  all  financial  matters,  and  there  was  then  a  term  of  great  de- 
pression;  so  that  within  a  single  year  the  loans  of  the  banks  were 
reduced  from  $710,000,000  to  about  $620,000,000,  and  the  circulation 
and  everything  else  accordingly. 

Mr.  President,  we  are  already  in  a  period  of  great  inflation.  The 
Government  of  the  United  States  has  either  in  circulation  or  has  au- 
thorized now  nearly  $100,000,000  of  United  States  notes.  We  have  a 
bank  circulation  of  from  one  hundred  and  sixty  to  one  hundred  and 
seventy  millions.  If  we  adopt  the  proposition  which  is  sent  to  us 
from  the  House  of  Representatives  to  go  on  increasing  our  circulation 
by  the  issue  of  three  hundred  millions  more,  it  will  create  an  inflation 
that  will  inevitably  lead  to  the  derangement  of  all  the  business  affairs 
of  the  country.  We  must  check  it ;  we  must  put  a  stop  to  it.  What- 
ever may  be  the  hazards,  we  must  check  this  over-expansion  and  over- 
issue.    If  you  authorize  that  issue  of  United  States  notes,  it  will  be 


NATIONAL  BANK  CUREENCY.  67 

at  once  followed  by  an  issue  of  more  bank  paper,  and  then  we  shall 
have  the  wildest  speculation.  Hitherto  the  inflation  has  not  extended 
to  many  articles.  Real  estate  has  not  yet  been  much  affected  by  it  ; 
clothing  is  somewhat  higher,  bnt  most  articles  of  provisions  still  main- 
tain their  equilibrium.  The  wild  lands  of  the  West,  which  in  1837 
were  worth  from  flfteen  to  twenty  dollars  an  acre,  were  one  year  after- 
ward reduced  to  Government  prices.  They  will  again  become  inflated, 
and  every  kind  of  business  will  be  damaged  and  disorganized.  I  say 
it  is  a  danger  before  which  a  lost  battle  sinks  into  insignificance ;  and 
if  we  jDermit  this  inflation  to  go  on,  we  shall  do  our  country  a  greater 
harm  than  the  Confederates  can  possibly  do  by  defeating  any  one  of 
our  armies. 

The  question  then  occurs — the  only  one,  indeed,  which  is  at  all 
practical  to  this  discussion — whether  the  bank  bill  proposed  by  the 
Secretary  of  the  Treasury,  and  introduced  by  me  in  the  Senate,  will 
tend  to  secure  us  a  national  currency  beyond  the  danger  of  inflation. 
The  amount  of  circulation  limited  by  .the  terms  of  this  bill  is  $300,- 
000,000.  I  think  any  one  who  will  read  this  bill  with  candor  will  find 
that  beyond  all  contingency  the  currency  proposed  to  be  issued  under 
it  is  safe.  It  is  first  secured  by  the  bonds  of  the  United  States ;  a 
margin  of  ten  per  cent,  is  left  for  depreciation ;  and  then  in  case  of 
further  depreciation  the  Secretary  is  authorized  to  call  for  the  deposit 
of  a  greater  amount  of  bonds.  While  the  depreciation  under  par  ex- 
ists, no  interest  can  be  paid  upon  these  bonds,  but  it  is  held  in  the 
hands  of  the  Secretary  of  the  Treasury  for  redemption.  Besides  that, 
the  banks  have  to  keep  on  hand  twenty-five  per  cent,  in  lawful  money. 
It  is  proposed  to  make  that  gold  and  silver ;  but  that  is  perfectly  futile 
and  impossible  now.  The  bank  bill  requires  that  twenty-five  per 
cent,  of  the  deposits  and  the  circulation  shall  be  kept  on  hand,  so  that 
the  note-holder  will  first  have  the  security  of  the  bonds  of  the  Gov- 
ernment and  a  margin  for  depreciation ;  he  will  have  twenty-five  per 
cent,  of  the  amount  of  circulation  always  on  hand  in  the  bank ;  and, 
in  addition  to  that,  the  first  lien  on  all  property  of  the  bank.  The 
Government  would  have  a  lien  for  all  the  deficiency  upon  all  the  prop- 
erty of  the  bank ;  and  in  addition  to  that  it  would  have  the  responsi- 
bility of  the  banker  himself  to  the  amount  of  twice  the  capital  stock. 
There  is  not  in  this  country  any  scheme  of  banking  which  secures  the 
note-holder  more  perfectly  than  this.  First,  he  has  the  creditof  the 
United  States  by  its  bonds  and  by  its  guarantees ;  to  guard  against  de- 
ficiency he  has  the  deposit  of  one  fourth  tlie  amount  in  bank ;  he  has 
the  individual  liability  of  the  stockholders  to  a  limited  extent ;  and  he 
has  the  first  lien  on  all  the  property  of  the  bank,  including  the_  deposits. 
It  is  impossible,  therefore,  to  make  a  system  more  safe  than  this  will  be. 

Will  this  money  be  convertible  ?  The  United  States  notes  are  not 
convertible ;  that  is,  there  is  no  one  to  pay  them  on  demand.  These 
bank  bills  are  convertible.  When  they  are  presented  at  the  counter,  it 
is  the  duty  of  the  banker  at  once  to  pay  them  promptly  in  lawful 
money  of  the  United  States ;  and  that  money  is  to  be  restricted  to  the 
amount  of  the  present  issues,  or  to  the  $50,000,000  additional  author- 
ized in  this  bill.     They  are  convertible  at  any  time. 


68  SPEECHES  AND  REPOKTS   OF  JOHN  SHERMAN. 

This  currency  will  be  uniform.  It  will  be  printed  by  the  United 
States.  It  will  be  of  uniform  size,  shape,  and  form ;  so  that  a  bank 
bill  issued  in  the  State  of  Maine  will  be  current  in  California ;  a  bank 
bill  issued  in  Ohio  will  be  current  wherever  our  Government  currency 
goes  at  all ;  and  a  bank  bill  issued  in  the  State  of  Connecticut  will  be 
freely  taken  in  Iowa  or  anywhere  else.  There  is  no  limit  to  its  con- 
vertibility. I  have  no  doubt  these  United  States  notes  will,  in  the 
end,  be  taken  as  the  Bank  of  England  note  now  is  all  over  the  world, 
as  a  medium,  and  a  standard  medium,  of  exchange ;  not,  it  is  true, 
during  the  war,  but  after  peace  shall  again  bless  us.  These  notes  will 
then  be  the  very  best  currency  that  can  be  issued.  They*  will  be  safe ; 
they  will  be  uniform  ;  they  will  be  convertible.  Those  are  all  the  re- 
quisites that  are  necessary  for  any  system  of  currency  or  exchange. 

Now,  Mr.  President,  let  us  see  and  examine  a  Kttle  more  accurately 
the  advantages  the  Government  will  derive  from  this  system  ;  because, 
unless  it  is  to  derive  some  benefit,  the  system  ought  not  to  be  pressed. 
I  take  it  as  an  axiom  that  the  United  States  should  not  issue  notes  to 
an  amount  greater  than  sufficient  to  fill  the  vacuum  created  by  the 
withdrawal  of  gold,  the  amount  of  present  issues.  What  benefit,  then, 
does  the  United  States  obtain  from  this  system  ?  The  first  benefit  is, 
there  is  a  market  furnished  for  the  bonds.  These  banks  must  furnish 
ten  per  cent,  more  of  the  bonds  of  the  United  States  than  they  receive 
in  paper  money.  This  at  once,  if  the  full  amount  is  issued,  which  I 
do  not  anticipate  within  a  year,  will  furnish  a  market  for  over  three 
hundred  and  thirty  million  dollars  of  bonds ;  and  we  know  very  well, 
by  the  laws  of  demand  and  supply,  that  where  a  demand  is  made  for  a 
given  article  the  demand  extends  far  beyond  the  particular  want.  For 
instance,  if  there  is  a  demand  in  England  for  ten  million  bushels  of 
wheat,  that  demand  affects  the  price  of  one  hundred  million  bushels  in 
this  country ;  so  that  the  increase  in  the  price  of  wheat  growing  out  of 
this  unexpected  demand  for  wheat  is  more  than  twice  or  threefold  the 
value  of  the  wheat  that  is  demanded.  You  make  a  fixed  and  perma- 
nent demand  for  United  States  bonds  used  for  banking  purj^oses,  and 
you  give  a  credit  to  §1,000,000,000  of  bonds.  That  is  the  law  of 
demand  and  supply.  The  very  demand  for  these  bonds,  owing  to  the 
necessity  for  capitalists  to  keep  them  to  base  their  banking  upon,  will 
make  them  a  desirable  security.  When  a  banker  wishes  these  bonds, 
other  persons  will  wish  them.  Every  demand  you  make  for  them 
increases  largely  the  value  of  the  security. 

I  have  no  doubt — indeed  I  know — that  within  a  very  short  time 
after  this  system  is  in  operation,  banks  will  be  started.  I  know  that 
then  there  will  be  a  demand  for  bonds.  Many  of  the  bonds  that  are 
now  outstanding  will  be  absorbed  for  banking  purposes,  and  others  will 
be  demanded.  Sir,  you  cannot  carry  on  this  war  except  by  the  sale  of 
your  bonds.  Any  ingeniously  conti'ived  system  to  carry  it  on  by  paper 
money  in  the  form  of  currency  will  be  futile.  Then  you  can  only 
carry  on  your  operations,  as  an  individual  or  a  nation,  by  the  sale  of 
your  bonds  or  the  use  of  your  credit.  If  you  have  not  got  the  money, 
you  must  borrow  it ;  and  aU  other  schemes  are  idle.  You  may,  it  is 
true,  furnish  a  limited  amount  in  paper  cuiTency.     When  you  go  one 


NATIONAL  BANK  CURRENCY.  69 

step  beyond  that  limit  fixed,  by  the  laws  of  finance  and  commerce,  then 
you  destroy  the  value  of  that  which  you  use  as  currency.  Your  power 
to  borrow  goes  on  indefinitely.  Your  business,  therefore,  is  to  make  a 
demand  for  your  Government  securities,  and  thus  induce  the  invest- 
ment of  the  money  of  the  j)eople  in  the  bonds  of  the  United  States. 

AVhy,  sir,  there  is  in  this  country  an  ample  supply  of  capital  for  all 
purposes.  Our  annual  productions  are  showTi  by  the  census  to  be 
$1,900,000,000  a  year.  The  aggregate  wealth  of  this  people  is  over 
$12,000,000,000.  The  actual  capital  that  is  now  in  the  hands  of  the 
people,  seeking  and  begging  for  investment,  would  carry  on  this  war 
for  years.  There  is  no  want  of  capital.  It-  is  a  want  of  confidence,  a 
want  of  system ;  a  fear  that  that  which  the  people  have  will  fall  sud- 
denly on  their  hands  utterly  worthless.  That  is  the  real  danger.  This 
bill  furnishes  a  market  for  your  bonds  and  your  securities — ^that  credit 
by  wliich  alone  you  can  carry  on  a  Government  in  time  of  war. 

But,  sir,  that  is  not  all.  It  will  furnish  a  medium  by  which  the 
State  bank  paper  may  be  gradually  absorbed — not  by  any  harsh  meas- 
ures. Some  of  the  friends  of  local  banks  think  this  is  a  great  scheme 
to  break  down  local  banks.  Why,  sir,  as  I  shall  show  you  before  I  am 
through,  it  is  clearly  the  interest  of  every  local  bank  of  the  United 
States  to  avail  itself  of  the  provisions  of  this  law.  It  will  no  doubt 
operate  gradually  to  absorb  the  local  banks,  to  retire  their  issues  by 
substituting  in  their  place  an  issue  that  will  be  safe,  uniform,  and  con- 
vertible in  all  parts  of  the  country.  I  believe  this  system,  if  it  has  a 
fair  trial,  a  fair  experiment,  will  gradually  absorb  all  the  State  banks, 
without  deranging  the  currency  of  the  country  or  destroying  the  value 
of  the  property  of  stockholders  in  banks. 

I*^ot  only  that.  This  scheme  will  furnisli  a  convenient  agency  for 
the  collection  of  taxes.  You  have  now  in  this  courftry  collectors  and 
assessors  scattered  aU  over  the  country,  in  every  district,  and  the  people 
are  compelled  to  pay  taxes.  AYhat  is  the  medium  by  which  they  are 
to  be  paid  ?  At  present  the  only  one  is  what  are  called  greenbacks, 
United  States  notes,  and  these  notes  are  forced  out  of  circulation  by 
the  superabundance  of  bank  paper ;  so  that  a  person  who  desires  to 
pay  taxes  is  compelled  to  go  into  the  market  to  obtain  first  United 
States  demand  notes  by  the  sale  or  conver.^on  of  his  bank  paper.  This 
will  furnish  a  convenient  medium  by  which  the  taxes  may  be  paid ; 
and  as  these  banks  will  gradually  extend  themselves  all  over  the  coun- 
try, they  will  be  made  the  convenient  depositories  of  the  public  money. 
As  it  is  now,  every  collector  is  bound  to  take  what  paper  money  he 
gets,  and  hold  it  in  his  hands  subject  to  all  risks.  He  dare  not,  under 
our  laws,  deposit  it  with  banks.  He  runs  all  the  risk  of  fire  and  acci- 
dent ;  and  all  the  money  he  may  have  on  his  hands  he  is  responsible 
for.  He  has  no  safe  where  he  can  deposit  it.  The  United  States  Gov- 
ernment does  not  furnish  a  safe,  and  it  forbids  him  to  deposit  in  banks. 
Under  this  system  all  the  money  of  the  United  States  may  be  safely 
deposited  in  banks,  and  the  deposit  will  be  secured  by  Government 
bonds,  so  that  there  can  be  no  loss. 

But  there  is  another  reason  in  favor  of  this  measure.  It  will  make 
a  comniunity  of  interests  between  the  stockholders  of  banks,  the  people, 


70  SPEECHES  AND  KEPOKTS  OF  JOHN  SHEEMAN. 

and  tlie  Government.  At  present  there  is  a  great  diversity  of  inter- 
ests. The  local  banks  have  one  interest,  and  the  Government  has 
another.  They  are  brought  into  conflict.  But,  sir,  by  the  passage  of 
this  bill  you  will  harmonize  these  interests  ;  so  that  every  stockholder, 
every  mechanic,  every  laborer  who  holds  one  of  these  notes  will  be  in- 
terested in  the  Government — not  in  a  local  bank,  but  in  the  Govern- 
ment of  the  United  States — whose  credit  he  will  be  anxious  to  uphold. 
If  this  system  had  been  sj^read  all  over  this  coimtry,  and  these  l)anks 
had 'been  established  as  agencies  upon  the  basis  of  national  credit,  I 
believe  they  would  have  done  very  much  indeed  to  maintain  the  Fed- 
eral Government  and  to  prevent  the  great  crime  of  secession. 

But,  sir,  there  is  a  still  higher  motive  for  the  passage  of  this  bill. 
It  will  promote  a  sentiment  of  nationality.  There  can  be  no  doubt  of 
it.  The  policy  of  this  country  ought  to  be  to  make  everytliing  nation- 
al as  far  as  possible ;  to  nationalize  our  country,  so  that  we  shall  love 
our  country.  If  we  are  dependent  on  the  United  States  for  a  currency 
and  a  medium  of  exchange,  we  shall  have  a  broader  and  a  more  gen- 
erous nationality.  The  want  of  such  nationality,  I  believe,  is  one  of 
the  great  evils  of  the  times.  This  doctrine  of  State  rights,  which  sub- 
stitutes a  local  community — for,  after  all,  the  most  powerful  State  is 
but  a  local  community — instead  of  the  United  States  of  America,  has 
been  the  evil  of  the  times ;  and  it  is  that  jjrinciple  of  State  rights, 
that  bad  sentiment  that  has  elevated  State  authority  above  the  great 
national  authority,  that  has  been  the  main  instrument  by  which  our 
Government  is  sought  to  be  overthrown. 

But,  Mr.  President,  I  say  that  this  system  will  be  a  benefit  to  the 
banks  themselves,  as  well  as  to  the  Government.  The  similarity  of 
notes  all  over  the  United  States  will  give  them  a  wider  circulation.  A 
note  issued  by  a  bank  in  Maine  will  have  upon  it  precisely  the  same 
engraving,  the  same  form,  the  same  character,  as  a  note  issued  in  Iowa. 
They  will  both  rest  on  the  same  basis  and  the  same  security.  This 
very  fact  will  give  them  a  broader  circulation.  ISTow,  when  a  note  is 
issued  in  Oliio,  if  it  straggles  as  far  as  Washington,  it  is  discounted  two 
per  cent.,  although  it  is  just  as  good  as  any  other  note,  and  is  driven 
back  by  the  very  fact  that  it  is  at  a  discount.  If  that  note  bore  the 
similitude  of  the  United  States  of  America,  and  the  stamp  and  the  guar- 
antee which  the  United  States  gives  it,  it  would  go  everywhere  ;  and  a 
note-holder  would  not  care  whether  it  were  issued  in  Ohio,  Connecti- 
cut, or  California.  That  very  similitude  would  give  it  a  broader  circu- 
lation, and,  consequently,  a  more  profitable  circulation  to  the  bank  ;  it 
would  not  be  returned  so  quickly.  I  have  been  told  by  gentlemen 
from  New  England  that  the  average  period  of  circulation  in  ISTew  Eng- 
land is  al)out  thirty  days ;  in  New  York,  in  the  cities,  it  is  much  less ; 
in  the  West  it  is  said  to  be  sixty  days.  But,  sir,  these  notes  all  being 
the  same,  they  may  have  an  indefinite  circulation,  and  the  average  may 
extend  to  years,  instead  of  months  or  days. 

There  is  another  important  advantage  which  the  banks  would  derive 
from  this  system.  They  would  be  guarded  against  all  frauds  and  alter- 
ations.  There  would  be  but  five  or  six  kinds  of  notes  in  the  United 
States,  instead  of  the  great  diversity  that  there  now  is.     This  would  be 


NATIONAL  BANK   CUERENCY.  71 

a  great  guard.  I  have  here  a  table  showing  the  number  of  counterfeit 
notes  in  this  country,  to  which  I  will  refer.  It  is  a  curious  and  in- 
structive expose^  by  a  friend  of  mine,  who  took  the  pains  to  examine 
into  the  subject : 

The  notes  of  over  twelve  hundred  banks  have  been  counterfeited  or  altered. 
There  are  in  existence  over  three  thousand  kinds  of  altered  notes,  seventeen  hundred 
varieties  of  spurious  notes,  four  hundred  and  sixty  varieties  of  imitations,  and  over 
seven  hundred  of  other  kinds ;  this  arising  from  the  great  variety  of  bank  notes, 
there  being,  at  a  moderate  estimate,  over  seven  thousand  various  kinds  of  g#nnine 
bills — some  executed  by  good  artists,  and  many  in  an  indifferent  manner. 

The  following  statistics  are  from  reliable  data  as  to  the  years  1856  and  1862  : 

1856.  1862. 

Number  of  banks ." 1,409  1,500 

Number  whose  notes  are  not  counterfeited 463  253 

Number  of  kinds  of  "  imitations  " 1,462  1,861 

Number  of  kinds  of  "alterations" 1,119  8,039 

Number  of  kinds  of  "  spurious  " 224  1,685 

I  ask  you,  sir,  how  is  it  possible  to  have  a  currency — how  is  it  pos- 
sible for  any  honest  man  to  detect  the  genuine  from  the  counterfeit, 
when  he  has  to  select  from  seven  thousand  different  kinds  of  bank  bills, 
and  the  bills  of  those  banks  have  been  counterfeited  ;  when  so  large  a 
portion  of  them  are  spurious  and  counterfeit  ?  It  is  impossible.  Under 
this  system,  the  banks  will  be  saved  from  all  this  difficulty.  There  will 
be  but  six  or  seven  kinds  of  notes.  They  will  become  familiar  to  us, 
so  that  every  man  will  be  a  counterfeit  detector  in  himself,  and  will 
not  be  compelled  to  look  through  a  long  list  to  ascertain  whether  a  bill 
is  genuine  or  not.  This  very  fact  will  give  a  credit  and  currency  to 
bank  circulation  which  it  has  not  now. 

There  is  another  advantage  these  banks  would  have.  They  are 
made  by  this  law  depositories  of  the  public  money.  All  the  money 
collected  by  the  collectors  and  various  other  Government  officers  would 
be  deposited  in  the  bank  convenient  to  the  collector ;  and  these  deposits 
are  the  most  abundant  and  profitable  source  of  revenue.  They  would 
be  more  stable  than  individual  deposits.  They  would  be  paid  out  in 
the  form  of  checks  and  drafts,  and  would  be  there  in  the  banks  per- 
fectly safe,  secured  to  the  Government  by  bonds ;  and  yet  they  would 
be  a  legitimate  source  of  banking  profit.  Under  the  present  system  the 
laws  forbid  such  a  thing.  The  experience  of  the  past  has  shown  that 
local  banks  are  not,  and  cannot  be  made,  safe  depositories  ;  and,  there- 
fore, this  would  be  an  advantage  which  the  new  banks  would^  have  over 
the  old. 

There  is  still  another  advantage.  These  notes  are  to  be  receivable 
for  taxes  due  to  the  United  States.  This  would  be  again  another  prof- 
itable source  of  circulation.  The  notes  of  the  State  banks  cannot  be  so 
received.  They  are  dishonored  and  disgraced  from  the  beginning  by 
being  refused  by  the  ]!^ational  Government. 

Under  this  system,  Mr.  President,  there  could  be  no  object  for 
brokers,  who  are  the  natural  enemies  to  banks,  to  "  run  "  ujDon  a  bank ; 
because  the  notes  will  be  uniform  in  face  and  value,  and  exchange  will 
be  equalized  all  over  the  country.  I  think,  therefore,  it  could  be 
proved  to  the  satisfaction  of  every  man  who  is  interested  in  these  bank- 


72  SPEECHES   AND  EEPOETS  OF  JOHN  SHERMAN. 

ing  associations,  that  it  is  for  their  interest  to  convert  their  local  systems 
into  tlie  national  system,  by  filing  with  the  Government  the  security 
required  by  tlie  law,  and  thus  aiding  the  Government  at  the  same  time 
that  they  aid  themselves. 

It  may  be  thought  that  I  am  hostile  to  State  banks.  I  am  not  and 
never  have  been.  I  have  always  been  friendly  to  them.  But,  sir,  I 
think  that  everything  ought  to  be  subordinate  now  to  what  is  necessary 
for  the  good  oi  the  country.  All  private  interests,  all  local  interests, 
all  bsrnking  interests,  the  interests  of  individuals,  everything,  should  be 
subordinat'e  now  to  the  interests  of  the  Government ;  and  whenever  I 
see  anything  whatever  standing  in  the  way  of  what  I  believe  is  de- 
manded by  the  good  of  the  United  States  at  large,  I  will  seek,  if  i)os- 
sible,  without  doing  them  any  injury,  to  make  them  harmonious  with 
the  system  adopted  by  the  Government.  I  believe  that  by  the  adop- 
tion of  this  system  you  will  harmonize  the  interests  of  the  local  banks 
with  the  interests  of  the  Government  of  the  United  States. 

ISTow,  sir,  what  benefits  would  the  people  derive  from  this  system  ? 
Those  benefits  may  be  inferred  from  what  I  have  already  stated.  In 
this  way  the  people  would  have  a  currency  combining  the  national 
faith  with  the  private  stock  and  private  credit  of  individuals.  They 
would  have  a  currency  that  would  be  safe,  uniform,  and  convertible. 
They  would  have  all  that  can  be  desired  in  any  community :  a  currency 
limited  in  amount,  restrained  by  law,  governed  by  law,  checked  by  the 
power  of  visitation,  checked  by  the  limitation  of  liabilities,  safe,  uni- 
form, and  convertible  in  every  part  of  the  country.  When  I  see  that 
the  people  of  the  United  States  can  derive  these  advantages,  when  I 
see  that  the  Government  of  the  United  States  can  derive  these  advan- 
tages from  this  system  of  banks,  I  will  not  hesitate  for  a  moment,  even 
if  I  am  compelled  as  a  part  of  the  system  to  induce  the  withdrawal 
of  local  bank  paper,  the  surrender  of  the  power  to  issue  or  to  coin 
money. 

Mr.  President,  I  do  not  wish  to  pursue  this  argument  much  fur- 
ther ;  but  I  could  show,  by  reference  to  our  own  history,  that  I  seek  to 
accomplish  only  what  all  the  statesmen  of  our  country  have  sought  to 
accomplish.  Every  party  that  has  been  organized  in  this  country,  from 
the  foundation  of  the  Government  to  this  time,  has,  at  some  period  of 
its  history,  sought  to  accomplish  this  object  of  a  uniform  national 
currency.  The  Federalists,  under  the  lead  of  Alexander  Hamilton, 
brought  order  out  of  chaos  after  tlie  Revolutionary  War  by  the  adoption 
of  the  United  States  Bank.  They  gave  us  for  twenty  years  a  stable 
currency  ;  and  without  that  currency  the  funding  system,  which  secured 
the  credit  of  the  United  States,  could  not  have  been  adopted.  It  was 
only  through  the  agency  of  the  Bank  of  the  United  States,  organized 
in  some  respects  upon  a  foundation  like  this,  upon  the  basis  of  Govern- 
ment securities,  that  our  fathers  were  enabled  to  pay  off  the  Revolu- 
tionary debt — to  establish  that  wise  system  by  which  it  was  gradually 
diminished  and  finally  paid  off.  When  that  bank  expired  we  had  a 
period  of  confusion  and  disorder.  We  had  the  issues  of  local  banks 
for  four  or  five  years,  when  the  Republican  party,  the  rivals  of  the  old 
Federalists,  then  in  power,  passed  a  bank  bill  under  the  lead  of  Mr. 


NATIONAL  BANK  CURRENCY.  73 


Madison  and  Mr.  Dallas 


The  arguments  at  tliose  times  in  tliis  very 
body,  and  in  the  House  of  Representatives,  in  1815  and  1816,  show 
that  the  same  difficulties  by  which  we  are  now  surrounded  then  ex- 
isted— a  depreciated  and  disordered  paper  currency,  which  could  only 
be  remedied  by  the  substitution  of  one  national  currency.  That  object 
was  accomplished  by  the  Republican  party  of  Mr.  Madison,  by  the 
incorporation  of  the  second  Bank  of  the  United  States ;  and  for  twenty 
years  that  went  on  in  a  career  of  almost  uninterrupted  prosperity.  ISTo 
one  lost  by  it.  However,  at  the  expiration  of  the  charter  of  the  se'cond 
bank,  there  was  no  longer  any  debt  of  the  United  States  ;  there  was 
no  object,  so  far  as  the  Government  was  concerned,  in  having  any  kind 
of  paper  money.  All  the  motive  for  paper  money  had  ceased,  so  far 
as  the  Government  was  concerned.  The  debt  was  paid  off.  It  was 
the  object  then  not  to  contract  any  further  debt ;  and,  upon  the  basis 
of  the  facts  then  existing,  I  believe  the  adoption  of  the  Sub-Treasury 
scheme  was  a  wise  and  judicious  plan.  I  was  too  young  to  take  part 
in  the  political  disputes  of  that  time.  Probably  at  that  time,  with  my 
natural  predilections,  if  I  had  taken  part,  I  should  have  been  opposed 
to  the  Sub-Treasury  scheme  ;  but  looking  on  it  now  without  any  feel- 
ing, I  believe  its  adoption  was  wise,  and  in  times  of  peace  it  was 
ample  ;  gold  and  silver  were  abundant  enough  for  a  national  currency, 
and  formed  the  best  national  currency  ;  and  were  it  not  now  necessary 
by  the  operations  of  war  to  substitute  some  other  for  it,  I  should  not 
be  in  favor  of  overthrowing  any  portion  of  that  system. 

The  Democratic  party,  from  1837  to  1845,  upheld  the  Sub-Treasury 
scheme.  We  now,  surrounded  by  difficulties,  surrounded  by  war,  and 
in  the  midst  of  great  troubles,  are  compelled  to  resort  to  some  scheme 
by  which  to  nationalize  and  arrange  upon  a  secure  and  firm  basis  a 
national  currency.  Every  commercial  country  in  the  world  has  adopted 
it,  and  it  is  a  remarkable  fact  that  every  nation  of  modern  times  that 
has  attempted  to  base  its  currency  solely  upon  Government  paper  has 
utterly  failed,  and  has  eventually  repudiated  that  currency  ;  but  when 
its  currency  has  been  supported,  aided,  and  combined  with  local  banks, 
when  the  interests  of  private  individuals  have  been  combined  with 
those  of  the  Government,  the  issues  succeeded.  The  Bank  of  England 
is  a  striking  example.  The  Bank  of  England  grew  out  of  the  loan  by 
private  individuals  to  the  Government  of  Great  Britain  of  something 
like  a  million  pounds.  From  that  time  it  has  been  increasing,  never 
failing,  and  yet  the  Bank  of  England  is  but  a  Government^)  machine. 
All  the  paper  issued  by  that  bank  is  based  upon  the  bonds  of  the  Gov- 
ernment. Xot  a  dollar  of  notes  is  issued  by  that  bank  but  what  is 
represented  either  by  gold  or  silver,  or  by  Government  securities  ;  usu- 
ally the  Government  securities  are  largely  in  excess  of  the  circu- 
lation. 

It  is  not  necessary  to  resort  to  the  history  of  the  Bank  of  England 
or  the  Bank  of  France  to  show  that  no  Government  can  borrow  large 
sums  of  money  from  the  i>eople  except  through  the  agency  of  some 
kind  of  fiscal  corporation  or  of  individuals.  There  must  be  some  in- 
termediate link  between  the  people  who  loan  the  money  and  the  Gov- 
ernment who  borrows  it-;  and  that  link,  according  to  the  experience  of 


74:  SPEECHES  AND  REPORTS  OF  JOHN"  SHERMAN. 

nations,  must  be  some  corporation  authorized  to  issue,  upon  the  credit 
of  the  people,  paper  money.  Every  Bank  of  England  note,  every  note 
of  the  Bank  of  France,  is  really  a  note  of  England  or  of  France.^  In 
all  the  troubles  that  have  occurred  since  the  foundation  of  those  insti- 
tutions, they  have  been  mainly  instrumental  in  supporting  and  sustain- 
ing the  credit  of  the  country. 

Sometimes,  I  know,  we  are  told  that  unless  we  issue  this  large 
amount  of  paper  money  we  shall  have  to  pay  interest,  and  the  national 
debt  will  accumulate.  Why,  Mr.  President,  a  national  debt,  although 
it  is  not  a  blessing,  is  yet  not  so  dangerous  and  troublesome  a  thing  as 
many  Senators  think.  The  power  of  paying  off  a  national  debt  by  the 
means  of  a  sinking  fund  exists  at  any  time.  The  amount  of  tax  levied 
by  this  bill  will  in  forty  years  pay  oif  every  dollar  of  the  national  debt. 
That  may  seem  to  be  a  striking  proposition,  but  yet  it  is  absolutely 
true.  A  sinking  fund  of  $1,000,000  a  year,  at  five  per  cent,  per  annum, 
will  amount  to  $100,000,000  in  thirty-five  years  ;  at  six  per  cent,  it  will 
be  $100,000,000  in  thirty-two  years ;  and  the  very  tax  levied  by  this 
bill  upon  these  banks,  if  applied  as  a  sinking  fund  and  set  apart  for 
that  purpose,  would  in  thirty-five  years  at  five  per  cent.,  or  thirty-two 
years  at  six  per  cent.,  pay  oif  $600,000,000  of  the  national  debt.  A 
sinking  fund  of  $10,000,000  annually,  commenced  to-day,  would  in  the 
lifetime  of  a  single  man  pay  oif  $2,000,000,000.  Sir,  I  do  not,  there- 
fore, fear  a  national  debt  if  we  only  have  a  wise  system  of  finance  by 
which  it  may  be  maintained  ;  because  the  operation  of  the  sinking 
fund,  as  proved  by  actual  experiment,  is  so  striking  that  in  the  life- 
time of  a  single  man  an  annuity  of  $10,000,000,  as  I  have  stated,  would 
pay  off  the  largest  possible  debt  that  it  is  anticipated  can  occur  in  our 
generation — that  is,  $2,000,000,000.  I  may  here  say  that  it  was  the 
intention  of  the  Committee  on  Finance  to  report  as  part  of  this  scheme 
a  pennanent  sinking  fund ;  but  on  reflection,  as  it  was  a  great  sub- 
ject, we  thought  it  better  to  defer  it  until  the  next  session  of  Con- 
gress, when  no  doubt  it  will  be  presented  for  the  consideration  of  both 
Houses. 

The  operation  of  a  sinking  fund  teaches  us  a  lesson  of  economy. 
One  hundred  tliousand  dollars  that  you  may  now  waste  by  careless 
legislation,  before  it  is  paid  off  will,  by  the  accumulation  of  interest, 
amount  to  a  very  large  sum,  which  will  have  to  be  paid  off  in  gold  and 
silver.  An  annuity  of  $10,000 — an  amount  easily  spent  uselessly  and 
foolishly — would,  if  set  aside,  in  thirty-five  years  pay  off  $1,000,000  of 
debt.  This  fact  should  teach  us  a  lesson  of  economy.  I  know  Sena- 
tors sometimes  complain  of  efforts  made  to  restrict  expenditures ;  but 
when  you  remember  that  the  money  now  paid  out  in  an  inflated  cur- 
rency must  ultimately  be  redeemed  in  gold  and  silver  coin,  with  all 
the  accumulated  interest  that  may  gather  in  a  period  of  thirty  or  forty 
or  fifty  years,  it  furnishes  us  a  lesson  ^nd  a  warning. 

Mr.  ^President,  I  think  I  have  now  stated  all  I  desire  to  state  in  re- 
gard to  the  merits  of  this  bill.  I  know  that  many  are  disposed  to  take 
a  gloomy  view  of  our  financial  condition.  I  do  not.  Every  nation 
has  encountered  the  same  difiiculty  which  is  now  presented  to  us.  In- 
deed, no  nation  in  the  world  has  the  spirit  that  ours  has  evinced  in 


NATIONAL  BANK  CURRENCY.  75 

this  war.  Why,  sir,  if  any  man  will  go  back  and  read  the  simple  state- 
ments of  history  in  regard  to  other  wars  in  other  countries,  he  will  see 
that  our  financial  condition  is  wonderful  when  compared  with  that  of 
other  nations  in  similar  circumstances.  I  will  ask  your  attention  to 
one  or  two  authorities  on  that  point,  to  show  you  to  what  straits  the 
wealthiest  countries  of  modern  times  have  been  reduced.  The  finan- 
cial condition  of  Great  Britain  in  1T97  presents  an  instructive  lesson, 
and  I  hope  it  will  be  a  lesson  of  encouragement  to  us  all.  I  read  from 
Alison : 

The  aspects  of  public  affairs  in  Britain  had  never  been  so  clouded  since  the 
commencement  of  the  war,  nor,  indeed,  during  tlie  whole  of  the  eighteenth  cen- 
tury, as  they  were  at  the  opening  of  the  year  1797.  The  return  of  Lord  Malmes- 
bury  from  Paris  had  closed  every  hope  of  terminating  a  contest  in  which  the 
national  burdens  were  daily  increasing,  while  the  prospect  of  success  was  continu- 
ally diminishing. 

Party  spirit  raged  with  uncommon  violence  in  every  part  of  the  empire.  In- 
surrections prevailed  in  many  districts  of  Ireland,  discontents  and  suffering  in  all ; 
commercial  embarrassments  were  rapidly  increasing,  and  the  continued  pressure  on 
the  bank  threatened  a  total  dissolution  of  public  credit. 

The  consequence  of  this  accumulation  of  disasters  was  a  rapid  fall  of  the  pub- 
lic securities;  the  three  per  cents  were  sold  as  low  as  fifty-one,  having  fallen  to 
that  from  ninety-eight,  at  Avhich  they  stood  at  the  commencement  of  the  contest. 
Petitions  for  a  change  of  ministers  and  an  alteration  of  Government  were  presented 
from  almost  every  city  of  note  in  the  empire,  and  that  general  distrust  and  depres- 
sion prevailed  which  is  at  once  the  cause  and  effect  of  public  misfortune. 

There,  sir,  at  the  beginning  of  a  great  war,  waged  by  the  people 
of  Great  Britain  against  her  rival,  France,  the  Government  securities 
sank  to  fifty-one  per  cent.  Again,  at  the  same  time,  you  wiU  re- 
member that  there  was  a  mutiny  in  the  fleet,  which  created  great  con- 
fusion, and  led  to  a  still  further  decline  in  the  public  securities.  Ali- 
son says : 

At  the  intelligence  of  this  alarming  insurrection,  the  utmost  consternation 
seized  all  classes  in  the  nation.  Everything  seemed  to  be  failing  at  once ;  their 
armies  had  been  defeated,  the  bank  had  suspended  payment,  and  now  the  fleet,  the 
pride  and  glory  of  England,  seemed  on  the  point  of  deserting  the  national  colors. 
The  citizens  of  London  dreaded  a  stoppage  of  the  colliers  and  all  the  usual  supplies 
of  the  metropolis ;  the  public  creditors  apprehended  the  speedy  dissolution  of  Gov- 
ernment, and  the  cessation  of  their  wonted  payments  from  the  treasury. 

Despair  seized  upon  the  firmest  hearts;  and  such  was  the  general  panic  that 
the  three  per  cents  were  sold  as  low  as  forty-five,  after  having  been  nearly  one 
hundred  before  the  commencement  of  the  war.  Never,  during  the  whole  contest, 
was  the  consternation  so  great,  and  never  was  England  placed  so  near  the  verge  of 
destruction. 

This  is  a  far  gloomier  view  than  even  the  most  despondent  has  ever 
taken  of  our  financial  condition.  Our  securities,  running  but  a  short 
time,  have  always  been  at  from  eighty  to  one  hundred  and  ten  per 
cent.,  never  below  eighty.  The  securities  of  Great  Britain,  which  had 
been  accumulating  for  years,  in  the  face  of  and  in  the  beginning  of  a 
great  war,  fell  at  once  to  forty-five  per  cent.  ISTot  only  that,  but  dur- 
ing the  whole  continuance  of  that  war,  for  over  twenty  years,  the  pub- 
lic securities  ranged  all  the  time  below  what  they  are  at  this  moment  in 
this  country.  I  have  before  me  Cohen's  "  Compendium  of  Finance," 
which  gives  a  summary  of  the  British  debt  from  the  beginning  of  the 


76  SPEECHES  AND   KEPORTS   OF  JOHN  SHERMAN. 

war  till  1815  ;  but  I  will  only  refer  to  the  loans  made  by  Great  Britain 
from  1803  to  1815.  Slie  sold  her  bonds,  some  three  per  cents,  some 
long  annuities,  some  four  per  cents,  some  five  per  cents,  at  various  rates. 
The  ao;o;regate  of  bonds  sold  between  those  periods  w^as  £420,905,400, 
or  over"$2^000,000,000.  The  proceeds  of  those  bonds  were  only  £266,- 
800,000  ;  so  that,  taking  the  whole  of  the  war,  the  debt  of  England  did 
not  bring  on  an  average  sixty-five  per  cent.;  and  yet  people  in  this 
country  become  discouraged  because  the  Government  cannot  borrow 
at  par.  l^ever,  in  the  midst  of  those  great  difficulties,  did  the  people 
of  that  country  falter  in  the  purpose  they  had  in  view.  They  waged 
that  war  against  their  jjowerful  rival  for  twenty  years,  selling  their  pub- 
lic debt  below  par,  and  carried  it  on  with  manly  spirit ;  and  what  has 
been  the  consequence  ?  They  maintained  their  Government ;  they  suc- 
ceeded in  the  end ;  and  now  their  national  debt  is  not  felt  by  them  as 
a  serious  burden.  Suppose  they  had  succumbed  to  the  financial  diffi- 
culties that  gathered  around  them  in  1797" ;  suppose  the  opposition  in 
Parliament  had  then  fulminated  the  decrees  that  are  now  fulminated 
here ;  suppose  that  disorder  had  spread  over  the  country  and  broken 
out  in  open  war  and  mutiny,  that  ancient  power  might  have  been  over- 
thrown. Her  condition  then  was  far  w^orse  then  ours  has  ever  been,  I 
believe  that  there  is  that  spirit  in  the  American  people  that  will  carry  us 
through  these  difficulties.  It  is  wise  for  us  to  look  to  the  lessons  of  his- 
tory and  see  that  other  nations  involved  in  a  less  holy  cause  have  strug- 
gled unfalteringly  through  difficulties  greater  one  hundred  fold  than 
ours. 

In  1805,  just  before  the  battle  of  Austerlitz,  the  securities  of  France 
could  not  be  sold  at  any  price ;  the  Emperor  could  not  get  money  to 
pay  for  his  breakfast ;  everything  was  deranged ;  the  Government 
securities  were  so  depreciated  that  they  were  of  no  fixed  value ;  the 
assignats  had  disappeared  or  been  converted  into  what  they  called 
mmidats,  and  they  had  depreciated  and  disappeared ;  the  Government 
credit  was  gone,  and  the  ordinary  expenses  of  the  household  of  the  Em- 
peror could  not  be  carried  on  except  by  indirection.  Did  the  French 
succumb  ?  Did  that  brave  and  warlike  people  give  way  to  the  difficul- 
ties which  surrounded  them,  and  make  what  was  considered  by  their  ru- 
lers a  dishonorable  peace  ?  JSTo,  sir.  They  appealed  to  the  conscription 
law,  and  gathered  the  young  men  of  France  around  the  standard  of  the 
empire  ;  they  carried  on  their  Government  as  best  they  could,  living 
from  hand  to  mouth ;  and  it  was  not  long  before  the  sun  of  Austerlitz 
spread  its  beams  all  over  France,  and  victory  perched  upon  her  ban- 
ners. 

Sir,  I  ask  you  whether  that  example  does  not  furnish  us  some  en- 
couragement and  hope  ?  Every  nation,  like  an  individual,  must  have 
its  trials  and  troubles.  Ours  has  not  suffered  yet  as  it  will.  I  believe 
yet  that  this  is  to  be  a  w\ar  longer  than  many  of  my  friends  think.  I 
am  willing  to  look  the  difficulties  in  the  face  and  fight  it  out.  I  want 
at  the  commencement  to  secure  a  stable  financial  system  by  which  we 
can  appeal  to  the  people  for  money  upon  which  they  can  rely,  so  that 
the  farmers  and  the  laboring  men,  the  common  people  of  this  country, 
can  lend  to  tlie  Government  their  money  through  these  financial  organs, 


NATIONAL  BANK   CURRENCY.  7Y 

and  tlms  maintain  and  npliold  tlie  Government.  Sir,  we  must  subor- 
dinate all  these  interests.  How  could  England  Lave  carried  on  lier 
great  war  except  bj  the  agency  of  the  Bank  of  England  ?  She  did  not 
resort  to  Government  paper  money ;  but  she  borrowed  money  upon 
the  sale  of  her  bonds,  and  used  the  Bank  of  England — which  was  but 
one  of  her  instruments,  guided  wisely  by  the  wisdom  of  Pitt — as  a 
financial  agent,  just  as  these  banks  may  be  used  under  this  system. 

France,  at  the  commencement  of  her  revolutionary  war,  when  the 
revolutionary  fervor  was  upon  her,  issued  in  unlimited  quantities  the 
notes  of  the  people,  her  assignats,  against  the  warnings  of  the  wise  men 
of  France.  The  debates  show  that  such  men  as  Necker,  all  those  men 
who  knew  something  about  finance,  warned  the  people  of  France 
against  the  fatal  effect  of  an  over-issue  of  assignats ;  but  the  eloquence 
of  Mirabeau  carried  it ;  the  demagogues  carried  it — the  men  who  ap- 
pealed rather  to  the  temporary  interests  of  the  moment  than  to  the 
permanent  interests  of  the  nation  at  large.  The  consequence  was  that 
in  a  short  time  all  values  in  France  wei-e  deranged  ;  everything  was 
destroyed ;  and  it  was  only  the  genius  of  Na23oleon,  after  innumerable 
victories,  that  could  reconstruct  upon  the  broken  foundations  of  finan- 
cial credit  the  superstructure  which  finally  carried  France  through  that 
war,  and  which  is  now  the  basis  of  the  French  financial  system. 

Sir,  I  am  not  discouraged  by  our  difiiculties.  We  are  surrounded 
by  them.  Every  individual,  in  the  course  of  his  lifetime,  is  surrounded 
by  them.  If  he,  with  unmanly  fear,  gives  way,  he  is  submerged ;  but 
if  he  meets  the  difiiculties  boldly,  and  faces  them  honestly,  he  will 
come  out  in  the  end.  So  with  this  country.  We  have  the  wealth, 
we  have  the  resources,  we  have  the  physical  power.  All  we  want 
is  wisdom  to  guide  our  counsels,  and  courage  and  energy  to  lead  our 
soldiers. 

Under  the  system  now  projDOsed  with  the  sanction  of  the  Secretary 
of  the  Treasury,  the  Government  of  the  United  States  pays  but  four 
per  cent,  on  the  amount  of  bonds  filed  in  the  Dej)artment,  and  these 
banks  provide  a  market  for  a  greater  quantity  of  bonds.  The  banks 
under  this  system  will  be  the  means  and  the  medium  by  which  the 
Government  can  reach  the  money  in  the  hands  of  the  people.  Those 
who  take  the  responsibility  of  defeating  a  measure  of  this  kind,  unless 
they  can  substitute  something  better  in  its  place  than  the  unlimited 
issue  of  paper  money,  will  take  a  responsibility  that  I  would  not 
for  my  life  assume.  I  had  doubts  about  this  system  ;  I  examined 
them  carefully  ;  I  weighed  them  all ;  and  on  my  responsiljility  I  feel 
bound  to  say  that,  all  things  considered,  it  is  the  best  that  can  be 
adopted  under  the  circumstances  to  avoid  that  which  will  be  inevita- 
ble destruction. 

If  this  bill  is  defeated,  and  we  go  on  upon  the  system  proposed  by 
the  House  of  Eepresentatives,  to  issue  an  indefinite  quantity  of  paper 
money,  without  restraint  or  limitation,  the  price  of  everything  will 
rise  ;  tlie  produce  that  we  use  will  rise,  and  the  expenses  of  the  Govern- 
ment will  be  largely  increased.  Kothing  now  restrains  the  speculative 
spirit  except  the" Senate.  Unless  we  can  devise  some  permanent  basis 
for  a  national  currency,  some  wise  financial  scheme,  our  people  will  be 


78  SPEECHES   AND  EEPOETS   OF  JOHN"   SHERMAN. 

embarked  in  reckless  speculation,  and  a  wild  and  eager  cluise  after 
foolisli  tilings. 

But,  sir,  when  your  United  States  notes  depreciate,  tliey  carry  down 
with  them  United  States  bonds.  Some  Senators  think  we  ought  to  go 
on  issuing  these  notes  until  the  mere  operation  of  the  law  of  supply 
and  demand  will  compel  the  people  to  convert  them  into  bonds.  Why, 
sir,  it  is  the  history  of  such  operations  that  as  the  United  States  notes 
go  down  so  the  bonds  go  down.  Stocks  that  I  know  to  be  worthless — 
inflated  stocks  of  broken  railroad  corporations — are  now  selling  in  ]S"ew 
York  for  more  money  than  the  six  per  cent,  bonds  of  the  United 
States,  with  interest  payable  in  gold  and  silver  coin.  It  is  one  of  the 
tendencies  of  the  times,  and  the  more  you  inflate  your  currency,  and 
derange  and  disorder  matters  by  the  issue  of  Government  paper  money, 
or  bank  paper  money  based  upon  it,  the  more  you  derange  values, 
and  give  an  impetus  to  the  speculation  now  going  on.  But  if,  by  a 
wise  system,  you  induce  the  local  banks  gradually  to  assume  as  the 
basis  of  their  circulation  the  United  States  notes,  and  limit  the  amount 
of  those  notes  (for  that  is  indispensable),  you  will  furnish  a  market  for 
your  bonds,  by  which  alone  you  can  ho23e  to  carry  on  the  operations  of 
this  war. 

I  may  be  like  other  men  who  have  thought  a  great  deal  on  a  par- 
ticular subject.  I  may  give  to  this  question  an  undue  importance ;  but 
with  me  it  is  all-important.  The  establishment  of  a  national  currency, 
and  of  this  system  as  the  best  that  has  yet  been  devised,  apj^ears 
to  me  all-important.  It  is  more  important  than  the  winning  of  a 
battle.  In  comparison  with  this,  the  fate  of  three  million  negroes 
held  as  slaves  in  the  Southern  States  is  utterly  insignificant.  I  would 
see  them  slaves  for  life,  as  their  fathers  were  before  them,  if  only  we 
could  maintain  our  nationality.  I  would  see  them  free,  disenthralled, 
enfranchised,  on  their  way  to  the  country  from  which  they  came,  or 
settled  in  our  own  land  in  a  climate  to  which  they  are  adapted,  or 
transported  anywhere  else,  rather  than  to  see  our  nationality  over- 
thrown. I  regard  all  those  questions  as  entirely  subordinate  to  this. 
Sir,  we  cannot  maintain  our  nationality  unless  we  establish  a  sound  and 
stable  financial  system  ;  and  as  the  basis  of  it  we  must  have  a  uniform 
national  currency.  So  it  seems  to  me.  I  may  be  wrong  ;  but  so  strong 
is  my  conviction  on  this  subject  that  I  believe  the  passage  of  this  bill, 
by  which  our  financial  system  may  be  harmonized,  and  by  which  we 
shall  have  what  has  always  been  desired  by  the  statesmen  of  America, 
a  sound  national  currency,  is  more  important  than  any  measure  that 
we  can  pass. 

I  may  say  to  my  political  friends  that  it  receives  the  sanction  of 
6very  member  of  the  Administration,  and  particularly  the  earnest  sanc- 
tion of  the  gentleman  who  is  placed  in  charge  of  the  Treasury  Depart- 
ment. I  will  say  to  my  political  adversaries  that  it  has  no  connection 
with  party  politics.  It  has  been  framed,  I  believe,  without  reference 
to  any  political  dispute,  simply  to  accomplish  that  which  we  all  desire 
— to  place  our  national  credit  on  the  surest  and  safest  foundation.  I 
ask  them,  before  they  record  their  votes  against  it,  at  least  to  furnish 
us  a  better.     It  is  easy  to  find  objections  to  this,  although  it  has  been 


NATIONAL  BANK   CURRENCY.  79 

carefully  prepared,  but  tell  us  a  better.  Shall  we  go  on  issuing  paper 
money,  disordering  and  deranging  the  value  of  everything  ?  Shall  we 
sell  our  bonds  in  the  market  for  what  they  will  bring '^  .That  we  can 
do.  Great  Britain  did  it ;  but  she  established  a  sound  national  currency 
through  the  agency  of  the  Bank  of  England  before  she  did  it ;  she  re- 
moved the  restrictions  from  the  Bank  of  England  before  she  com- 
menced that  system  of  selling  her  public  securities.  Then  she  did  it. 
Unless  you  can  tell  me  a  better  system,  I  appeal  to  friends  and  oppo- 
nents to  vote  for  this  bill ;  because,  whatever  differences  there  may  be 
as  to  the  mode  of  administering  the  Government,  whatever  differences 
there  may  be  as  to  political  questions  growing  out  of  the  war  on  the 
mnch  disputed  matter  of  the  condition  of  the  African  race  in  this 
country,  there  can  be  no  doubt  that  we  all  alike  are  interested  in  pre- 
serving our  national  honor,  our  national  credit,  our  national  existence. 
If  these  are  lost,  what  a  sea  of  troubles  is  before  ns !  If  our  credit  is 
gone,  if  our  nationality  is  destroyed,  who  among  ns  now  can  see  the 
end  of  the  difficulties  that  loom  u])  in  the  future  ?  Who  can  see  the 
difficulties  that  will  arise  if  a  boundary  line  is  attempted  to  be  drawn 
across  this  continent  between  two  hostile  sections  ?  Who  can  see  the 
difficulties  before  us  if,  by  the  progress  of  time,  onr  paper  currency 
becomes  what  my  friend  from  Kentucky  yesterday  said  it  was — "  worth- 
less trash  "  ?  Then,  sir,  the  Government  will  be  subverted.  'No  j)eople 
can  carry  on  a  long  war  except  with  money,  and  you  cannot  get  money 
unless  you  have  public  faith,  unless  you  have  the  means  of  borrowing, 
and  unless  the  means  of  paying  at  least  the  interest  shall  by  a  wise  and 
uniform  system  be  provided. 

I  believe  that  if  the  financial  bill  reported  from  the  Finance  Com- 
mittee, and  this  bill,  a  necessary  supplement,  together  with  a  just  system 
establishing  a  sinking  fund,  be  passed,  we  can  carry  on  this  war  even 
with  the  enormous  burdens  that  are  thrown  on  our  people.  Then  let 
us,  in  addition  to  this  system,  practice  economy.  1  know  that  some- 
times Senators  have  thought  I  have  been  very  captious  on  that  subject. 
Perhaps  I  have  been ;  but  I  have  felt  that  there  was  a  necessity  for  it. 
If  I  know  my  own  heart,  I  have  not  been  actuated  by  any  unworthy 
spirit,  but  simply  by  a  desire  to  save  and  husband  the  resources  of  the 
people  of  this  country,  to  enable  them  to  meet  the  great  national  difli- 
culties  that  exist.  If  we  can  only  get  through  this  strait,  if  we  can  see 
our  way  out  of  this  war  upon  the  basis  of  a  preservation  of  the  Union, 
there  is  nothing  that  can  be  said  too  highly  of  the  future  of  this  country. 
With  boundless  resources,  with  an  enterprising  population,  placed  in 
the  center  of  a  great  continent,  in  a  temperate  climate,  history  does  not 
afford,  and  cannot  furnish,  a  parallel  of  our  capacity.  Our  example  of 
success  will  not  only  establish  our  republican  form  of  government,  but 
it  will  spread  the  spirit  of  our  republican  institutions  over  lands  that 
are  yet  li%-ing  under  kings  and  nobles  and  despots.  Sir,  I  do  therefore 
press  upon  the  attention  of  the  Senate  this  important  bill. 


80  SPEECHES  AIs^D   REPORTS   OF  JOHN  SHERMAN. 


ON    THE    GENEEAL    FmANCIAL    POLICY    OF    THE 
GOVEKNMENT. 

/A^  TEE  SENATE    OF   THE   UNITED  STATES,   FEBRUARY  27,   1865. 

Mr.  President  :  I  desire  to  make  some  general  observations  to  tlie 
Senate  in  regard  to  tLe  financial  condition  of  tlie  countrj^,  and  especial- 
ly as  to  the  details  and  merits  of  tliis  bill.  I  may  as  well  avail  myseK 
of  the  present  occasion  to  do  so. 

The  late  period  of  the  session  at  which  the  House  of  Pepresenta- 
tives  sent  ns  this  bill  precludes  full  discussion  upon  any  of  the  impor- 
tant questions  presented  in  it.  The  House  is  jealous  of  its  exclusive 
prerogative  of  originating  revenue  bills,  but  it  ought  at  least  to  give 
us  an  opportunity  to  exercise  our  undoubted  power  to  amend  them. 
This  important  measure,  affecting  every  industrial  interest  of  the 
country,  declaring  in  its  title  that  it  is  to  provide  revenue  to  support 
the  Government  and  pay  interest  on  the  public  debt,  containing  fifty 
pages  of  printed  matter,  every  line  of  which  demands  an  examination 
of  the  previous  law,  was  sent  to  us  "^dthin  two  weeks  of  the  close  of 
the  session.  The  Committee  on  Finance  have  worked  diligently  to 
prepare  it  for  the  consideration  of  the  Senate,  and  now,  during  the 
closing  week,  with  all  the  hurry  incident  to  the  closing  days  of  the 
session,  with  the  appropriation  bills  still  pending  between  the  two 
Houses,  we  must  urge  the  Senate  to  pass  judgment  upon  the  numerous 
provisions  of.  this  bill  rather  than  to  discuss  them. 

After  the  first  careful  reading  of  the  bill,  considering  the  many 
important  changes  proposed  in  it,  I  was  inclined  to  recommend  that 
the  Senate  postpone  it  until  the  next  session  rather  than  by  hasty  legis- 
lation to  run  the  risk  of  new  errors ;  but  the  necessity  of  the  Govern- 
ment for  new  sources  of  revenue,  the  loss  of  revenue  caused  by  defects 
in  the  present  law,  the  construction  put  uj)on  parts  of  it  by  revenue 
officers,  and  the  palpable  failure  to  enforce  the  present  law,  especially 
as  to  incomes,  induced  your  Committee  to  report  it  back  with  several 
important  amendments,  and  especially  to  provide  for  such  an  examina- 
tion of  the  whole  subject  of  internal  taxation  as  would  enable  us  to 
legislate  in  the  future  with  fuller  information.  It  may  expedite  our 
action  to  submit  at  the  outset  a  few  general  remarks  as  to  the  necessity 
which  compels  us  to  impose  upon  our  constituents  the  system  of  inter- 
nal taxation  provided  for  by  this  bill  and  the  act  of  the  last  session. 

Under  the  practice  of  Congress  of  dividing  financial  measures  into 
numerous  bills,  all  of  which  are  considered  separately,  without  any  con- 
nection with  each  other,  there  seems  no  appropriate  time  to  consider 
the  "  budget,"  or  the  general  financial  estimates  and  plans  of  the  Gov- 
ernment. Yet  it  is  obvious  that  since  it  is  the  chief  duty  of  Congress 
to  provide  ways  and  means  to  carry  on  the  Government,  some  general 
principles  ought  to  be  ado])ted  and  applied  to  all  our  financial  measures. 
When  at  peace  the  United  States  had  an  ample  source  of  revenue  in  a 
moderate  rate  of  duty  on  imported  goods.     This  tax  was  so  light  as 


THE  GENERAL  FINANCIAL  POLICY  OF  THE   GOVERNMENT.    81 

never  to  be  felt  by  our  people,  and  its  incidental  effect  in  protecting 
our  domestic  industry  made  this  tax  a  blessing  rather  than  a  burden. 
But  the  rebellion  changed  all  this.  We  had  either  to  submit  to  have 
our  existence  as  a  nation  destroyed  by  a  haughty,  but  base,  ignorant, 
and  defeated  oligarchy,  or  we  had  to  assume  with  war  its  unavoidable 
incidents,  taxation  and  debt. 

The  people  of  the  United  States  having  definitely  determined  to 
prosecute  war,  it  only  remained  for  Congress  to  provide  the  ways  and 
means  to  carry  it  on.  It  is  manifest  now,  as  I  then  urged,  that  it  would 
have  been  better  at  the  first  session  in  1861  to  have  reduced  to  the  low- 
est possible  standard  all  expenditures,  and  to  have  provided  a  system  of 
internal  taxation.  It  is  easy  now  to  see  the  errors  of  the  past.  None 
of  us  appreciated  the  magnitude  of  the  contest — the  enormous  armies 
demanded  and  the  vast  sums  required  for  the  contest.  I  still  think 
that  with  the  closest  economy  and  heavy  taxes  from  the  beginning,  we 
might  have  borrowed  money  enough  on  a  specie  basis  to  have  avoided 
a  suspension  of  specie  payments ;  but  when  the  war  came  we  were 
without  a  currency  and  without  a  system  of  taxation.  Gold  disap- 
peared and  was  lioarded  by  banks  and  individuals.  It  flowed  in  a 
steady  stream  from  our  country.  By  the  Sub-Treasury  act  we  could 
not  use  the  irredeemable  bills  of  State  banks ;  and,  with  the  terrible 
lessons  of  1815  and  1837  staring  us  in  the  face,  no  one  was  bold  enough 
to  advise  us  to  adopt  as  a  standard  of  value  the  issues  of  fifteen  hun- 
dred banks,  founded  wpon  as  many  banking  systems  as  there  were 
States.  Under  these  circumstances  we  had  but  one  resource.  We  had 
to  borrow  vast  sums,  and  as  a  means  to  do  it  we  had  to  make  a  curren- 
cy. This  was  done  by  the  issue  of  United  States  notes.  Subsequent- 
ly, to  unite  the  interests  of  private  capital  with  the  security  of  the 
Government  as  a  basis  of  banking,  we  established  a  system  of  national 
banks,  and  upon  this  currency,  as  a  medium  for  collecting  taxes  and 
borrowing  money,  have  waged  a  war  unexampled  in  the  grandeur  of 
its  operations,  and,  as  I  trust,  soon  to  be  crowned  with  unconditional 
success. 

Such  a  war  has  not  been  conducted  without  vast  expenditures. 
Our  actual  expenditure  during  the  fiscal  year  ending  June  30,  1864, 
was  $865,234,0SY.  The  estimated  expenditure  for  the  current  fiscal 
year  is  $895,729,135,  upon  the  basis  of  the  present  laws.  Much  more 
than  one  half  of  this  sum  has  been  already  expended.  To  this  amount 
you  must  add  every  dollar  you  provide  for  by  new  laws,  and  this  grim 
fact  must  not  be  overlooked  for  a  single  moment  when  you  are  making 
new  appropriations.  Every  dollar  of  this  must  be  paid  in  the  fonn  of 
taxes  ;  and  that  is  not  the  worst  of  it — it  must  be  paid  now. 

We  must  get  the  money  either  by  making  it,  by  borrowing  it,  or  by 
collecting  it  from  our  people.  If  we  could  postpone  the  borrowing 
until  after  the  war  is  over,  it  would  be  easy  ;  but  we  nnist  have  it  now, 
and  we  must  devise  the  means  of  getting  it  before  we  can  sympathize 
with  the  poor  clerk,  the  brave  soldier,  or  the  needy  contractor.^  Until 
then  your  sympathy  is  mockery.  Your  very  measures  of  relief  may 
add  more  to  the  distress  of  all  whose  liveUhood  depends  upon  a  fixed 
salary. 


82  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

I  repeat  tliat  tliore  are  but  tliree  modes  of  raising  tliis  money  :  one 
is  by  printing  notes,  calling  them  money,  and  compelling  the  people  to 
take  it ;  another  is  by  issuing  bonds  or  promises  to  pay  in  the  future ; 
and  another  is  to  collect  the  money  by  taxation.  That  all  these  modes 
may  be  resorted  to  is  proven  by  the  history  of  all  modern  nations  when 
involved  in  war.  As  the  first  is  the  easiest,  it  is  apt  to  be  resorted  to 
first ;  but  it  is  a  doubtful  expedient  at  any  time,  always  dangerous,  and 
soon  exhausted.  If  pressed  too  far,  it  destroys  loans  and  taxes,  and 
national  bankruptcy  is  the  inevitable  result.  A  limited  amount  of  this 
money  was  indispensable  to  us  as  a  medium  of  exchange.  It  is  like 
some  medicines,  necessary  in  certain  cases  and  in  moderate  quantities, 
but  when  taken  in  excess  sure  death. 

Paper  money  issued  by  a  government  is  called  a  loan,  but  it  has 
none  of  the  elements  of  a  loan  except  the  promise  to  pay.  There  can 
be  no  loan  without  a  lender,  and  his  act  must  be  voluntary.  In  the 
middle  ages  governments  resorted  to  "  forced  loans,"  a  contradiction  of 
terms.  A  forced  loan  was  merely  an  unjust  and  unequal  tax.  I  choose 
to  regard  United  States  legal-tender  notes  not  as  a  loan  merely,  but  as 
money,  lawful  money,  which  the  citizen  is  compelled  to  receive,  and 
which  now  fixes  the  standard  of  value.  Whether  the  power  to  issue  it 
is  derived  from  the  power  to  coin  money  or  to  borrow  money,  or 
whether  it  is  inherent  in  any  government  clothed  with  the  attributes 
of  sovereignty,  are  questions  we  need  not  now  discuss.  We  have  exer- 
cised the  power.  It  is  now  the  currency  of  the  country,  the  measure 
of  value  ;  and  we  can  only  regulate  its  form  and  amount,  and  provide 
for  its  redemption. 

While  we  can  make  and  have  made  our  paper  money  the  measure 
of  value,  we  can  not  fix  the  price  or  value  of  any  commodity,  whether 
gold,  silver,  or  food.  The  attempt  has  been  made  by  many  govern- 
ments in  different  ages,  and  has  uniformly  failed.  The  standard  of 
value  may  be  fixed  by  the  government,  but  a  higher  law  fixes  the  rela- 
tive value  of  all  commodities  as  measured  by  this  standard.  We  may 
by  our  tariff  or  tax  law  affect  the  relative  value  of  commodities,  but  we 
can  not  by  direct  legislation  fix  tlie  value  of  any  commodity  either  in 
gold  or  paper  money.  When  the  attempt  has  been  made,  the  result 
has  usually  been  to  advance  rather  than  to  decrease  values.  All  our 
efforts  to  fix  the  value  of  gold  as  measured  by  our  currency  have  failed. 
We  may  make  j^enal  the  jDurchase  and  sale  of  gold  ;  we  may  deny  the 
use  of  our  courts  to  enforce  contracts  for  such  23urchases  or  sales ;  we 
may  prohibit  the  exportation  of  gold ;  we  may  deter  sales  of  gold  by 
heavy  taxation  ;  yet,  after  all,  the  price  of  gold  rises  or  falls  as  our 
national  credit  rises  or  falls.  So  far  as  our  legislation  produces  reve- 
nue or  strengthens  our  arm}^,  it  produces  a  fall  of  gold  as  measured  by 
our  standard.  So  fa,r  as  it  merely  discourages  trade  in  gold  or  any 
other  commodity,  it  increases  its  market  value.  We  may  as  well  recog- 
nize as  an  axiom  of  political  economy,  proven  by  the  exiDcrience  of  all 
nations,  by  every  form  of  government — despotic,  monarchic,  or  repub- 
lican— that  the  fixing  of  the  values  of  commodities  is  beyond  the  power 
of  legislation.  We  may  fix  the  standard  of  value,  we  may  fix  the  tax 
upon  the  commodity,  and  there  our  power  ends.     And  especially  is  this 


THE   GENERAL  FINANCIAL  POLICY   OF   THE   GOVERNMENT.    S3 

so  of  gold,  wliicli  lias  value  in  all  civilized  nations  of  the  world,  and, 
except  witli  nations  for  a  time  involved  in  war,  is  everywhere  the  staiv 
dard  of  value. 

It  is  therefore  manifest  that  the  first  duty  of  Congress  is  to  keep 
our  lawful  money,  as  a  standard  of  value,  as  near  as  possible  to  the 
standard  of  gold ;  and  this  can  only  be  done  by  Kmiting  the  amount 
and  by  making  it  valuable  to  pay  taxes  or  loans.  It  can  only  be  re- 
deemed by  the  Government  by  taxes  or  duties,  and  every  tax  or  duty, 
however  oppressive  to  the  individual,  which  Avithdraws  for  a  time  our 
paper  money,  brings  it  nearer  the  standard  of  gold.  The  power  to 
make  money  by  issuing  legal-tender  bills  is  now  exhausted.  More 
than  enough  is  now  outstanding  to  supply  a  currency.  The  issue  of 
$100,0(»0,0()0  more  would  not  only  increase  our  debt  to  that  amount, 
but  would  add  even  a  greater  sum  to  our  expenditures  by  the  increased 
price  of  commodities  consumed  by  the  war ;  while  the  imposition  of  an 
equal  amount  of  taxes  gives  value  to  our  currency,  and  thus  reduce*  the 
j)rice  of  commodities  we  are  compelled  to  buy.  An  increase  of  paper 
money  benefits  the  tax-payer  now  at  the  expense  of  the  soldier.  It  re- 
duces the  purchasing  value  of  the  pay  of  the  soldier,  while  by  debasing 
the  currency  it  is  easier  for  the  tax-payer  to  pay  a  specific  sum.  In 
the  end,  however,  the  tax-payer  loses  by  the  increased  cost  of  food  and 
clothing  and  transportation,  which  must  finally  be  paid  for  in  gold. 

I  assume,  then,  that  while  the  necessity  for  raising  these  vast  sums 
is  still  imperative,  yet  one  mode  of  doing  it,  and  that  the  easiest,  is  ex- 
hausted. Loans  and  taxes  are  our  only  resource.  A  loan  must  be 
voluntary.  It  may,  to  some  extent,  be  induced  by  patriotism.  In  tliis 
contest  thousands  of  patriotic  peoj)le — women,  children,  poor  and  rich 
alike — ^have  loaned  their  savings  to  the  Government  from  the  purest 
of  motives.  The  admirable  system  of  distributing  this  loan  by  going 
out  from  the  money  centers  to  the  remote  hamlets  and  villages,  gather- 
ing from  the  small  savings  of  the  people  rather  than  from  the  garnered 
treasures  of  the  rich,  has  proved  a  wonderful  success.  Yet,  after  all, 
to  borrow  money  you  must  appeal  to  the  self-interest  of  the  lender.  A 
great  nation  borrowing  money  will  be  tried  by  the  interested  tests  ap- 
plied by  the  pawnbroker  to  his  shivering  victim.  The  more  it  wants 
to  borrow,  the  more  it  must  pay.  The  terms  upon  which  we  now  bor- 
row prove  that  we  have  pressed  this  resource  as  far  as  is  expedient. 
Tested  by  the  present  standard  of  gold,  we  now  pay  seven  and  three 
tenths  per  cent,  for  three  years,  and  twelve  per  cent,  afterward  until 
the  debt  is  paid  in  gold.  We  promise  to  pay  $1,000  in  gold  at  the  end 
of  eight  years,  with  interest  for  five  of  these  years  at  six  per  cent,  in 
gold,  and  for  three  years  at  seven  and  three  tenths  in  currency ;  and  we 
receive  for  this  promise,  which  must  be  fulfilled  to  the  uttermost, 
$1,000  in  currency,  which  will  buy  our  soldiers  no  more  food  than 
$500  in  gold.  Biit  this  is  not  all.  We  stipulate  that  this  property 
lent  us  shall  be  exempt  from  all  the  burdens  which  this  war  casts  upon 
all  other  property,  of  State,  county,  and  municipal  taxes.  This  simple 
statement  shows  that  this  process  of  borrowing  is  exhausted ;  that  wc 
dare  not  extend  it  except  for  the  highest  object  of  national  existence. 

When  I  see  the  money  thus  borrowed  ex23ended  on  trivial  objects,  I 


84  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

can  not  but  look  forward  to  the  slow  and  hard  process  by  which  it  must 
all  be  repaid  in  gold,  with  interest  accumulated  and  accumulating, 
through  the  agency  of  collectors,  by  the  inquisitorial  process  of  this 
bill,  and  from  the  labor  of  the  poor.  And  if,  Senators,  you  have 
thought  me  hard  and  close  as  to  salaries  and  expenditures,  I  trust  you 
will  do  me  the  justice  to  believe  that  it  is  not  from  any  doubt  of  the 
ability  of  our  country  to  pay,  or  from  a  base  and  selfish  desire  for  cheap 
reputation,  or  from  a  disinclination  to  pay  my  share,  but  because  I  see 
in  the  dim  future  of  our  country  the  same  uneasy  struggle  between  cap- 
ital and  labor — between  the  rich  and  the  poor,  between  fund-holde.rs 
and  pro23erty-holders — that  has  marked  the  history  of  Great  Britain  for 
the  last  fifty  years.  I  do  not  wish  our  public  debt  increased  one  dollar 
beyond  the  necessities  of  the  present  war ;  and  the  only  way  to  prevent 
this  increase  is  to  restrict  our  expenditures  to  the  lowest  amount  consis- 
tent with  the  public  service,  and  to  increase  our  taxes  to  the  highest 
aggregate  our  industry  will  bear. 

These  general  principles  induce  me  to  support  many  of  the  taxes 
proposed  in  this  bill.  I  regard  the  proposed  tax  on  sales  as  indefensi- 
ble in  principle ;  yet,  as  a  temporary  exj)edient  to  raise  revenue,  I  will 
vote  for  it.  The  increase  of  the  postage  on  letters  is  only  to  make  the 
Post-Office  Department  self-supporting,  and  to  preserve  the  proportions 
between  the  old  rate  and  the  price  of  labor  and  commodities.  The 
changes  in  the  income  tax  are  necessary  to  prevent  a  repetition  of  the 
shameless  and  wholesale  evasions  of  the  special  income  tax.  This  is 
the  only  tax  imposed  on  accumulated  property,  the  only  tax  on  money 
invested  in  State  and  Government  securities.  It  is  the  one  that  should 
have  been  paid  most  cheerfully,  but  its  assessment  and  collection  was  a 
disreputable  farce. 

A  still  more  important  feature  of  this  bill  is  the  section  to  compel 
the  withdrawal  of  the  State-bank  notes.  As  the  volume  of  currency 
affects  the  price  of  all  commodities,  I  have  no  doubt  the  amount  of 
such  paper  money  now  outstanding  adds  to  the  cost  of  our  purchases 
$50,000,000.  The  refusal  of  Congress  at  the  last  session  to  pass  re- 
strictive measures  to  compel  its  redemption  has  seriously  affected  the 
value  of  our  currency.  The  national  banks  were  intended  to  sujDersede 
the  State  banks.  Both  can  not  exist  together ;  yet,  while  the  national 
system  is  extending,  the  issues  of  State  banks  have  not  materially  de- 
creased. Indeed,  many  local  banks  have  been  converted  into  national 
banks,  and  yet  carefully  keep  out  their  State  circulation.  They  exact 
interest  from  the  people  on  it,  and  yet  avail  themselves  of  the  benefits 
of  the  new  system.  They  transfer  their  capital  to  national  banks,  issue 
new  circulation  upon  it,  and  yet  studiously  keep  out  the  old.  They 
issue  two  circulations  upon  the  same  capital.  It  is  far  better  at  once  to 
abandon  the  national  banking  system  than  to  leave  it  as  a  cloak  for 
outstanding  State  issues. 

If  the  State  banks  have  power  enough  in  Congress  to  prolong  their 
existence  beyond  the  present  year,  we  had  Ijetter  suspend  the  organiza- 
tion of  national  banks.  As  the  first  friend  of  this  measure  in  the  Sen- 
ate, I  would  vote  to-day  for  its  repeal  rather  than  allow  it  to  be  the 
agency  under  which  State  banks  can  inflate  our  currency.     And  the 


THE   GEISERAL   FINANCIAL  POLICY   OF  THE   GOVERNMENT.    85 

j)ower  of  taxation  can  not  be  more  wisely  exercised  than  in  harmonizing 
and  nationalizing  and  placing  on  the  secure  basis  of  national  credit  all 
the  money  of  the  country. 

Many  of  the  taxes  proposed  by  this  bill  are  not  in  accordance  with 
established  rules  of  political  economy  founded  upon  the  experience  of 
European  countries.  We  are  new  beginners  in  the  science  of  taxation. 
The  object  now  is  less  to  equalize  taxation  than  to  increase  revenue. 
All  other  questions  must  await  the  necessity  put  upon  us  by  war  to 
levy  in  the  most  expeditious  mode  the  largest  possible  taxes,  and  to  do 
this  we  must  extend  it  to  nearly  all  articles  of  production  and  con- 
sumption. 

It  may  be  truly  said  of  some  of  these  taxes  that  they  are  unequal. 
We  can  only  reply  that  we  need  the  money  now,  and  must  look  chiefly 
to  the  result  of  the  tax  in  revenue,  leaving  to  the  future  to  make  such 
changes  as  experience  proves  to  be  just  and  proper.  Taxes  levied  now 
must  be  paid  by  those  at  home  who  do  not  light,  while  if  postponed 
they  will  fall  in  a  measure  upon  those  who  have  fought.  Taxes  col- 
lected now  can  be  jDaid  in  a  depreciated  currency,  while  if  postponed 
they  must  be  paid  in  gold.  Taxes  paid  now  not  only  tend  to  reduce 
the  present  price  of  commodities,  but  by  reducing  the  sum  to  be  bor- 
rowed enable  us  to  borrow  on  better  terms,  while  taxes  withheld  now 
largely  increase  the  sum  to  be  levied  hereafter.  What  we  pay  now  we 
pay  without  interest ;  what  we  postpone  for  the  future  we  pay  three- 
fold in  accumulating  interest.  The  war  has  given  vast  activity  to  all 
classes  of  industry,  and  has  yielded  enormous  profit  to  those  who  are  in 
business.  It  is  proper  that  now  they  pay  to  the  Government  their  full 
tax  on  these  proiits  before  they  are  consumed  by  expenditure.  A  tax 
system  fully  enforced  now  will  enable  us  to  relieve  our  people  from 
many  taxes  when  the  reaction  of  peace  shall  lessen  the  profits  of  in- 
dustry. We  can  not  increase  our  taxes  after  war ;  we  must  be  prepared 
to  reduce  tliem.  Taxes  are  more  cheerfully  paid  now  in  view  of  the 
mountain  of  calamity  that  would  overwhelm  us  if  the  rebellion  should 
succeed  ;  but  when  we  reach  the  haven  of  peace,  when  the  danger  is 
13ast,  you  must  expect  discontent  and  complaint.  The  grim  specter  of 
reimdiation  can  never  disturb  us  if  we  do  our  duty  of  tax-paying  as 
well  as  our  soldiers  do  theirs  of  fighting.  I  therefore  conclude  that 
every  dictate  of  policy,  every  sentiment  of  patriotism,  demand  of  us  the 
largest  taxation  now,  to  be  fearlessly  assessed  and  impartially  collected. 

But  it  is  impossible  to  consider  the  subject  of  internal  taxation  with- 
out some  reference  to  our  tariff  laws.  Though  this  bill  does  not  change 
the  present  duties  on  imported  goods,  yet  the  same  general  j)rinciples 
must  be  applied  to  tariffs  as  to  excises.  The  object  now  of  our  tariff 
laws  should  be  to  raise  revenue.  In  times  of  peace  we  may  discrimi- 
nate in  favor  of  our  industry,  we  may  abandon  taxes  to  increase  our 
commerce.  JSTow  our  industry  is  sufficiently  protected  by  requiring 
customs  duties  to  be  paid  in  gold,  and  we  are  in  no  condition  to  pro- 
tect our  commerce  from  foretgn  competition,  because  our  vessels  are 
the  prey  of  English  pirates.  Our  immediate  want  is  revenue,  and  es- 
pecially revenu'e  payable  in  gold.  We  are  committed  to  the  payment 
of  near  sixty  millions  in  gold  annually,  and  must  rely  upon  customs 


86  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN". 

duties  to  pay  this  sum.  We  can  not  forego  this  revenue  without  de- 
stroying the  national  credit,  the  vahie  of  our  bonds,  tlie  basis  of  our 
currency.  We  can  not  affect  these  without  seriously  impairing  our  man- 
ufactures and  our  commerce.  I  repeat  that  we  must  now  frame  our 
tariff  laws  solely  with  a  view  to  revenue.  All  incidental  protection  or 
benefit  to  any  industry  must  now  give  way  during  this  war  to  the  im- 
mediate and  j^ressing  need  of  revenue. 

A  different  principle  prevails  in  Great  Britain,  and  in  her  present 
position  of  peace,  with  all  her  great  wealth  employed  in  commerce  and 
manufacture,  it  is  founded  upon  the  highest  wisdom.  The  principle 
adopted  by  her  is  thus  stated  by  Sir  Morton  Peto  : 

If  a  customs  duty,  however  moderate,  imposed  for  a  financial  object,  prevents 
trade  with  a  countiy  which  would  otherwise  receive  your  goods  in  exchange  for  its 
products,  it  is  surely  better  to  remove  the  duty  which  imposes  the  obstacle  to  com- 
mercial intercourse  than,  for  the  sake  of  a  small  revenue,  to  preclude  the  possibility 
of  commercial  exchange.  .  .  . 

But  the  first  object  of  legislation  in  regard  to  customs  duties  should  be,  not  to 
tax  all  articles  which  do  not  come  within  the  class  of  raw  materials  or  food,  but  on 
the  contrary  to  tax  those  articles  alone  which  can  be  taxed  without  injuriously  af- 
fecting our  trade  with  other  countries,  and  to  tax  such  articles  only  to  such  an  ex- 
tent as  will  not  injuriously  affect  their  consumption  by  our  own  people. 

Upon  this  princi2)le,  and  another  equally  simple,  not  to  impose 
duties  on  the  raw  materials  of  industry  and  tlie  first  articles  of  food, 
was  based  the  policy  of  Sir  Eobert  Peel,  which  reduced  the  number  of 
articles  charged  with  duties  from  1,103  in  1841  to  44  in  1862 ;  and, 
sir,  if  we  were  at  peace,  with  our  currency  restored  to  its  normal  con- 
dition, I  should  be  very  willing  to  discriminate  in  favor  of  our  own 
commerce  and  manufactures.  Although  representing  an  interior  State 
chiefly  engaged  in  agriculture,  yet  I  have  always  felt  that  the  prosperity 
of  one  industry  and  section  finally  inured  to  the  benefit  of  the  wdiole 
nation  and  of  every  part.  I  therefore  have  supported  the  present  tariff 
law,  framed  with  a  distinct  view  to  discriminate  in  favor  of  our  home 
industry,  and  I  would  now  only  so  far  modify  the  present  duties  as  to 
increase  the  revenue.  If  by  lowering  the  duty  we  can  increase  the 
revenue,  it  should  be  done.  If  by  increasing  the  duties  on  any  article 
we  can  increase  the  revenue  without  diminishing  in  a  greater  degree 
the  consumption  of  that  article,  it  ought  to  be  done.  During  war, 
when  our  industry  is  fully  emj^loyed  in  repairing  the  waste  of  war,  in- 
creased importation  may  become  a  vast  injury  by  exhausting  us  of  gold 
and  food,  which  must  then  be  sent  to  pay  for  luxuries.  Then  we  send 
abroad  that  which  we  most  need,  and  receive  that  which  we  can  do 
without.  The  true  principle  for  a  nation  in  our  condition,  struggling 
for  its  existence,  is  so  to  frame  its  tariff  laws  as  to  produce  the  greatest 
revenue  from  the  least  importation.  When  the  war  ceases,  our  armies 
will  be  disbanded  and  our  soldiers  will  return  to  the  ordinary  pursuits 
of  industry ;  then  the  Englisli  rule  should  be  applied  of  levying  the 
requisite  duties  on  the  fewest  articles,  and  with  a  view  to  increase  our 
connnerce  and  protect  our  industry. 

With  this  general  statement,  I  approach  the  consideration  of  this 
])ill.  I  am  not  entirely  satisfied  with  it,  but  I  am  sure  it  will  improve 
the  present  law  and  add  some  new  sources  of  revenue.     When  the 


THE   GENERAL  FINANCIAL   POLICY   OF  THE   GOVERNMENT.    87 

machinery  of  collecting  is  perfected,  wliicli  can  only  be  clone  by  experi- 
ence, the  whole  of  these  taxes  will  be  revised.  They  will  be  arranged 
into  classes  and  schedules,  and.  simplified.  Its  success  will  depend 
mainly  upon  the  Commissioner  of  Internal  Revenue.  If  he  will  per- 
form his  duty,  and  require  his  subordinates  to  do  theirs,  we  shall  realize 
during  this  calendar  year  $300,000,000  of  internal  revenue,  which  will 
be  an  ample  basis  of  public  credit,  and  will  go  far  to  reduce  the  public 
debt.  If  our  military  and  naval  forces  complete  their  great  duty  with- 
in this  year,  our  present  system  of  national  finance  will,  I  confidently 
trust,  very  soon  enable  us  to  commence  the  permanent  reductionr  of  our 
national  debt,  and  to  resume  specie  payments  within  a  period  equal  to 
that  required  in  Great  Britain  after  her  wars  with  Napoleon.  AYehave 
resources  in  this  country,  when  united  and  at  peace,  far  greater  than 
those  of  any  nation  of  modern  times.  Our  accumulated  wealth  is  not 
to  be  compared  with  that  of  Great  Britain  and  France,  but  a  bountiful 
Providence  has  given  us  sources  of  wealth  far  greater  than  either  of 
these  powerful  nations  ever  had.  The  cotton  now  coming  through  our 
lines  already  afi^ects  the  price  of  exchange.  Petroleum  is  already  ex- 
ported to  the  amount  of  thirty-one  million  gallons  a  year.  Our  mineral 
resources  are  scarcely  touched.  Our  young  sister  IN^evada  is  exciting 
our  fancy  with  mountains  of  gold  and  silver ;  and  dry  statistics  inform 
us  of  a  product  there  of  gold  and  silver  equal  to  the  product  of  the 
world  fifty  years  ago.  The  South  is  to  be  opened  to  new  industry,  and 
millions  of  laborers  from  Europe  and  from  Asia  are  meeting  on  our 
favored  shores  to  help  develop  our  resources.  We  have  taken  our 
place  among  the  great  nations  ;  but  as  we  have  attained  our  military 
position  only  after  hard,  exacting  toil  of  military  discipline,  after  de- 
feats and  discouragements,  we  can  maintain  our  financial  position  only 
by  the  hard  processes  of  taxes  and  economy.  I  wish  to  see  the  evil 
predictions  of  our  enemies,  at  home  and  abroad,  all  belied.  They 
prophesied  disunion  ;  we  will  show  them  Union.  They  prophesied 
bankruptcy ;  we  will  see  them  begging  for  our  bonds,  our  cotton,  pe- 
troleum, and  gold.  Theii  we  can  provide  for  our  jmblic  debt.  Then 
we  can  restore  our  commerce  on  the  high  seas,  now  driven  by  British 
pirates  to  take  refuge  under  foreign  flags.  Then  we  may  revive  old 
doctrines  about  the  American  continent  being  no  longer  the  home 
of  European  kings.  I^ow  our  duty  is  dry,  hard,  exacting ;  but  it  will 
be  the  more  cheering  when  in  the  future  our  self-sacrificing  patriotism 
in  this  great  crisis  shall  have  enabled  our  country  to  enter  upon  its 
new  career  without  a  stain  upon  its  financial  honor. 


88  SPEECHES  AND   REPORTS   OF  JOHX   SHER^AK 

WAYS  AXD  MEANS. 

APRIL  9,  1866. 

The  Senate  proceeded  to  the  consideration  of  the  bill  (H.  R.  No.  207)  to  amend 
an  act  entitled  "  An  act  to  provide  ways  and  means  to  support  the  Government," 
approved  March  3,  1865. 

Mr,  Sherman  said : 

I  EEGKET  very  much  that  I  differ  from  the  Committee  on  Finance  in 
regard  to  this  bilL  Tliis  is  the  only  bill  on  the  subject  of  the  public 
debt  on  which  I  have  not  been  able  to  concur  with  that  Committee,  I 
do  not  perceive  the  necessity  for  conferring  on  the  Secretary  of  the 
Treasury,  in  the  present  condition  of  our  finances,  the  vast  powers 
proposed  to  be  conferred  in  this  bill.  It  is  true  that  the  bill,  as  it  now 
comes  before  us,  is  very  different  from  the  one  first  reported  in  the 
House  of  Representatives.  That  bill  contained  a  clause  which  author- 
iz;ed  the  Secretary  of  the  Treasury,  not  only  to  sell  the  bonds  of  the 
United  States  abroad,  but  to  make  them  payable  in  the  currency  of 
foreign  countries.  Under  it  the  Secretary  could  make  our  bonds  pay- 
able in  pounds,  shillings,  and  pence,  guilders,  francs,  or  any  of  the 
various  forms  of  currency  known  in  any  European  country.  That 
provision  was  stricken  out  by  the  House  of  ReiDresentatives.  After 
the  bill  was  defeated  in  the  House  a  clause  was  added,  on  reconsidera- 
tion, intended  to  limit  the  power  of  the  Secretary  of  the  Treasury  over 
the  legal  tenders ;  but  this  clause,  altliough  wise  in  itself,  will  not  ac- 
complish the  pUi-pose  designed  by  the  House.  It  is  on  this  ground, 
chiefiy,  that  I  object  to  the  bill  as  it  now  stands. 

If  Senators  will  read  the  bill,  they  wiU  find  that  it  confers  on  the 
Secretary  of  the  Treasury  greater  powers  than  have  ever  been  con- 
ferred since  the  foundation  of  this  Government  upon  any  Secretary  of 
the  Treasury.  Our  loan  laws  heretofore  have  generally  been  confined 
to  the  negotiation  of  a  single  loan,  limited  in  amount.  As  the  war 
progressed  the  difliculties  of  the  coimtry  became  greater,  and  we  were 
more  in  the  habit  of  removing  the  limitations  on  the  power  of  the 
Secretary  of  the  Treasury ;  but  generally  the  power  conferred  was  con- 
fined to  a  particular  loan  then  in  tlie  market.  This  bill,  however,  is 
more  general  in  its  terms.  It  authorizes  the  Secretary  of  the  Treasury 
to  sell  any  kind  of  bonds  without  limit,  except  as  to  the  rate  of  inter- 
est. It  does  not  Kmit  him  to  any  fonn  of  security.  The  security  may 
run  for  any  period  of  time  within  forty  years.  He  may  sell  the  secu- 
rities at  less  than  par,  without  limitation  as  to  rate.  He  may  sell  them 
in  any  form  he  chooses.  He  may  put  them  in  the  form  of  Treasury 
notes  or  bonds,  the  interest  payable  in  gold  or  in  paper  money.  He 
may  undertake,  under  the  provisions  of  this  bill,  to  fund  the  whole 
debt  of  the  United  States.  The  only  limit  as  to  amount  is  the  debt 
itself,  now  $2,700,000,000.  The  power  conferred  on  the  Secretary  of 
the  Treasury  is  absolute,  and  is  to  continue  until  the  act  shall  be  re- 
pealed. The  description  of  the  bonds  in  the  act  of  March  3,  1865,  re- 
ferred to  here,  would  probably  limit  the  rate  of  interest  to  six  per  cent. 


WAYS  AND  MEANS.  89 

in  coin  and  seven  and  three  tenths  per  cent,  in  currency ;  but  with  this 
exception  there  is  no  limitation. 

The  people  are  not  generally  aware  of  the  favorable  condition  of 
our  finances.  The  statement  of  the  public  debt  laid  on  our  tables  the 
other  day  does  not  show  it  fully.  But  a  small  portion  of  the  debt  of 
the  United  States  will  be  due  prior  to  August,  1867,  that  will  give  the 
Secretary  any  trouble.  But  little  of  the  debt  which  he  will  be  required 
to  fund  under  the  provisions  of  this  bill  matures  before  that  time. 
The  temporary  or  call  loan,  now  over  one  hundred  millions,  may  readi- 
ly be  kept  at  "this  sum  even  at  a  reduced  rate  of  interest.  The  certifi- 
cates of  indebtedness,  amounting  to  sixty-two  millions,  may  easily  be 
paid  from  accruing  receipts,  or,  if  necessary,  may  be  renewed  or  funded 
at  the  i^leasure  of  the  Secretary.  Kone  of  the  compound-interest 
notes  or  the  seven-thirty  notes  mature  until  August,  1867. 

It  is  idle,  therefore,  to  say  that  there  is  now  at  this  moment,  or  will 
1)0  within  a  year,  a  pressing  necessity  to  confer  on  the  Secretary  of  the 
Treasury  this  enormous  power.  It  is  only  in  view  of  a  change  of 
policy,  either  by  a  reduction  of  the  currency  or  some  other  measure  in 
the  mind  of  the  Secretary,  that  he  can  claim  that  this  power  is  neces- 
sary. Xor  is  there  necessity  to  contract  debt  to  pay  current  expendi- 
tures, because  the  present  income  exceeds  our  expenditures.  In  his 
annual  report  he  estimated  that  there  would  be  a  deficit  of  $112,000,- 
00(->  at  the  close  of  the  present  fiscal  year.  It  is  now  admitted  that 
there  will  be  no  deficit,  and  that  the  amount  on  hand  together  with  the 
current  receipts  will  be  sufficient  to  pay  the  exi)enses  of  the  Govern- 
ment up  to  the  1st  of  July  next;  The*^  estimated  expenditures  during 
the  next  year  are  stated  by  him  at  §280,000,000.  Those  estimates 
have  been  reduced  somewhat  by  the  bills  sent  to  us  by  the  House  of 
Ilepresentatives,  and  it  is  scarcely  possible  that  the  expenditures  dur- 
ing the  next  year  can  reach  §275,000,000  on  the  present  basis.  We 
have  a  current  revenue  now  of  nearly  §.500,000,000  during  this  year. 
The  amount  of  the  gold  receipts  during  the  first  three  quarters  of  the 
year  were  §140,000,000,  and  for  this  quarter  will  not  fall  below  §20,- 
000,000  ;  it  is  supposed  that  the  internal  revenue  will  yield  during  the 
current  year  not  less  than  §320,000,000  ;  so  that,  including  the  profits 
realized  on  the  sale  of  surplus  gold,  we  have  an  income  of  not  less  than 
§500,000,000  this  year,  and  some  authorities  place  it  higher.  Thus  it 
is  evident  that  we  'have  §200,000,000  more  income  this  year  than  we 
will  have  expenditures  next  year. 

Ko  man  can  tell  the  future,  and  it  is  possible,  perhaps  probable, 
that  during  the  next  year  there  will  be  a  considerable  falling  off  in 
revenue.  I  do  not  think  the  internal  revenue  will  fall  off  materially, 
because  there  are  many  sources  of  revenue  that  will  come  in  next  year 
which  we  have  not  yet  felt.  Xo  one  doubts  that  the  tax  on  spirits  will 
yield  two  or  three  times  as  much  as  it  has  during  the  current  year. 
No  doubt,  however,  other  taxes  will  be  diminished.  I  hope  that  the 
duties  received  from  imported  goods  will  be  diminished  by  a  dimmu- 
tion  of  importations.  But  neither  the  Secretary  of  the  Treasury  nor 
the  head  of  the  Internal  Re^'enue  Bureau  contemplates  any  very  mate- 
rial reduction,  and  on  the  basis  of  the  present  law  as  it  now  stands  we 


90  SPEECHES   AND   REPORTS   OF  JOIIX   SHERMAN. 

shall  next  year  i)robabl7  have  a  revenue  of  $400,000,000,  or  at  least 
$100,000,000  more  than  the  expenditure. 

There  is  therefore  no  immediate  necessity  for  these  vast  powers. 
It  is  true  we  may  repeal  this  law  next  year,  but  we  know  very  well 
that  when  such  powei-s  are  granted  they  are  seldom  recalled  ;  they  are 
made  precedents  for  further  grants.  It  seems  to  me  that  the  whole 
object  of  the  passage  of  this  bill  is  to  enable  the  Secretary  to  contract 
the  currency,  and  thus,  as  I  think,  to  produce  an  unnecessary  strain 
upon  the  people.  The  House  of  Kepresentatives  did  not  intend  to 
give  him  this  authority.  They  debated  the  bill  a  long  time,  and  it  was 
defeated  on  the  ground  that  they  would  not  authorize  him  to  reduce 
the  currency  ;  and  finally  it  was  only  jiassed  with  a  proviso  contained 
in  tlie  bill,  which  I  will  now  read  : 

Provided,  Tliat  of  United  States  notes  not  more  than  $10,000,000  maybe  retired 
and  canceled  within  six  montlis  from  the  passage  of  this  act,  and  thereafter  not 
more  than  $4,000,000  in  any  one  month. 

The  purpose  of  the  House  of  Kepresentatives  was,  while  giving  the 
Secretary  the  most  ample  power  over  the  deljt  by  funding  it  as  it  ma- 
tured or  even  before  maturity,  to  limit  his  power  over  the  currency, 
lest  he  might  carry  to  an  extreme  the  view  })resented  by  him  in  his  an- 
nual report.  If  this  proviso  would  accomplish  the  purpose  designed 
by  the  House  of  Representatives,  I  would  cease  all  opj)osition  to  the 
bill ;  but  I  know  it  will  not,  and  for  this  very  obvious  reason  :  that 
there  is  no  restraint  upon  the  power  of  the  Sccretaiy  to  accumulate 
legal-tender  notes  in  the  Treasury.  He  may  retire  S2<>0,<i(  10,000  of 
legal-tender  notes  by  retaining  them  in  his  possession  without  cancella- 
tion, and  thus  accomplish  the  very  thing  the  House  of  Representatives 
did  not  intend  to  permit.  He  may  sell  the  bonds  of  the  United  States 
at  any  rate  he  chooses  for  legal  tenders,  and  he  may  liold  those  legal 
tenders  in  his  vaults,  thus  retiring  them  from  the  business  of  the  coun- 
try, and  producing  the  very  contraction  which  the  House  of  Represen- 
tatives meant  to  prevent.  Therefore,  this  proviso,  which  only  limits 
the  power  of  canceling  securities  or  notes,  does  not  limit  his  power 
over  the  currency  ;  and  he  may,  without  violating  this  bill,  in  pursu- 
ance of  the  very  terms  of  the  bill,  contract  the  currency  according  to 
his  own  good  will  and  pleasure. 

My  own  impression  is  that  the  Secretary  of  the  Treasurs',  in  carry- 
ing out  his  known  policy,  will  do  so.  He  says  he  will  not*^  contract  k 
unreasonably  or  too  rapidly,  but  I  believe  he  will  contract  the  cuiTcncy 
in  this  way.  He  has  now  in  the  vaults  of  the  Treasury  $60,000,000  in 
currency  and  $62,000,000  in  gold — a  larger  balance,  I  believe,  than 
was  ever  before  kept  in  the  Treasury  until  within  the  last  two  or  three 
months ;  a  larger  balance  than  was  ever  found  in  the  Treasury  during 
the  war.  What  is  the  object  of  accunnilating  these  vast  balances  in 
the  Treasury  ?  Simply  to  carry  out  his  policy  of  contraction.  With 
this  power  of  retaining  in  the  Treasury  the  money  that  comes  in,  what 
does  he  care  for  the  limitation  put  upon  this  bill  by  the  House  of  Rep- 
resentatives ?  That  says  that  he  shall  not  retire  and  cancel  more  than 
$10,000,000  of  United  States  notes  within  six  months,  and  not  more 


WAYS  AND  MEANS.  91 

tliaii  $4,000,000  in  aii}^  one  month  thereafter ;  but  why  need  he  retire 
and  cancel  them  when  he  can  retain  them  in  the  vaults  of  the  Treasury, 
and  thus  contract  the  currency  ? 

That  brings  me  to  the  only  material  objection  that  I  have  to  this 
bill.  I  do  not  think  it  wise  now  to  place  in  the  power  of  the  Secretary 
of  the  Treasury  or  any  mortal  man  this  absolute  and  extreme  control 
over  the  currency  of  the  country.  AVe  have  never  done  it  before.  In 
the  bills  that  were  passed  when  my  honorable  friend  from  Maine  [Mr. 
Fessenden]  was  Secretary  of  the  Treasury,  and  when  Mr.  Chase  was 
Secretary  of  the  Treasury,  we  authorized  them  to  retire  legal-tender 
notes,  but  only  by  issuing  other  notes  of  the  same  character. 

I  do  not  doubt  in  the  least  either  the  integrity  or  the  capacity  of 
the  ]u-csent  incumbent  of  tlie  Treasury  Department ;  I  have  as  much 
conlidence  in  him  as  any  one ;  but  this  question  of  the  currency  is  one 
that  affects  so  intimately  all  the  business  relations  of  life,  the  property 
of  every  man  in  this  country,  his  ability  to  pay  taxes,  his  ability  to  earn 
food  and  acquire  a  living,  that  no  man  ought  to  have  the  power  to  vary 
the  volume  of  currency.  It  ought  to  be  regulated  by  law,  and  the  law 
ought  to  be  so  tixed  and  so  defined  that  every  business  man  may  trans- 
act his  business  with  full  knowledge  of  the  amount  of  the  currency, 
with  all  its  limits  and  qualilications. 

AVith  the  powers  confen-ed  by  this  bill  the  Secretary  of  the  Trea- 
sury may  at  any  moment  put  into  tlie  market  a  bond  that  will  at  once 
absorb  all  the  legal  tenders.  It  may  be  said  that  lie  will  not  do  it ; 
that  it  Mill  not  be  his  interest  to  do  it.  Then  why  give  him  the  power 
to  do  it  when  it  is  not  necessary  (  If  there  Avas  now  an  impending  ne- 
cessity resting  upon  him  to  raise  a  large  sum  of  money  within  a  short 
time,  I  would  be  willing  to  give  him  this  power  as  clieerfully  as  any 
one ;  but  there  is  no  such  necessity.  AVhy,  then,  place  it  in  his  power 
to  contract  or  expand  the  currency  at  his  pleasure,  and  thus  make  fluc- 
tuations in  all  the  bu.>.iness  transactions  of  life  i  That  this  is  not  an 
idle  fear  I  know  from  correspondence  with  some  of  the  best  business 
men  cf  the  country.  They  are  alanned,  and  refuse  to  go  on  and  con- 
tract new  obligations  ;  they  refuse  to  go  on  with  their  business  in  the 
manner  in  which  it  has  gone  on  ;  the  effect  of  the  pendency  of  this  bill 
has  been  to  limit  and  contract  the  transactions  in  various  operations  of 
enterju'ise  and  Inisiness.  I  presume  there  are  few  Senators  here  but 
have  had  conq)laints  of  this  kind  made  from  business  men  in  different 
parts  of  the  country,  that  the  uncertainty  of  the  amount  of  currency 
on  hand,  and  the  uncertainty  as  to  the  policy  to  be  adojited  by  the  Gov- 
ernment and  the  Secretary  of  the  Treasur}\  take  away  from  them  aU 
means  of  judging  as  to  what  amount  of  business  they  can  transact. 

I  do  not  think  that  this  is  the  time  or  the  occasion  to  enter  into  an 
elaborate  discussion  as  to  the  amount  of  currency  needed  in  this  coun- 
try, or  as  to  the  various  financial  subjects  that  may  be  brought  before 
the  Senate  at  different  periods.  My  own  impression  has  been,  and 
when  this  bill  Avas  l)efore  the  Committee  on  Finance  I  believed  it 
would  be  better  for  that  Committee  to  report  to  the  Senate  a  financial 
project  to  fund  the  debt  of  the  United  States.  I  believe  that  now  is 
thefavorable  time  to  do  it.     If  a  five  per  cent,  bond,  a  long  bond  of 


92  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

proper  description  and  proj^er  guarantee,  was  now  placed  njx)!!  tlie 
market,  witli  sucli  ani])le  powers  to  neojotiate  it  as  ouglit  to  be  given  to 
the  Secretary  of  the  Treasury,  such  a  loan  as  was  authorized  two  years 
ago,  at  a  reduced  rate  of  interest,  to  be  exempt  from  taxation,  I  have 
no  doubt  whatever  the  Secretary  of  the  Treasury  could  fund  every 
portion  of  the  debt  of  the  United  States  as  it  matured. 

The  real  ditliculty  of  our  tinancial  po,<ition  in  the  future  grows  out 
of  the  peculiar  character  of  the  seven-thirty  notes.  ]>y  those  notes  the 
holder,  when  they  mature,  has  the  option  to  demand  tlie  money  or  a 
iive-twenty  bond.  It  is  manifest  that  as  this  option  is  out  it  can  not  be 
recalled.  To  recall  it  would  l)e  a  violation  of  the  faith  of  the  United 
States,  that  the  liolder  of  these  notes  may  demand  either  tlie  money  or 
a  bond.  It  is  therefore  the  interest  of  the  United  States  so  to  preserve 
its  credit  that  the  five-twenties  will  Ite  above  par,  and  thus  the  seven- 
thirty  notes  when  due  will  be  converted  into  live-twenties,  which  will 
run  for  live  years  at  six  per  cent. ;  then  I  think  the  whole  debt  of  the 
United  States  might  be  funded  and  reduced  to  five  per  cent.  I  do  not 
believe  it  would  limit  or  cripple  the  power  of  the  Secretary  if  we  would 
grant  him  authority  to  put  upon  the  market  such  a  bond  as  I  have  men- 
tioned, and  limit  his  power  over  the  national  currency  by  retpiiring 
him  to  pay  out  all  over  a  reasonable  balance  in  the  Treasury  toward 
the  liquidation  of  the  puldic  debt,  and  thus  i:)revent  the  very  thing 
the  House  of  Representatives  intended  to  prevent  by  this  proviso  to 
the  bill. 

I  do  not  like  to  embarrass  a  bill  of  this  kind  with  amendments,  be- 
cause I  know  it  is  difficult  to  consider  amendments  of  this  sort  requir- 
ing an  examination  of  ligures  and  tables.  I  have  prepared  a  bill  xery 
carefully,  with  a  view  to  meet  my  idea,  but  I  will  not  present  it  now 
in  antagonism  to  this  bill  passed  by  the  House  of  Representatives  and 
the  view  taken  by  the  Finance  Committee,  because  I  Know  that,  in  the 
present  condition  of  the  Senate,  it  would  not  probably  be  fully  consid- 
ered. My  only  purpose  now  is  to  point  out  the  fact,  that  is  perfectly 
clear  to  the  mind  of  every  sensible  man  who  has  examined  this  bill, 
that  as  it  stands  it  does  not  carry  out  the  manifest  intention  of  the 
House  of  Representatives  when  they  passed  it,  and  that  the  proviso 
limiting  the  power  of  the  Secretary  over  the  legal-tender  currency  does 
not  accomplish  the  purpose  which  they  designed,  and  without  which  I 
know  the  bill  never  could  have  passed  the  House  of  Representativ^es. 

Mr.  Fessenden,  Mr.  Chandler,  and  others  briefly  discussed  the  question,  and  it 
was  then  resumed  by  Mr.  Sherman. 

The  chairman  of  the  Committee  on  Finance  has  substantially  ad- 
mitted in  his  argument  that  there  was  no  necessity  for  this  bill  except 
to  endorse  the  policy  or  theory  of  the  Secretary  of  the  Treasury.  In 
the  present  condition  of  our  finances  I  do  not  think  it  wise  to  advance 
theories  or  to  endorse  them.  Perhaps  it  was  not  wise  in  the  Secretary 
of  the  Treasury  to  be  so  open  in  the  announcement  beforehand  of  what 
he  intended  to  do,  and  perhaps  it  would  be  just  as  unwise  for  Congress 
now  to  endorse  that  pohcy  until  we  see  the  events  that  will  come 
before  us. 


WAYS  AND  MEANS.  93 

That  this  bill  is  not  necessary  for  maintaining  the  public  credit  I 
think  is  clearly  deuionstrated.  It  certainly  is  not  necessary  to  meet 
current  expenditures.  On  all  hands  it  is  admitted  that  our  receipts  are 
in  advance  of  them,  and  no  possible  or  probable  deduction  will  make 
our  receipts  fall  below  them ;  so  that  the  bill  is  not  necessary  as  a  loan 
bill  to  enable  the  Secretary  to  get  money  to  carry  on  the  expenses  of 
the  (Government.  The  honorable  Senator  from  Maine  admits  substan- 
tially that  it  is  not  necessary  for  other  jnirposes.  The  only  debt  that 
is  maturing  during  the  coming  year  is  ^02,000,000  of  certificates  of  in- 
debtedness. The  balance  now  on  hand,  as  reported  and  shown  by  the 
Treasury  books,  is  §112<>,<»0(),000 ;  but  the.  actual  balance  on  hand  is 
some  twenty  or  thiity  millions  more  than  the  reported  balance  growing 
out  of  the  manner  in  which  the  books  of  the  Treasury  are  kept. 

A  draft  is  drawn  here  on  the  Treasurer  at  Xew  1l  ork,  and  it  is  im- 
mediately put  t(j  his  credit  though  the  money  may  not  be  drawn  for 
some  time,  so  that  there  is  always  more  money  in  the  Treasury  than 
the  books  show;  and  that  siinjde  fact  led  to  the  controversy,  about 
which  a  good  deal  has  been  sai<l  in  the  newspapers,  between  the  Comp- 
troller of  the  Currency  and  the  Secretaiy  of  the  Treasury.  Deposits 
are  made  in  the  national  hanks  all  over  the  country,  and  it  maybe  some 
time  before  they  are  so  ivported  at  "Washington  as  to  be  entered  on  the 
books  of  the  Treasury  liere  ;  while  if  di-afts  are  drawn  here  on  New 
Orleans  or  anywhere  else,  tliey  are  at  once  entered  on  the  books  of  the 
Treasury  to  tlie  credit  of  the  Treasurer,  while  the  money  nuiy  not  be 
actually  drawn  for  a  month  or  two  months.  There  is  always  that  dis- 
cre]iancy  ;  there  is  always  more  money  in  the  Treasury  than  is  reported 
by  the  Treasury  I)ei)artment,  not  because  they  intend  to  deceive  any- 
body, but  simjlly  from  the  nature  of  the  transactions  and  the  manner 
in  which  the  acc<»unts  are  ke])t. 

I  say  there  is  no  necessity  for  this  1>ill  to  enable  the  Secretary  of 
the  Treasury  to  pay  the  current  expenses  or  to  meet  accniing  indebted- 
ness. The  sixty-two  millions  of  certificates  of  indebtedness  can  be  paid 
out  of  the  current  j-eceii)ts;  or  if  they  are  not  sufficient,  as  the  Senator 
knows  very  well,  the  Secretary  has  now  power  to  exchange  for  those 
cei-tificates  any  of  the  bonds  of  the  I'nited  States,  lie  may  issue  five- 
twenties  in  payment  of  those  certificates  under  the  existing  law.  There 
is  no  necessity  for  the  bill  therefore  for  that  purpose. 

In  regard  to  the  seven-thirties,  the  honoral)le  Senator  a^ees  with 
me  that  it  is  not  expected  that  they  will  be  paid  in  money ;  the  holders 
undoubtedly  will  avail  themselves  of  their  privilege  to  convert  them 
into  five-twenties,  so  that  they  are  not  to  burden  the  Treasury ;  and 
that  will  postj^one  the  payment  of  the  principal  of  all  of  them  five 
years  more,  and  give  the  Government  the  option  of  paying  them  after 
any  time  within  twenty  years.  There  is,  therefore,  no  ol^ject  in  this 
bill  to  provide  for  the  credit  of  the  Government,  because  the  credit  of 
the  Government  is  already  provided  for,  and  the  Secretary  of  the 
Treasury  has  ample  power  for  that  pui']")0se. 

What,  then,  is  the  purjjose  of  the  bill  i  I  think  the  Senator  frankly 
stated  it ;  it  is  to  declare  the  policy  of  the  reduction  of  the  non-interest- 
bearing  legal  tenders.     Under  the  present  law,  he  has  power  to  retire 


94  SPEECHES  AND   REPORTS  OF  JOHX   SHERMAN. 

every  dollar  of  the  interest-bearint:;  lei;al  tenders  by  excluiii^e  ;  lie  may  re- 
deem them  when  they  become  due,  and  no  portion  of  them  mmU  be  due 
until  Aug'ust,  18<>7,  and  then  they  mature  fjradually,  and  not  in  bulk.  He 
has  power  under  the  existin<^  law  to  retire  them  by  e\chan<;e  of  any  securi- 
ties ff)r  them,  and  with  the  present  eitse  in  the  money  market  there  is 
no  difficulty  in  retirin<j^  them  M'henever  he  can  ^ct  hold  of  them. 
Whenever  he  can  get  liokl  of  them,  he  is  now  retiring  them.  The 
trouble  is  that  they  are  sought  for  and  held  by  brokers  and  banks  and 
bankers,  and  therefore  he  can  not  reach  them  until  they  become  due, 
when  they  will  fall  into  the  body  of  the  national  debt.  There  is  no 
object  in  passing  this  bill  excei)t  to  contract  the  currency,  and  the  hon- 
orable Senator  says  the  Secretary  will  not  do  that  to  an  unreasonable 
extent ;  but  in  his  annual  report  he  says  he  will  do  it.  That  is  the 
whole  theory  of  his  proposition,  and  he  is  doing  it,  and  in  the  very 
Avay  I  have  mentioned.  The  Secretary  of  the  Treasury  accumulates 
large  balances  on  hand.  Our  friend  here  on  my  right  [Mr.  Fesscndcn] 
had  no  such  balance  in  his  hands  when  he  was  Secretary  there ;  he  was 
very  glad  to  have  a  much  less  balance;  and  for  the  oi-dinary  })ur])ose8 
of  the  Treasury  Department,  is  there  any  occasir)n  for  such  an  enor- 
mous balanced  What  is  it  lield  therefor?  The  balance  has  been  so 
great  that  the  Secretary  actually  hits  retired  notes  that  are  not  due  for 
two  and  a  half  years. 

I  would  have  no  objection  to  conferring  on  him  the  power  to  dis- 
pose of  bonds  to  meet  bills  as  they  mature.  Indeed,  I  nuiy  say  that 
was  one  of  the  amendments  I  ])roposed,  that  the  power  to  sell  bonds 
should  be  only  to  meet  accruing  indebtedness.  Give  him  one  year,  if 
you  choose,  to  do  it  in,  but  no  more.  I  do  not  think  it  is  wise  to  con- 
fer on  the  Secretary  of  the  Treasury  the  jiowcr  to  meet  the  indebted- 
ness not  accruing  for  a  year  or  two  or  three  yeai-s.  I  do  not  think  it  h 
necessary  in  our  present  financial  condition  to  authorize  him  to  go  into 
market  now  and  sell  bonds  at  current  market  rates  with  a  view  to  pay 
debts  that  do  not  mature  in  a  year  or  two,  I  have  no  doubt  before 
the  five-twenty  loans  are  due  we  shall  retire  every  dollar  of  them  at 
four  or  five  per  cent,  interest.  ±so  one  who  heeds  the  rai)id  develop- 
ments of  new  sources  of  wealth  in  this  country,  the  enormous  yield  of 
gold  now,  the  renewal  of  industry  in  the  South,  the  enormous  yield  of 
cotton,  the  growing  wealth  of  this  country,  and  all  the  favorable  pros- 
pects that  are  before  us,  doubts  the  ability  of  this  Government  before 
this  debt  matures  to  reduce  it  to  four  or  five  per  cent,  interest.  I 
therefore  do  not  think  it  wise  to  place  it  in  the  power  of  the  Secretary 
of  the  Treasury  to  sell  six  j^er  cent,  long  Ijonds  or  any  class  of  bonds, 
even  five  per  cent,  bonds,  except  to  meet  accruing  in(le]>tedness.  This 
I  am  perfectly  willing  to  do :  the  Secretary  of  the  Treasury  may  sell 
bonds  at  any  rate  to  meet  debts  as  they  accrue,  but  that  is  not  the  pur- 
pose of  this  bill. 

I  will  state  here  that  I  have  in  my  hands  a  talde  showing  that  the 
Secretary  of  the  Treasury  used  a  portion  of  the  surplus  reveiiue  for  the 
purpose  of  retiring  the  seven-thirties  not  due  for  two  years  and  a  half 
to  come.  He  has  retired,  of  the  third  issue  of  seven-thirties,  $7,701),- 
000;   and  of  the  second  issue,  not  due  until  June  and  July,  1868, 


WAYS  AND  MEANS.  95 

S4:,402,000 ;  making  an  aggregate  of  $12,000,000  which  he  has  retired 
in  the  very  mode  provided  in  this  bilL  That  is  the  power  now  given, 
and  he  will  use  the  power.  He  may  think  it  to  his  interest  to  retire 
the  whole  of  the  seven-thirties  or  the  ten-forties ;  but  is  it  wise  for  us 
to  give  hiin  tliat  power  now,  at  the  heel  of  the  war  and  before  things 
have  settled  down  i     I  do  not  think  it  is. 

I  repeat,  I  do  not  wish  to  call  in  question  tlie  integrity  of  the  Secre- 
tary of  the  Treasury.  The  Senator  interjects  by  saying  we  must  look 
ahead.  There  is  just  the  difference  between  him  and  me.  I  say  the 
future  for  this  country  is  hopeful,  buoyant,  joyous.  We  shall  not  have 
to  beg  of  foreign  nations,  or  even  of  our  own  people,  money  within 
two  or  three  years.  Our  national  debt  will  be  eagerly  sought  for,  I 
have  no  doubt.  I  take  a  hopeful  view  of  the  future.  I  do  not  wish 
now  to  crij)j)le  the  industry  of  the  country  by  adopting  the  policy  of 
the  Secretaiy  of  the  Treasury,  as  he  calls  it,  by  reducing  the  currency, 
by  crippling  the  operations  of  the  Government,  when  I  think  that, 
under  any  probability  of  affairs  in  the  future,  all  this  debt  Avill  take 
care  of  itself.  I  believe  that  if  the  Secretary  of  the  Treasury  would 
do  nothing  in  the  world  except  simply  sit  in  his  chair,  meet  the  accru- 
ing indebtedness,  and  issue  his  Treasury  warrants,  this  debt  will  take  care 
of  itself,  and  will  fund  itself  at  four  or  iive  per  cent,  before  very  long. 

In  my  judgment,  the  amount  of  legal  tenders  now  outstanding  is 
not  too  much  for  the  present  condition  of  the  country.  I  expect  to 
come  back  to  sj)ecie  payments,  and  I  expect  to  see  gold  approach  the 
level  and  standard  of  our  i)aper  money,  without  any  material  reduction 
of  our  currency.  Our  currency  now  is  less  than  the  currency  of  Eng- 
land or  France,  according  to  the  statistical  tables  we  have.  Our  whole 
currency  now  is  $704,000,000,  excluding  the  interest-bearing  legal  ten- 
ders, which  do  not  enter  at  all  into  it,  and  which  can  not  be  found,  and 
including  bank  circulation  of  every  kind.  Four  hundred  and  fifty 
millions  of  it  consist  of  Ignited  States  notes  and  fractional  cuirency. 
Then,  there  are  over  8250,0(»0,00i»  of  bank  currency,  including  the 
notes  of  outstanding  State  banks,  which  are  being  rapidly  retired.  The 
limit  of  the  national-l)ank  currency  is  83u0,000,000 ;  so  that  the  whole 
currency  can  not  exceed  $750,000,000.  I  do  not  consider  the  comj)ound- 
interest  notes  as  an3i:hing,  because  they  are  not  in  circulation.  The 
circulation  before  the  war  was  $207,000,000  in  paper,  and  perhaps 
$l<i0,00(i,(H)O  in  gold.  It  is  difficult  to  tell  how  much  gold  there  was 
in  the  country.  We  are  now  developing  the  mining  regions.  The 
production  of  gold  is  increasing  with  great  rapidity.  The  amount  of 
gold  in  the  country  1  believe  will  in  five  years  approach  the  amount  of 
our  legal-tender  currency,  so  that  the  one  will  be  convertible  into  the 
other.  The  proportion  of  gold  to  that  currency  at  this  day  is  greater 
than  it  was  at  the  l)eginning  of  the  war.  Exchange  A\ith  all  countries 
is  in  our  favor.  Bills  on  England  can  now  be  had  for  lOG  in  gold. 
That  is  two  or  three  per  cent,  in  our  favor.  We  have  vast  uses  for  the 
currency.  It  is  being  absoi-bed  in  the  Southern  States  and  held  there. 
They  are  glad  to  sell  anything  they  have  got  for  it.  Cotton,  which 
was"  hardly' counted  indeed  when  the  war  ended,  has  yielded  enor- 
mously. 


96  SPEECHES    AND   IlEPOKTS   OF  JOHN   SIIEUMAN. 

» 

In  regard  to  i;<)iiii;  back  to  spociu  j)avmc'iits,  wla-ii  did  cvlt  a  nation 
travel  toward  specie  payment  as  raj)idly  as  thin  c(juntry  lias  done  with- 
out a  reduction  of  the  currency  i  ilere  is  a  si<^niticant  fa<-t,  that  when 
gold  was  i!S(>  our  currency  was  ,^.').")0,(>oo,0(KJ  ;  and  now,  when  our  cur- 
rency is  over  ^7<'<',<'<'0,(hh»,  gnhl  is  l.'Jti,  and  g«»ing  down  and  down,  and 
no  power  in  this  workl  can  j)revent  its  going  (h>wn,  Tliis  fact  shows 
that  tlie  mere  amount  of  legal  tender  outstan<ling  does  not  fix  the  rate 
of  gold.  That  is  the  result  of  the  restored  continence  of  the  ])eople  of 
this  country  and  of  all  nations  in  the  credit  of  the  I'niteil  States.  I 
believe  that  if  the  Secretary  of  the  Treasury  will  kccj)  out  of  the  stock 
market,  will  just  remain  in  his  seat  in  the  Treasury  I  )cpartnu'nt,  and 
pay  the  debts  as  tliey  ])ecome  due,  the  i)eoj)le  of  the  I'nitcd  States  will 
take  care  of  the  currency  of  the  country  and  of  the  credit  of  the  (iov- 
ernment ;  and  it  will  not  be  necessary  to  buy  bonds  before  tliey  mature 
or  do  anything  else  except  simply  to  meet  the  current  indebtedness  in 
order  to  bring  us  back  to  specie  payments,  and  I  do  not  belii've  any 
power  can  ])revent  it. 

I  do  not  wish  the  Senate  to  suppose  that  in  these  remarks  I  intend 
to  criticise  the  conduct  of  the  Secretary  of  the  Treasury.  He  takes  a 
different  view  from  what  I  do.  I  am  more  hopeful  than  he  is.  He 
probably,  like  a  good  banker  as  he  is,  wants  a  very  large  ijalancc  on 
hand.  I  have  more  contiilence  in  the  future,  and  am  willing  to  trust 
to  it.  I  do  not  now  see  any  imperative  neces>ity  for  this  bill,  but  at 
the  same  time  I  would  make  no  op])osition  to  it,  no  opposition  t(»  the 
vast  power  to  sell  bonds,  because  I  think  the  power  would  not  be  abused, 
if  the  Secretary  would  not  in  this  way  undertake  to  cairy  out  what  he 
calls  his  policy,  a  conti"acti<tn  of  the  currency  without  any  sjx-'citic  law. 
That  is  what  I  am  afraid  of — his  interference  to  contract  the  currency. 
The  honora])le  Senator  from  Maine,  however,  would  seem  to  think  that 
I  im})ute  to  him  a  wrong  motive,  and  therefore  I  corrected  him  when 
he  made  the  remark  that  I  seemed  to  suj^pose  the  Secretary  was  doing 
this  improperly.  I  think  not.  The  Secretary  of  the  Treasury  infonned 
ns  that  he  desired  to  reduce  the  currency,  and  he  has  l)een  dt)ing  it  as 
far  as  he  could.  He  has  been  accumulating  large  balances.  He  was 
opposed  to  the  proviso  which  has  been  inserted  in  this  bill,  and  yielded 
to  it  only  with  reluctance.  That  is  admitted  on  all  hands,  and  he  is 
not  precluded  either  in  honor  or  propriety  from  carrying  out  his  policy 
if  you  give  him  the  power  to  do  it. 

This  is  all  I  desire  to  say  upon  the  l)ill.  The  only  reason  why  I 
spoke  is  because  I  can  not  vote  for  it  under  the  circumstances ;  I  felt 
bound  to  state  thus  briefly  the  reasons  that  actuated  me  in  coming  to 
this  conclusion. 

The  bill  was  further  discussed  and  passed. 


FUNDING  THE  NATIONAL  DEBT.  97 

FUXDIXG   THE  NATIOXAL  DEBT. 

IX  THE  r  SITED  STATES  SEX  ATE,  MAY  22,  ISGG. 

TnE  Senate  having  under  consideration  the  bill  (S.  No.  300)  to  reduce  the  rate 
of  interest  on  the  national  debt,  and  for  funding  the  same,  Mr.  Sherman  said  : 

^[i£.  Pkk.sii)p:nt  :  This  bill  came  to  us  in  the  usual  mode  from  the 
Secretary  of  the  Treasury,  and  its  purpose  is  to  facilitate  the  ncf^oti- 
ation  of  a  five  per  cent.  i»»aii.  1  have  had  an  earnest  desire  dnriii<r  the 
present  scs.sion  of  ('(>n«jress  t(j  see  the  interest  on  the  debt  of  the 
Unitetl  States  reduced  to  a  rate  not  exceeding  tive  per  cent. ;  l)ut  tlie 
Secretary  of  the  Treasury,  jus  will  be  "gathered  from  his  ])iiblie  docu- 
ments, hesitated  somewhat  as  to  whether  he  could  ne^otrate  a  loan 
bearing  that  rate  of  interest.  After  full  consideration,  however,  he 
presente<l  this  bill  as  containing  the  tenns  upon  which,  in  his  judg- 
ment, this  loan  could  be  negotiated.  It  came  to  us,  and  by  general 
citnseiit  was  reported  t(j  the  Senate,  ])rinted  for  the  j)urpose  of  at- 
tracting attention  and  criticism,  ami  was  subse(piently  considered  by 
the  Committee,  and  reported.  Its  history  is  now  known  to  the 
Senate. 

Ik'fore  c<msidering  the  siK'citic  terms  of  the  bill,  it  will  be  iieces- 
Siirv  for  me  to  state  the  condition  of  the  public  debt.  IJy  the  state- 
ment laid  on  our  tables  on  the  l^t  of  May,  it  appears  that  the  ascer- 
tained debt  of  the  I'nited  States  at  that  time  was  S2,SL>7,<i7<'»,871  ;  and 
from  that  may  be  i)roperly  deducted  the  anujunt  of  money  (coin  and 
currency)  on  liand  o  $137,'J>> 7,028.82.  To  this  aggregate  must  neces- 
sarily be  added  <piite  a  nund>er  (tf  items,  some  of  which  have  been 
acted  iijion  at  the  i)re.sent  ses>ion  of  Congress,  and  some  of  which  will 
be  acted  upon  before  our  adjournment,  the  mere  statement  of  which 
will  show  the  Senate  the  probable  condition  of  the  public  debt  within 
the  next  year  or  two.  The  largest  sum  that  will  be  recjuired  is  by  the 
bill  introduced  from  the  Committee  on  Military  Alfaii-s  for  the  equal- 
ization of  bounties,  which  will  re(piire,  if  passed,  near  ,s2oO,00<»,(»0(>. 
What  will  be  the  fate  of  that  measure  I  have  no  means  of  knowing. 
The  Pacific  Kailroad,  now  l)eing  constnicted,  will  probal)ly  cost  in  the 
coin-se  of  the  next  tive  yeai-s  something  like  s.5(>,<»0(»,(M)O. 

In  the  settlements  with  the  States  for  expenses  incun-ed  for  the 
military  service  in  an  irregular  way,  we  have  already  a])})ropriated,  I 
think,  about  !S10,0(Ht,OuO  to  the  States  of  Missouri,  Kansas,  Penn- 
sylvania, and  West  Virginia ;  and  there  are  other  claims  of  the  same 
character  which  will  be  presented  by  other  States.  I  am  told  that  In- 
diana, Kentucky  ])erhaps.  and  ( Jhio'will  have  such  claims,  Ohio  has  a 
claim  of  that  kind  growing  out  of  the  Morgan  raid.  The  jirobability 
is  that  this  cla.ss  of  claims^  now  unadjusted  but  not  disputed,  the  prin- 
ciple having  been  settled,  will  take  s20,(»00,000.  The  largest  yet  al- 
lowed was  to  the  State  of  Missouri,  which  I  think  amounted  to  some 
87,»MKM»0().  Then  there  is  the  measure  presented  by  a  prominent 
member  of  the  House  of  Representatives,  which  I  hope  will  not  pass 


98  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

— the  proposition  to  assume  a  jxd-tiiui  of  the  e.\j)eiises  of  the  States  in 
raising  men  durin<i^  the  rebellion,  antl  which,  should  it  receive  tlu'  sanc- 
tion of  Con«,'ress,  would  take,  hy  its  terms,  >;l  H;.(mi(),(KK).  As  I  have 
seen  but  very  little  ellort  to  i)as«  that  bill,  I  lay  that  aside  as  not  a 
probable  burden  upon  the  "^rreasury. 

Then  there  are  classes  of  large  private  claims  growing  out  of  the 
war,  many  of  which  are  Ijeing  constantly  pressed  upon  us,  and  wiiich 
will  take  prol)ably  millions  of  dollars,  but  tlie  precise  amount  of  whicii 
no  man  can  estimate.  Tiie  bill  passed  the  otner  day  for  the  relief  <^)f 
the  contractors  for  the  iron-clads,  and  the  claims  made  by  the  States  «»f 
Kentucky  and  Tennessee  and  the  various  border  States  for  danuiges 
caused  by  the  war,  and  claims  for  pn»perty  used  by  the  army,  arc  8|)eci- 
mens  of  this  class  of  claims,  amounting,  I  might  say,  to  fifties  and 
hundreds  of  millions.  I  take  it  the  great  bodv  of  these  claims  will 
be  rejected  upctn  the  general  ])rinciples  of  public  law;  and  tlu-refore, 
in  estimating  the  proljable  burden  on  the  Treasury,  I  do  not  j>ut  this 
item  very  large,  especially  as  I  see  a  dis})osition  in  Congress  to  criticise 
very  accurately  this  class  of  claims. 

It  therefore  is  very  certain  that  in  the  most  favorable  aspect  of 
aifairs  the  public  debt  of  the  Ignited  States  might  fairly  now  be  esti- 
mated at  >^a,0()(i,0()(),(i(K).  That  is  the  amount  stated  'by  the  Secre- 
tary of  the  Treasury  in  his  annual  rej)ort,  and  I  think  it  is  not  over- 
stated. AVith  the  strong  j)robability  of  passing  the  bill  for  the  ecpiali- 
zation  of  bounties,  it  may  be  understated ;  but  I  take  it  as  a  correct 
estimate. 

It  will  be  observed  that  this  debt  is  of  the  most  diverse  character. 
It  consists  not  oidy  of  the  uidiquidate<l  claims  that  I  have  specitied, 
but  the  ])ublic  debt  which  is  ascertained  is  provided  for  by  twenty- 
seven  diHereut  laws  and  as  many  as  forty  ditferent  forms  of  'securities. 
The  report  on  the  finances,  which  wa.s  laid  on  your  table  at  the  com- 
mencement of  the  present  session,  contains  a  list  of  these  various  loans, 
covering  six  or  seven  pages.  Under  some  of  these  laws  there  is  a  great 
diversity  of  issues.  For  instance,  under  the  seven-thirty  law  there  are 
three  different  series  of  notes,  and  under  the  tive-twenty  law  there  are 
live  different  series,  containing  somewhat  different  provisions.  The 
seven-thirties  vary  somewhat,  although  it  is  very  difficult  precisely  to 
state  the  difference.  The  difference  arises  from  the  dates  of  issue  partly, 
but  ill  the  seven-thirties  it  exists  also  in  the  terms  of  the  bond.  The 
principal  difference  is  that  in  one  class  of  those  bonds  the  interest  may 
be  at  the  pleasure  of  the  Government  paid  in  gold  at  six  ])er  cent.  I 
merely  allude  to  this  diversity  to  show  that  the  natural  idea  of  every 
one  connected  with  the  iinances  of  the  Government  would  be,  as  early 
as  possible,  to  consolidate  the  public  debt  of  the  United  States.  It  is 
now  difficult  for  the  people  of  the  United  States  to  understand  any  but 
two  or  three  of  these  loans,  and  none  but  a  skillful  linancicr,  engaged 
in  the  purchase  and  sale  of  stocks,  can  tell  the  various  differences"  in 
value  of  the  different  securities,  and  the  reasons  therefor.  It  is  obvi- 
ous, therefore,  that  for  public  convenience  it  is  necessary  to  consolidate 
these  loans  as  soon  as  possible  into  one  distinct  fonn,  so  that  we  shall 
have  nothing  to  provide  for  but  the  interest  of  the  debt  and  such  per- 


FUNDING  THE  NATIONAL  DEBT. 


09 


tion  of  the  principal  as  the  policy  of  the  United  States  may  require  us 
to  pay  off. 

'I'here  is  another  reason  for  funding  our  public  debt.  It  is  not  a 
(juestion  of  policy,  but  it  is  a  question  of  necessity.  A  lar^e  portion 
<tf  this  del»t  matures  very  soon,  and  it  must  be  either  renewed  or  paid 
off.  It  can  oidy  be  paid  off  ]>y  sellin<^  other  bonds,  and  consequently 
there  is  necessity  of  prescribing  the  terms  of  these  new  securities.  I 
have  here  a  table  showing  when  this  pulilic  debt  matures: 


CHABACTEB  OF  ISSUE. 


Temporary  loan,  four  per  cent 

"  "     five  per  cent 

"  "     nix  jMT  cent 

Certificates  of  iuilcljteilne^s,  »ix  per  cent. 
One-  and  two-year  D<nes,  five  jm-T  cent. . . 

Total  amount  due 


Six  per  c»  nt.  Ixind.s  (five-twenti<  -;. 

Six  |>cr  cent.  Imiid-* 

Six  per  cent.  eoni|)ound-intcreMi  not.    . 
Seven  and  t)ire«  tenths  Trvai>urv  note.-t. 


Amount  ootstanding. 

•When  redeemable. 

$612,227  98 

Due. 

•"  '•■•1.710  65 

Due. 

■..168  47 

Due. 

..^l.tXHJ  00 

Due. 

:..i,ft86,»01  00 

Due. 

10 

>..i  t,,-',. 0 

After  Muy  1,  1S67. 

y.>ir>,'j.')0  (M> 

After  Dec.  31,  1867. 

I07.i>l-J,lll   (10 

After  Dec.  31,  18«7. 

:i34,40O,0OO  00 

Afu-r  June  80,  1807. 

Total  maturing;  in  1H6" 


Six  per  cent.  iMind* 

Seven  and  three  tenths  Trvatsurv  not^>a 


Totiil  niuturin;;;  in  18CS..  . 
Six  per  cent,  bonds  (five-twenties). 
Six  per  cent,  bond;*  (five-twontics). 
Five  per  cent,  bonds 


1,1  XX  I  (>o 
1,000  00 
'•,000  00 


SO 

I  to 


Five  per  cent,  bondn. .    

Five  per  cent,  bonds  (ten-forties). 

Total  maturing  in  1874 


0 

uO 

172 

■  no 
77U,1(jO  Oi) 

$192 

770,100  00 

Six  percent,  bond? $18,415,000  00 


Six  per  cent,  bonds I  $50,000,000  00 

Six  per  cent.  bonds« 192,252,430  00 

Six  per  cent,  bonds 75,000,000  00 

Six  per  cent,  bonds  (Oregon  war) 1,016,000  00 


Total  m.iturin£r  in  1S81. 


$318,268,430  00 


Six  per  cent,  bonds  (T.  P.  R.  R.  Co.)... 
Six  per  cent,  bonds  (C.  P.  U.  II.  Co.)...  . 


$640,000  00 
1,898,000  00 


Total  maturing  in  1895. 


$2,533,000  00 


.Mt.r  .liilv  1,  1S68. 
After  Miii'cli  3,  1808. 
After  Marcii  3,  1868. 
After  March  3,  1868. 


After  Nov.  1,  1869. 

After  Nov.  1,  1870. 

After  Jan.  1,  1871. 

After  Jan.  1,  1874. 
After  March  1,  1874. 

After  Dec.  31,  1880. 

After  June  30,  1881. 
After  June  30,  1881. 
After  .Itme  30,  1881. 
After  July  1,  1881. 

After  Nov.  1,  1895. 


of  the 
lie  reach 
of  the  Secretarv,  and  that  next  year  and  the  year  following  both  the 
seven-thirties  and  five-twenties  come  within  his  reacli  for  ]>Mvnienr  or 


It  will  thus  be  seen  that,  while  the  pressure  of  the  principal 
public  debt  is  not  very  great  now,  yet  sl7.^,0<M»,000  is  within  the 


100  SPEECHES   AND  REPUHTS  OF  JOHN   SHERMAN. 

conversion.  The  Governniont  nuiy  liave  ;i  lonirer  tiiUL"  fur  pavnient 
if  it  cliooses,  by  payin«;  six  i)er  cent,  interest  in  .i;<>l(l.  Hut  t  wij^h 
simply  now  to  show  that  it  is  within  the  power  of  tlie  Ciovcrnnicnt,  if 
it  can  reduce  the  rate  of  interest,  to  do  so  consistently  with  the  stipu- 
lations of  the  bonds. 

lUit  there  is  another  arminient  for  consul idatint?  the  debt  derived 
from  an(»tlier  table  that  1  have  before  me.  All  njodern  nations  who 
arc  now  dealing  very  largely  in  ])ublic  debt  have  aj^  a  matter  of  policy 
reduced  their  i)ublic  debt  to  some  simnle  form,  so  that  in  every  coun- 
try there  is  a  specific  debt  known  to  tne  ]>eoi)le  of  that  country,  with 
a  fixed  rate  of  interest  prescribed  by  law;  and  the  whole  (»f  the  public 
debt  is  *:;eiiera]ly  ])iit  in  that  form  as  soon  as  possible.  Kngland  had 
formerly  the  same  diversity  of  securities  that  we  now  have  ;  but  it  luw 
been  the  p<»licy  of  Kni;lish  statesmen,  from  William  Pitt  down  t(»  this 
time,  to  reduce  the  del)t  into  one  simple  form,  so  that  there  should  l)e 
nothin<]j  but  the  interest  to  be  ])rovit{ed  for  ;  and  the  result  has  been 
that  the  whole  of  the  j)ublic  debt  of  Knghuul  is  reduced  to  a  three 
per  cent,  debt,  except  about  one  million  pounds.  The  total  amount 
of  the  public  debt  of  (ireat  liritain  is  i:7'.»'.>,>"LM."3'.».  and  the  wlude  of 
this  may  now  be  said  to  be  a  three  i)er  cent,  annuity,  the  ])rincij)al, 
however,  redeemable  at  the  pleasure  ot  the  CTOvernmeut.  In  France  I 
find  the  same  thiuir  has  occurred.  The  term  rentes  generally  descril)e8 
the  great  mass  of  the  j)ublic  debt.  I  think  all  the  debt,  excej)t  a  few 
technical  annuities,  given  ])robably  for  specific  purj>oses,  oni'  called 
oblKjations  t)mtcn<iircM,  and  some  floating  debt,  is  now  funded  in  the 
form  of  reiites.  The  debt  of  Russia,  also,  is  now  funded  into  three, 
four  and  a  half,  and  five  per  cent,  stocks — the  great  body  of  it  in  the 
form  of  five  per  cent,  foreign  loans.  The  .same  statement  holds  good 
in  regard  to  all  Euntpean  countries.  Every  nation  in  Europe,  where 
a  jniblic  debt  has  existed  in  some  cases  for  centuries,  has  adoj)ted  it  as 
a  principle  to  reduce  that  debt  to  as  sim}>le  a  form  as  ])ossible,  wj  that 
the  interest  alone  would  be  a  charge  upon  the  treasury,  and  that  a 
sinking  fund  should  pay  off  gradually  sucJi  portion  of  tlie  principal  of 
the  public  debt  as  the  policy  of  the  (Tovernment  would  allow. 

It  is  manifest  that  if  tlie  debt  of  the  I'nited  States  was  now  re- 
duced to  one  simple  form  of  a  five  per  cent,  stock  or  bond,  so  that  the 
United  States  need  look  only  to  the  payment  of  the  interest,  and  to 
the  payment  or  purchase  of  such  portion  of  the  principal  as  its  policy 
might  dictate,  much  of  our  financial  difficulty  Avould  be  removed. 
What  is  now  the  trouble  with  us  i  Why  can  not  this  project  be  adopted  \ 
The  answer  is  that  a  very  large  portion  of  the  principal  of  the  ]niblie 
debt  becomes  due  in  a  short  time,  and  the  Secretary  must  provide  for 
the  payment  of  it ;  and  this  very  necessity  of  going  constantly  into  the 
market  to  renew  these  loans  imposes  npon  him  nearly  all  the  burdens 
of  his  office.  xVnd  yet  I  do  not  arraign  the  policy  that  was  adopted 
during  tlie  war  of  making  short  loans.  It  was  proper  to  do  it,  it  was 
necessary  to  do  it.  It  Avas  not  proper  for  this  Government  to  stipu- 
late to  pay  these  high  rates  of  interest  for  a  long  ])eriod  of  time,  and 
therefore  during  the  war  it  was  necessary  to  make  short  loans  at  a  high 
rate  of  interest ;  Init  it  was  always  done  in  view  of  reducing  the  rate 


FlNDlNLi    T1!K    XATIUNAL    DEIJT.     .  101 

of  interest  after  tlie  war  was  over,  and  with  a  view  of  consolidating 
the  wh(de  deht.  The  |x)Hey,  so  far  as  I  know,  of  those  connected 
with  the  finances  of  tlie  country,  has  ])een  to  kee})  ever  in  view  the 
principle  <»f  refh-ennibk-nesH  in  every  form  uf  security  issued  during 
the  war.  Therefore  tlie  tive-twenty  bund  was  payable  or  niiglit  be 
pai<l  after  five  years.  The,  seven-thirties  and  the  various  forms  of 
securities  that  have  been  issued  are  within  the  reacli  of  the  Govern- 
ment in  a  hhort  time.  Why  was  this  idea  so  carefully  kept  in  view^ 
Sinii»ly  to  enable  the  I'nited  States  to  retain  the  advantage  of  paying 
the  principal  after  the  war  when  loans  couhl  be  negotiated  on  more 
favorable  terms.  And  now  we  may  proj)erly  reaj)  the  bencHt  of  this 
wise  ixdiey.  We  may  now  enter  the  money  market  with  the  laurels 
of  victory  and  ])eace.  We  need  no  longer  compete  with  the  industrial 
interests  of  our  citizens  in  borrowing  money,  but  may  prescribe  our 
own  terms  and  renew  our  dei>ts  on  conditions  consistent  with  our  vast 
power  and  resources. 

Now,  Mr.  rrtsident,  the  only  additional  question  I  need  present  in 
this  connci'tion  is,  In  this  the  time  to  fund  the  i)ublic  debt  i  1  say 
emphatically  it  is.  I  believe  we  have  wa.^ted  f<»ur  or  live  precious 
months  already.  I  lielieve  that  the  ])rocess  would  have  been  easier  at 
the  beginning  of  this  session  tlian  it  will  be  now  ;  and  why  ^  In  (»r- 
der  to  fund  the  public  debt  of  the  rnited  States,  a  large  amount  of 
currency  is  necess;iry  :  l)ut  it  is  necessary  for  us  to  re<luce  our  currency 
as  soon  as  possible.  We  can  not  get  back  to  specie  j)ayments  without 
some  re<luction  of  the  currency.  Every  one  desires  to  resume  specie 
payments,  but  Iwforc  we  d(j  so  the  debt  ought  to  be  funded.  It  can 
not  be  funded  on  as  favorable  tenns  after  we  return  to  specie  pay- 
ments. The  very  abundance  of  the  currency  obviously  enables  us  to 
fund  the  debt  at  a  l<»w  rate  of  interest  ;  ami  as  the  debt  was  contracted 
ui>on  an  intlatcd  currency,  it  is  just  and  right  that  upon  tliat  same  cur- 
rency it  shouhl  be  funded  in  its  pennanent  form.  The  effect  of  tlie 
superabundance  (d"  pajK-r  money  is  to  reduce  the  rate  of  interest;  that 
is  obvious.  At  the  time  of  the  celebrated  John  Law  excitement,  the 
i*ate  of  interest  in  France  was  reduced  to  one  and  a  ludf  per  cent,  by 
the  overwhelming  amount  of  paper  money.  I  say  that  now,  above  all 
others,  is  the  time  to  fund  this  debt  in  some  fonn  of  security.  If  we 
postpone  it  six  months  or  a  year,  it  will  only  add  to  our  difficulties. 
The  longer  we  postpone  it,  and  the  longer  we  leave  this  amount  of 
fli»ating  indebtedness  upon  the  market  of  the  United  States,  the  less 
will  we  be  able  to  fund  it  at  a  low  rate  of  interest  and  on  favorable 
terms.  And.  sir,  we  have  no  choice  al)Out  it.  We  have  got  to  do  it, 
l)ecause  this  debt  is  maturing,  and  we  have  got  to  i>ut  it  in  some  other 
fonn  nnless  we  intend — to  use  a  very  expressive  phrase — to  shin  it, 
and  go  into  the  market  to  renew  short  loans.  This  debt  matures,  and 
it  must  be  paid.  It  can  be  i)aid,  not  by  taxes,  but  by  selling  new  bonds 
and  new  loans ;  and  therefore  we  must  determine  upon  some  form  of 
fun«ling  it  as  s(»on  as  practicable. 

And  this  brings  me  to  the  main  question,  what  rate  of  interest  the 
United  States  ought  to  pay  on  the  public  debt.  Upon  sS80,000,0(m» 
we  are  now  paving  interest  at  the  rate  of  seven  and  three  tenths  per 


102  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

cent.,  higher  than  we  allow  our  citizens  to  exact  from  each  other. 
Upon  the  great  i)art  of  our  debt  we  [n\y  six  per  cent,  in  gold,  etjuiva- 
lent  at  present  rates  to  seven  and  eight  tenths  per  cent,  in  the  currency 
for  which  the  l)on<ls  were  sold.  We  exenii)t  our  public  creditors  from 
the  burdens  of  taxation.  The  (piestion  is  now  whether  we  are  willing 
to  continue  to  pay  such  interest,  and  wl^ethcr  we  are  unable  to  meet 
our  obligations  on  more  favorable  terms. 

And,  sir,  in  considering  this  <piestion,  I  wi>h  it  distinctly  under- 
stood that  I  would  n(»t  arbitrarily  change  anv  contract  with  a  ]>ublic 
creditor.  Public  faith  is  the  most  precious  jewel  of  a  nation,  and  I 
would  not  tarnish  oure  by  any  violation  of  promise  or  contnict.  So 
far  as  we  liave  stipulated  we  nmst  pay;  our  credit  denuuuis  it.  .\n 
old  writer  says : 

This  is  tlio  frreat  tliinj,'  calK-il  crodit.  Cre<lit  is  n  ronsoquenrc,  not  ft  oiuiso  ;  the 
effect  of  a  sul)staiic'e,  ni>t  a  suhstanco;  it  is  the  .sunshine,  not  the  sun;  the  cjuicken- 
ing  souKthinjr,  enll  it  what  you  will,  that  h\\l'»  life  to  trade,  jrives  beinj;  t<»  tho 
branclios  and  nidisturo  to  tho  roots.  It  is  tho  oil  to  the  wheel,  the  marrow  in  tho 
bone,  the  blood  in  the  veins,  and  the  spirits  in  tho  heart  of  all  the  ntgocf,  trmlo, 
cash,  and  coiiimeree  of  tho  worhl. 

Credit  is  based  not  oidy  upon  a  strict  compliance  with  contnicts  and 
ability  to  perform  them,  but  also  upon  great  care  in  making  tliem. 
We  must  have  prudence  in  quaking  a  contract,  iio!n»r  in  observini;  it, 
and  ability  to  perform  it.  These  are  the  elements  of  j)ublic  as  well  as 
private  credit.  Our  history  as  a  natitm  lias  shown  tliat  we  have  tlie 
means  and  will  to  till  our  contracts.  It  is  for  us  t<»  show  our  prudence 
in  making  them  in  the  future.  In  ])rivate  dealing  we  will  not  tnist  a 
man  who  has  great  means  and  ample  })roperty,  if  he  is  reckless  in  mak- 
ing engagements  ;  but  we  do  tnist  a  prudent  man  who  luis  no  resources 
but  his  prudence  and  probity.  As  a  nation  we  ought  not  to  ini])air 
our  credit  by  making  engagements  more  onerous  than  other  nations  do, 
unless  we  are  compelled  to  do  so  by  stem  necessity.  Now,  sir,  I  can 
not  but  think  that  it  is  discreditable  to  us  as  a  nation  that  we  are  now 
issuing  our  bonds  at  a  higher  rate  of  interest  than  any  Christian  nation 
of  tlie  world ;  that  we  now  continue  to  issue,  at  a  coin  value  of  seventy- 
live  cents  on  the  dollar,  six  per  cent,  bonds,  principal  and  interest  pay- 
able in  gold.  I  do  think  that  the  fact  that  European  nations,  with 
their  complicated  relations  and  expensive  forms  of  government,  can 
sell  their  securities  at  a  more  favoralde  rate  than  we,  is  an  unpleasant 
fact  no  longer  justitied  by  the  relati^-e  condition  of  the  several  coun- 
tries. While  we  were  in  war,  our  Government  in  discredit,  and  our 
own  people  fearing  the  result  of  the  struggle,  we  were  forced  by  neces- 
sity to  pay  high  rates ;  but  to  do  so  now  is  a  confession  of  weakness 
that  I  see  no  foundation  for. 

Let  us  test  this  question  by  a  more  detailed  comparison  of  the  rates 
of  interest  paid  by  this  and  other  countries,  and  of  the  res<:>urces  of 
each.  I  Itave  a  table  showing  the  debt,  population,  and  annual  interest 
paid  by  leading  nations  : 


FUNDING   THE    NATIONAL   DEBT. 


103 


Stti'tnieni  AJficinij  tin  iiij'jriQate  indtbUilne»g  of  the  gtvcral  Ku  rope  in  and  Auurican  nations, 
and  it*  averayr  jk  r  r.ijnta  on  tht  jHijiulation  thereof  ;  the  it<i<frr<jat€  interext  per  annum,  and 
ita  averagt  per  capita  on  the  population  thereof. 


COUNTKIE9. 


ToUl  debt. 


Population. 


Great  Britain. 
UnittKl  .^tatii). 

Fnince 

Ku.H:<ia 

Aimtria 

Spain , 

Holland 

Pra.s.tia 

rortuf^al 

liol^iuin 

Kavaria 

Hrazil 

Denmark .  .  . 

Saxony 

Hanover 

Wurternl>cr}» . 
Hamburg  ... 
(irivee 


f4,000,000,0<>0 

3,IMMMMMI,IMM» 


it)  (MM(  (MX) 


•;•••  ■ .iKMj 

l«>,tH>«t,0(K> 
M.<MK),(JO<) 
.iXXJ 


1,7(M»,(MK) 

222,000 
1,000,00<J 


I'.r 

Annual 

Per 

capita. 

interest. 

capita. 

$133  33 

$132,000.0(30 

$4  4o 

85  71 

13!»,o0o,U00 

3  97 

64  79 

78,000,000 

2   14 

14  62 

38,000,000 

48 

32  14 

58,oor»,ooo 

1   Gi> 

83  44 

13,000,000 

81 

155  00 

11,400,000 

3  80 

11  fl6 

ll,f.OO,000 

04 

87  60 

6,200,000 

1  30 

28  8H 

8,0<X),000 

1  77 

28  88 

5.650,000 

1  25 

14  80 

23  08 

24  00 
22  24 
14  70 

103  60 
20  00 


6,720,000 
3,129,000 
2,O60,(«K) 
l,7«o,(M>0 
1,470,000 
i,3no,ooo 
230.000 


74 


1  20 

1  02 

98 

86 

6  12 

23 


But  this  taljle,  while  it  ])rc8cnt8  hb  in  an  unpleai?ant  aspect,  does 
not  kIiow  Jill  the  facts.  Of  our  del.t  only  !?2,-J(»(i.(M)(»,(i(I(>  i.s  on  interest. 
The  re.siilue  is  not  funded  or  is  in  the  form  of  euriency;  but  on  the 
sum  of  a  little  more  than  *2,oo(i,(k>((,()00  we  pay  i?13I>,000,000  of  inter- 
est, while  (inat  Hritain  j)ays  a  less  sum  of  interivst  hy  some  millions  of 
dollars  on  nearly  douMf  the  debt.  The  rate  of  intere.'^t  on  her  consols, 
at  tlR'ir  presi-nt  market  value,  is  three  and  a  third  per  cent.     One  hun- 


dred dollars  of  ht-r  bonds,  l)earin^  interest  at  three  i»er  cent.,  will  sell 
in  any  money  market  of  the  world  for  ei^dity-si.\  dollars  in  gold,  equal 
to  ninety-four  <lollars  in  our  coin  :  while  one  hundred  dollars  of  United 
States  bonds,  bearing  six  per  cent,  interest,  will  sell  in  P^urope  at  from 
sixty-tive  to  seventy  dollars  in  sterling  gold,  and  in  the  market  at  New 
York  for  about  seventy-six  dollars  in  «nir  coin.  Is  there  such  a  diifer- 
ence  between  the  coiidition  of  atTaii-s  In  this  country  and  in  Great 
Britain  I  Is  there  anything  in  our  ])ublic  credit,  the  nature  of  our  iii- 
8titution.s,  or  the  character  of  our  laws,  or  in  the  uncertainty  of  pay- 
ment, that  compels  this  exorbitant  difference  i'  I  do  not  think  so.  In 
France  the  rate  of  interest  is  about  four  per  cent,  and  a  fraction; 
sometimes  a  little  less  than  four.  In  IJussia  it  is  tive  per  cent.  In 
Austria  it  is  tive  per  cent.  Five  per  cent,  is  the  highest  rate  ])aid,  ex- 
cept during  an  emergency,  by  any  of  tho.se  countries  ;  and  their  re- 
sources are  not  t«»  be  compared  with  ours.  This  table  shows  that, 
tested  bv  the  jmblic  debt  ot  any  nation  of  modem  times,  the  amount 
paid  by  the  Tnited  States  is  entirely  exorbitant,  and  therefore  the  first 
duty  i.s  to  reduce  the  rate.  In  my  judgment,  it  will  be  a  public  dis- 
credit if  the  Secretary  of  the  Treiisury  is  compelled  to  issue  any  more 
six  per  cent,  gold-bearing  bonds. 

When  you  examine  our  resources  and  compare  them  with  the 
amount  of  <.ur  ])ublic  debt,  the  latter  seems  insignificant.  It  is  shown, 
not  only  by  our  ofiicial  tables,  but  by  the  actual  exhibition  of  our 


1(4  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

industry  ami  strennrth  in  the  last  three  or  four  years,  tliat  we  have 
more  elements  of  streiii^li  and  more  resources  in  money  than  any  na- 
tion in  Euroi)e.  England  has  hut  thirty  million  j)eonle  upon  wlioin 
her  public  debt  rests;  we  have  thirty-tive  million  pe<»ple,  and  our  poj>- 
ulation  increases  at  a  ratio  without  exam])le,  maintainini;  that  ratio  for 
sixty  years.  We  have  the  1)roadest  a^n-ieultural  field  of  any  nati(»n  in 
theVorld,  not  excepting'  Russia,  because  the  «;reater  ])art  of  Ku.ssia  is 
either  too  cold  or  too  dry  for  agricultural  productions.  We  liave  a 
territory  of  compact  form  but  varied  climate,  and  productions  «^reater 
in  amount  than  all  Europe.  We  have  2.<>44,<iT7  separate  farms,  each 
occupied  by  the  owner,  and  in  the  main  tilled  by  his  own  labor.  Our 
coal  fields  are  estimated  to  be  tliirty-six  times  the  size  of  those  of  Great 
Britain  and  Ireland,  and  are  distributed  tiiroui,diout  all  portions  of  the 
country.  As  coal  is  tlie  basis  of  the  wealth  of  Cireat  Britain,  and  ac- 
tually yields  seventy-two  million  tons,  wiiile  we  now  consume  but  fif- 
teen millions,  we  have  in  coal  a  bank  that  will  never  break,  a  nune  of 
jewels  more  valuable  than  all  the  ^old  of  the  world.  And  our  mineral 
resources  are  "greater  th;in  those  of  any  two  countries  of  the  world. 
California  has  furnished  to  the  mints  of  the  Tnited  States  for  coining; 
over  s;}(;o,(M)0,(Mi(»  in  <:^old,  and  probably  a  <^reater  amonnt  in  bullion 
exchanged  for  forei«xn  })rodnctions.  Mountains  of  rich  ircui  ore  are 
scattered  over  most  of  the  States.  We  have  more  actual  wealth  yx?r 
capita  than  any  nation  in  P^urope.  The  ])rice  of  labor  here  is  twice 
what  it  is  in  Europe.  All  the  elements  which  enter  into  the  computa- 
tion are  in  our  favor.  For  us  to  pay  this  rate  of  interest,  it  seems  to 
me,  is  an  acknowledijfinent  that  there  is  some  defect  in  oiir  form  of 
government,  some  insecurity,  or  some  unreasonable  demand  for  the  use 
of  money,  that  I  can  not  ex})lain. 

The  vast  disprojKH-tion  i)etwcen  the  rates  of  interest  we  pay  and 
our  resources  has  excited  the  intelligent  observation  of  an  Englishman 
recently  among  us.  who  has  written  a  book  upon  the  resources  and 
prospects  of  America,  a  copy  of  which  I  have  l)efore  me.  I  refer  to 
Sir  Morton  Peto,  and  I  am, sure  every  Senator  who  hears  me  will 
deeply  regret  that  one  so  friemlly  to  our  country  seems,  by  the  advices 
we  have  this  morning,  to  have  been  involved  in  financial  embarrasa- 
ments  at  home.  This  intelligent  writer,  who  is  familiar  with  the 
whole  system  of  finance  and  taxation  in  England,  has  ])resented  in  this 
volume  the  results  of  his  study  and  observation  of  our  resources  in  a 
manner  that  must  attract  the  attention  of  every  reader.  The  book  is 
a  careful  collection  of  facts  admirablv  arranged,  but  without  attempt 
at  concealment  or  exaggeratioTi,  and  lie  closes  it  by  saying  that,  after 
the  completion  of  our  Pacific  railroad — 

We  shall  be  called  upon  to  regard  America  as  the  greatest  nation  of  the  world. 
She  will  be  entitled  to  take  that  rank  by  reason  of  her  extent,  her  diversity  of  soil 
and  climate,  the  character  of  her  communications,  the  variety  of  her  resources,  her 
vast  mineral  riches,  and  the  abundant  field  which  she  presents  for  labor  and  for  the 
employment  of  capital  and  enterprise.  Many  among  us  are  accustomed  to  smile 
when  we  hear  the  Americans  speak  of  the  United  States,  in  their  accustomed  man- 
ner, as  a  "  great  nation."  But  there  is  no  mere  boast  in  that  description.  Em- 
phatically, America  is  a  '"great  nation.''  Where  can  we  find  her  e»]ual  in  geo- 
graphical and  natural  advantages,  in  material  progress,  or  in  general  prosperity  ? 


FUNDING  THE   NATIONAL  DEBT.  105 

As  a  nnited  people,  tlit«  Aiiu-rieans  present  to  the  world  a  spoctaclo  tlint  must 
excite  general  admiration.  Kegarding  them  as  of  the  same  race  and  ancestry  with 
t)urrtelves,  luj  a  jieople  u>ing  our  lantruatre,  j^overned  hy  our  laws,  united  by  the 
same  religion,  induenced  l»y  kindred  sentiments,  their  progress  is  a  spectacle  which 
should  kindle  our  admiration  and  enthusiasm. 

And,  Bir,  in  tliis  coniieetion  m'o  must  remember  that  \vliile  onr 
resources  arc  s<»  ^reat,  thev  are  not  locked  up  in  the  bosom  of  Mother 
Earth,  l)ut  may  be  toiiclied  by  tlie  ])ower  of  taxation.  Tlie  actual  ex- 
])eriment  ha-s  been  tried,  and  the  residt  lias  been  far  greater  than  any 
of  U.S  estimated.     Wc  are   now  colk'ctin<;  a  revenue  greater  than  any 


pajred  in  the  hajii)y  duty  of  re])ealiii^  many  of  tliese  taxes,  but  Mill 
still  retain  s;5(i,(mm(Jh»(>  to  apply  annually  on  the  ]>rincipa]  of  our  debt; 
a  fact  that  has  forcibly  impres.'ied  the  mind  of  ^Ir.  Gladstone,  who, 
after  years  of  |K'ace,  is  fortunate  in  bein*;  able  in  (ireat  IJritain  to  i)ro- 
pose  a  ])lan  of  slightly  reducin<r  the  debt  of  that  country  by  cluui^dug 
a  ]>ortion  of  it  into  terminaitle  annuities. 

Another  element  (»f  credit  is  that  under  our  system  of  j;overnmcnt 
<»ur  natioual  expenses  are  far  le.s><  tlian  those  (»f  other  nations.  Sii"  Mor- 
tem Peto  says:  "In  proportion  to  jx.pulation,  the  I'nited  States  in  IsC.o 
had,  I  apprehend,  tlie  smallest  expenditure  and  the  smallest  national 
debt  <»f  any  country  in  the  world."  Ami,  sir,  even  under  the  increase  of 
our  exjHiHliture  since  the  war,  our  actual  exi>enditure,  other  than  on  ac- 
count of  the  ])ublic  debt,  will  be  in  the  future  far  less  than  that  of  the 
same  population  in  Kurope.  Hire  war  expenses  cease  with  the  war. 
No  standiu^  army  swells  exorl)itantly  our  e.-timates.  Our  heroes  who 
saved  the  country  by  war  are  now  enrichiii«r  it  by  their  labor.  Our 
current  ex])ense8  next  year  will  be  considerahly  less  than  two  hundred 
milli(»ns.  So  that  whatever  view  we  take  of  our  financial  position, 
whether  we  consider  (»ur  resources,  our  receii)ts,  run-  expenditure,  or 
the  varied  industn*  of  (»ur  jieople,  we  must  conclude  that  we  are  not 
justified  in  ]>ayin<;  rates  of  interest  so  far  in  excess  of  other  nations. 

A^'ain,  sir,' the  i)resent  rate  of  interest  is  a  war  rate,  and  the  distinc- 
tion between  a  war  rate  and  a  peace  rate  is  recognized  by  all  writers 
on  the  sid)ject.  England  was  compelled  to  sell  many  of  her  three  per 
cent,  anniiities  at  some  sixty  cents  on  the  dollar;  but  even  En^dand 
when  she  was  involved  in  the  irreat  war  with  Napoleon  never  paid  any- 
thin«r  like  the  rate  of  interest  that  we  pay.  It  seems  from  the  report 
of  one  of  the  Kevenue  Conunissioners,  which  is  very-  full  of  facts  and 
details  on  this  subject,  that  the  avera^re  rate  of  interest  paid  by  Great 
Bi-itain  durin«;  her  war  of  ei^jht  years  with  the  French  Pwcpublic  was 
£4  17.9.  ])er  £'loO,  a  little  less  than'tive  per  cent. ;  that  during  the  year 
I.^Ol'  it  wiLS  reduced  to  £'4  4.*.  ;  that  durin^^  the  war  with  the  French 
Empire  it  was  £4  l.')*. ;  that  from  the  end  of  tlie  war  until  ls21  it  was 
£4  5*.,  or  four  and  one  fourth  per  cent. ;  and  that  the  average  rate 
during  the  whole  period  of  the  war  was  four  and  three  fifths  per  cent., 
reduced  to  a  specie  standard  ;  and  yet  we  have  paid,  unifonnly,  six  per 


lOG  SPEECHES  AND   REPORTS  OF  JOHN  SHERMAN. 

cent,  in  ^okl,  whiK'  we  receive  j)aper  for  (nir  Ixiiuls.  At  one  time  dur- 
ini?  the  war  we  paid  at  tlie  rate  of  thirteen  or  fourteen  per  cent,  on 
money,  counting  tlie  diti'erence  between  *;oki  and  j)aper.  Snch  a  thin^ 
as  thiit  would  exhaust  any  country  except  ours.  We  arc  aide  to  Ixtr- 
row  and  ;xet  it  from  the  ])eople ;  hut  it  is  plain  that  at  the  very  earlieiit 
moment  we  must  ^o  hack  to  Bomethiui;  like  a  reasunahle  rate  of  inter- 
est. AVe  must  not  tear  from  our  peoplo  the  results  of  their  lah<»r  ami 
pay  it  for  ^ur])ose.s  of  this  kind  when  there  is  no  necessity.  I  take  it, 
therefore,  as  an  axiom  witli  which  to  set  t>ut,  that  we  ou<^ht  to  reduce 
the  rate  of  interest.  I  expect  to  live  to  see  the  time  when  the  rate  of 
interest  in  this  country  will  not  be  over  three  or  four  j)er  cent.,  and 
now  we  propose  to  reduce  it  on  new  loans  to  tive  per  cent. 

There  are  one  or  two  collatenil  views  that  Senat<»rs  mii,dit  reflect 
upon  witli  ^reat  j)ro|)riety.  Fii-st,  there  is  the  influence  of  these  hi^li 
rates  of  interest  on  tiie  industry  of  our  country.  1  have  a  letter  here, 
which  probably  j)resents  tins  point  as  clearly  m  I  can,  from  a  very  in- 
telligent citizen  of  New  York.  I  will  read  a  short  extract,  lie  speaks 
of  the  effect  of  the  high  rates  })aid  by  the  (iovernment  in  the  city  of 
New  Yt)rk.     He  says  : 

A  ])o\vorf'ul  oaiiso  which  exposes  the  pi>or  ami  persons  of  limiiod  iiu-nns  to  such 
hifrh  routs  is  t'uiind  in  the  rates  of  interest  estal»lislie<l  l>y  national  an<l  State  \nwn, 
and  tiio  increased  value  given  to  money  Ity  such  lepslation.  I)urin>r  the  rehcllion 
the  Government  olfered  a  liiirher  rate  of  interest  than  the  laws  of  New  York  and 
the  seaboard  States  f,'ener:dly  had  estahli^hcd  as  Icjral ;  hence  investments  in  I'nited 
States  securities  now  realize  more  than  two  per  cent,  over  bonds  and  inortirages  iu 
New  York.  Capitalists  have  therefore  been  withdrawinir  money  from  real  estato 
loans  to  invest  them  at  lii).'her  rates  in  (rovernments.  This  policy  fttVe«-ts  scores  of 
millions  of  capital.  It  has  a  direct  tendency  to  limit  and  retard  building;  and  di»- 
couraL'e  all  State  developments.  It  has  entirely  un-*ettled  the  whole  system  of  the 
demand  and  sujijily  of  money  for  private  enterprises.  Every  day  an  unprecedented 
number  of  houses  and  lots  are  thrown  on  the  market,  either  from  the  inal)ility  of 
the  borrower  to  pay  ott'his  mortj:aj;es  or  debts  in  any  other  way.  or  from  the  im- 
perative necessity  of  raising;  money  to  i)rosecute  old  business  or  start  new.  These 
enforced  real  estate  sales  benefit  the  capitalists  alone,  who  in  return  demand  at  least 
tit'toeu  per  cent,  on  their  new  i)roperty ;  and  those  wlu)  are  obliged  to  rent  are  thus 
held  at  their  mercy. 

Before  the  war  capitalists  and  corporations  were  ready  to  loan  from  fifty  to 
seventy  per  cent,  on  real  estate  securities.  With  from  two  to  five  thousand  dollars 
on  hand,  a  man  could  buy  and  build  with  a  certain  reliance  on  a  loan,  while  his  fu- 
ture earnings,  with  the  gradual  advance  of  property,  would  nltimately  give  him  n 
clear  title  to  a  home  for  himself.  In  this  way  many  thousands  of  good  dwellings 
were  constructed  in  New  Y'ork ;  but  the  arrest  of  this  system  has  put  our  popula- 
tion into  the  hands  of  the  landlords,  and  they  will  hold  tlie  power  till  the  system  is 
changed.     If  the  poor  became  rich  they  would  do  the  same. 

The  effect  of  these  hiorh  rates  paid  by  the  Government  is  not  only 
to  absorl)  the  floating  capital  of  the  country,  but  to  deter  men  from  en- 
gaging in  enterprise;  and  therefore  all  over  cities  of  the  United  States 
it  is  a  common  remark,  ''It  is  impossible  to  get  houses."  In  the  AVest 
the  cry  is  distressing.  In  all  the  cities  it  is  impossible  to  get  a  house 
at  a  fair  rent.  The  rent  absorbs  all  a  man's  little  earnings.  The  re- 
sult is,  tlie  people  are  crowded  into  tenements,  half  a  dozen  families  in 
a  house — in  New  York,  in  some  cases,  two  or  three  families  in  a  room  ; 
and  all  this  grows  out  of  the  advance  in  rents,  togetlier  M-itli  the  high 


FUNDING  THE  NATIONAL  DEBT.  10' 


prices  of  the  necessaries  of  life.  By  paying  tliis  high  rate  of  interest 
we  c«)inj)ete  with  every  inchistry :  with  the  railroad  companies  in  the 
Biile  of  their  !).»ii(ls  ;  with  the  manufacturei-s  in  the  building  of  new 
warehouses;  with  all  classes  by  (ttft-ring  a  hiirher  rate  of  interest  tlian 
we  allow  the  courts  to  enforce  for  them.  During  the  war  that  was 
necessary  ;  we  could  not  avoid  it ;  but  it  is  not  necessary  now. 

The 'leading  objects  of  this  bill  are  to  fund  the  public  debt  and 
to  rt-duce  the  interest  ;  but  there  is  another  object  proposed  Tt}'  it  which 
1  think  is  ]»eculiarlv  an  American  one,  and  ui)on  which  1  ought  to  say 
something  before  1  pr«M-fe<l  to  exandne  the  details  of  the  bill  ;  and 
that  is  the  providing  of  a  method  of  payment  of  the  debt  by  ap])ly- 
ing  a  sjH.'cihc  sum  every  year  to  the  cancellation  of  b(»nds  under  laws 
tol)e  hereafter  framed.'  *The  original  funding  act  framed  by  Alexan- 
der Hamilton  w;u-i  ba.-ed  upon  the  idea  that  a  public  debt  should  be 
temp«»rarv,  and  this  idea  is  ingrafted  upon  American  finance.  In 
view  of  this,  in  the  tirst  h.an  law  of  Isr.-J,  if  I  remend)er  aright,  we 
provided  that  (»ne  j)er  cent,  of  the  amount  of  the  loan  sliould  be  set 
aside  arf  a  sinking  fun«l  with  a  view  to  pay  off  the  principal  of  the 
debt.  That  pledge  has  never  been  redeemed,  nor  during  war  was  it 
possible  or  proper  to  redeem  it.  A  sinking  fund  can  properly  be  ac- 
cumulated <»idy  tlunng  i>eace.  It  woidd  be  bad  economy  to  take  a 
portion  of  the  money  borrowed  at  high  rates  of  inteiest  during  war  and 
invest  it  in  sec-urities  jmrchased  in  the  market,  and  then  lay  them  aside 
and  accumulate  the  interest  for  the  })uri>ose  of  paying  oil  a  debt  dur- 
ing peace,  (ireat  T.ritain  tried  that  U>r  neariy  one  hundred  years,  and 
timillv  abamloned  it.  The  ol<l  form  of  a  .-inking  fun<l,  which  was  the 
favorite  theory  of  Kobert  AValj.ole  and  AVilliam  Pitt,  was  abandoned, 
then  resumed,  and  tinallv  abandoned  in  l^ll».  I  have  an  interesting 
book  here,  the  j)refaee  of  which  was  written  by  the  celebrated  Mr. 
McCulloch,  in  wliich  he  speaks  of  the  abandonment  by  Great  Lntaiii 
and  by  all  other  nations  of  the  old  form  of  a  sinkmg  fund.  1  will 
read  an  extract  from  it  : 

Neither  mast  it  bo  snpposed  that  the  notion  of  the  won  dor- working,'  effects  of 
sinkinp  funds  has  been  a  mere  harnilcss  error.  On  the  contrary,  few  delusions 
havf  been  prarticallv  so  mischievous.  .         ,   .,      i  i     • 

Dr.  lianiilton,  ..f  Aberdeen,  has  tlio  merit  of  having?  dissipated  the  delusion  in 
recard  to  the  sinking  fund.  ...  He  showed  that,  instt-ad  of  rchicing,  the  smking 
fun.l  had  in.roa.-.od  tl.o  debt.  And  he  proved  to  demonstration  that  the  excess  of 
revenue  .ner  expenditure  is  the  only  fund  by  which  any  portion  ot  the  public  debt 
can  ever  be  discharged.  ^    ,      ^  ,  ^^^  ^, 

But  since  Dr.  Hamilton's  work  appeared,  more  correct  accounts  have  been  ob- 
tained of  the  expenditures,  loans,  etc..  «luring  the  great  .struggle  terminated  in 
IBl.J;  and  from  these  it  maybe  easily  shown  that  the  8''»,k'°g/'^"^,'^;'  ^h. 
clumsv  onlv,  but  a  costlv,  impo.sture.  In  proof  of  this  we  beg  to  state  that  the 
loans  Vuntracted  in  each  year  from  1704  to  1810,  both  mdusive  ''^";«""ted  in  all 
to  £.-,H4.H74.557,  at  an  annual  charge  to  the  public  of  £:KU74,3r,4.  Of  these  loans 
the  Commissioners  of  the  Sinking  Fund  received  ^l««^•^22,3.50,  the  propoi^on^^^ 
annual  charge  on  such  portion  being,  of  course,  £9.72.5  09o  But  it  f-^/t^^  ^J^'eajs 
from  the  accounts  referred  to,  that  the  stock  which  the  ^  ^'^/"'f  ^°f  ^X  vtk  ed 
with  this  sum  of  ,£l.ss..V22.3.50,  transferred  to  them  out  of  the  'oans,  onb  yielded 
on  annual  dividend  of  £'..,108,2:32.  On  the  one  hand  therefore,  ('".^"""^l^^^^'^f^ 
„f  £l..720,or.O  was  incurred,  to  enable  the  Sinking  ^  ""I^  ^  7'^\>f ^V  " o^o^  ?p  * 
market;  and,  on  the  other,  they  bought  stock  which  yielded  £J,16S,23-  a  jear. 


108  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAN. 

90  that,  ou  the  whole,  their  operations  during  the  war  ocoasionetl  a  dirert  dead 
loss  to  the  country  <if  no  less  than  £557,8.37  a  year,  eiiiiivaleiit  to  a  three  |nr  rvnt. 
capital  of  £18,.jy.j,233,  exclusive  of  the  expenses  of  the  otlice,  which  aniouiiti-d  to 
ahove  £00,000.  Such  wius  tlie  |)ractical  result  of  Mr.  Pitt's  faiuoiis  sinking'  fund, 
so  long  regarded  a^s  the  pulladiinn  of  public  credit,  ami  the  sheet-anchor  of  llie 
nation ! 

Notwithstanding»I)r.  Hamilton's  hook  was  puhlishcd,  as  alrejidy  stated,  in  1818, 
the  statute  for  tlie  suppression  of  the  sinking  fund,  10  George  IV.,  c.  '27,  waa  not 
passed  till  1^2;).  It  euaited  that  in  time  tu  eome  the  sum  to  he  applied  to  the  re- 
duction of  tlie  national  del)t  shouhl  be  the  actual  annual  surplus  of  rcvcDUO  over 
expenditure. 

The  <>1<1  fi»nii  of  siiikiiii;  fiiiid  adojttt-il  in  I-^ii^laud,  and  iilso  in 
tliis  couuti'V,  was  ti>  iiivist  tlir(»u<rli  certain  jtffsous  iiaim'<l  in  the  law 
specific  funds,  and  autliorize  tlu'iii  witii  those  ftmds  to  buv  any  |M)r- 
tion  of  the  public  debt.  That  plan  of  accumulating  a  Hinkiii^  fund 
has  been  abandoned,  and  now,  as  thi.s  author  says,  the  only  projK'r  way 
is  to  apply  a  fixed  sum  raist-d  by  taxes  and  from  surplus  rt-vrmie  to 
the  payment  of  the  public  deht.  Instead  of  endcavonn;^  to  keep  the 
debt  alive  by  sinking  fund  commis>ioners,  the  application  of  a  sjK'citic! 
sum  to  the  payment  of  the  principal  and  interest  of  the  <lebt  every 
year  would  have  the  same  effect  in  extiui^uishini;  the  j>ul)lic  debt  as  if 
invested  by  sinkin<;  fund  commissioners,  and  without  the  loss  and  ex- 
pense of  management. 

I  have  thus  stated,  I  fear  with  too  miudi  detail,  that  any  plan  sluuild 
embrace  these  ideas:  the  funding  of  the  debt,  the  reduction  (»f  inten.«st, 
and  the  ultimate  payment  of  princijjal.  And  here  a  difference  of  opin- 
ion has  arisen  whether  this  plan  sjiould  be  prescribed  by  ('ongre.ss  or 
wliether  it  should  be  left  maiidy  to  the  Secretary  of  the  Treastirv.  I 
objected  to  the  law  passed  here  a  month  or  two  ago,  and  I  still  think  I 
was  right,  ^[y  objection  did  not  arise  from  any  want  <»f  confidence  in 
the  Secretary,  for  I  know  the  present  Secretary  will  not  abuse  this  tnist. 
l>ut  it  grew  out  of  what  I  considered  the  right  of  the  people  to  know 
precisely  the  terms  of  the  loan.  That  bill  authorized  the  Secretary  to 
sell  a  bond,  principal  and  interest  payable  in  gold,  running  not  to  exceed 
forty  years,  and  hearing  an  interest  not  to  exceed  six  per  cent.,  to  be 
free  from  State  and  local  tax,  and  which  he  might  sell  under  par.  Xow, 
I  did  not  wish  to  admit  for  a  moment,  in  the  form  of  a  law,  the  possi- 
bility of  any  Secretary  selling  such  a  bond  even  at  par,  and  certainly 
not  under  par.  It  was  a  cheapening  of  the  public  credit  to  ])ro\-ide  for 
such  a  loan.  And  without  renewing  the  controversy,  I  ask,  is  it  not  bet- 
ter in  legislating  on  this  important  question,  itivulving  s8.0(K»,(»(I(»,00(>, 
to  put  in  tlie  form  of  law  and  on  the  face  of  the  statute  the  terms  and 
conditions  upon  -^'hicli  our  public  agents  sliall  sell  our  ]>onds  i  It  seems 
so  to  me,  and  therefore,  if  this  bill  contained  no  new  provisions,  I  should 
think  it  highly  important  that  the  terms  finally  agreed  tipon  and  fixed 
by  the  Secretary  of  the  Treasury,  after  full  consideration,  should  be 
embraced  in  the  form  of  law  so  as  to  be  binding  upon  him  and  his  suc- 
cessors, and  so  that  no  change  should  be  made  without  the  consent  of 
Congress.  I  do  not  propose,  however,  nor  do  I  ask,  the  repeal  of  that 
law ;  but  I  think  that  when  a  plan  of  funding  is  agreed  upon,  it  should 
assume  the  form  of  law,  leaving,  however,  the  general  provisions  which 


FUNDING   THE   NATIONAL  DEBT.  109 

passed  a  short  time  ago  to  ^taiid  to  meet  emergencies  and  exigencies 
now  unforeseen. 

The  further  (jucstiun  which  I  now  desire  to  suhniit  to  the  Senate 
is,  whetlier  this  i»ill  presents  a  i)hin  hy  wliich  these  objects  can  be  ac- 
complislied.  If  it  were  left  to  my  own  liuj)eful  view  of  things,  I  would 
strike  out  tw«»  or  three  clau.ses.  I  would  not  extend  tlie  exenii)ti()n  (»f 
the  bonds  from  taxation  to  the  income  tax.  I  would  ]>reserve  the  form 
of  our  laws  in  regard  to  the  convertibility  clau.se,  vesting  the  power  in 
the  I'nited  States  to  j)ay  olT  this  tlebt  after  a  certain  time,  say  ten  years. 
I  would  in.^^ert  a  proviso  which  w;us  in  the  old  law  of  lTi»5,  authorizing 
the  United  States  to  j)ay  otT  the  principal.  l>ut  the  Secretary  of  the 
Treasun',  who  is  to  execute  this  law,  is  of  o])inion  that  he  can  not  nego- 
tiate a  hve  j>er  eent.  loan  upon  tlu'se  terms,  and  therefore  he  would  not 
undertake  it.  lie  has  the  jjower  under  the  general  law  we  have  passed 
t<»  negotiate  a  loan  at  six  |)er  cent.,  or  one  at  a  less  rati-,  but  he  thought 
lie  could  not  negotiate  a  live  per  cent,  loan  without  additional  legi>la- 
tion.  lam  nut  sure  of  that.  1  believe  that  if  you  pass  a  bill  of  this 
kind  fixing  the  rate  of  intere.^t  at  five  per  cent.,  with  the  general  stijm- 
lations  ctintained  in  thi>  bill,  we  .'•hall  be  able,  though  jierhaps  with  some 
ditliculty  and  after  .M»me  time,  t<Fsave  the  one  per  cent,  without  giving 
any  a<l«litional  lnnetit.x.  lie  thought  not,  however.  The  (juesti(»n  now 
is,  not  whether  we  hhall  give  him  this  law,  but  whether  we  shall  cojiipel 
him  to  issue  a  six  j)er  eent,  rather  than  a  five  jK'r  cent.  l(»an,  unless  we 
give  him  the  terms  and  privileges  eontaine<l  in  this  bill.  If  I  Mas  called 
upon  to  prescribe  the  form,  being  j>robably  a  more  hopeful  man  than 
he  or  many  of  those  around  me,  J  wouM  insist  that  the  (iovernment 
of  the  Tnited  States  should  not  pay  in  any  event  over  five  i)er  cent. 
interest,  junl  that  a  clean  loan  should  be  negotiated  for  that  amount; 
and  that  it  should  be  something  like  the  ten-forty  loan,  within  easy 
conversion,  so  that,  if  in  ten  years  we  could  negotiate  a  loan  at  a  less  rate 
of  interest,  we  might  have  ])ower  to  «lo  it,  ]>ut  he  thought  that  in 
order  to  enable  him  to  negotiate  a  five  per  cent,  loan  he  must  have  two 
])rovisions;  one  giving  him  auth(»rity  to  issue  a  thirty-year  loan,  to 
postpt.ne  the  jniynKMit  of  the  j^rincijjal  n(»t  to  exceed  thirty  years ;  and 
the  other  to  exempt  these  securities  from  the  income  tax  of  the  United 
States. 

Those  were  the  twr»  conditions  uj><»n  which  he  thought  he  could 
negotiate  a  five  per  cent.  loan.  AVhen  I  came  to  examine  them,  I  found 
that  these  two  conditions  could  amount  to  but  very  little  loss.  The 
income  tax  levied  by  the  United  States  now  u])on  national  securities 
pavs  to  us  less  than  one  tenth  of  one  per  cent,  of  the  jmblic  debt.  By 
the  terms  of  the  tax  law  the  holders  of  these  bonds  are  compelled  to 
]iay  income  tax  as  upon  other  property;  but  all  the  bonds  that  are 
held  bv  persons  whose  agijregate  incon"ie  is  less  than  $000  go  free  of 
tax;  all  the  bonds  that  are  held  abroad  are  free  of  tax;  all  the  bonds 
that  are  held  bv  banks,  insurance  compaiues,  and  corporations  are  held 
free  from  this'  income  tax.  No  corporation  pavs  an  income  tax ;  the 
income  tax  is  levied  only  upon  individuals.  The  result  is  that  the 
bonds  of  the  United  States,  you  may  say  the  great  mass  of  them,  are 
held  in  such  a  way  that  they  pay  no  income  tax. 


no  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

The  Secretary  says:  "If  you  will  Kurreiuler  the  tTiHin<^  uiiiount  you 
collect  from  incomes  derived  from  Government  securities,  I  may  be 
eniil)led  to  save  you  one  sixth  of  idl  the  interest  paid  upon  the  public 
debt."  When  that  |)roposition  was  made,  it  seemed  to  me  that  we 
ought  to  adopt  it.  lliere  is  another  reason  for  its  ad(»ption.  The  in- 
come tax  is,  in  its  nature,  temporary.  There  is  scarcely  a  doubt  but 
wliat  that  tax  will  disajtpear,  like  many  of  the  other  taxes,  in  a  sli(>rt 
period  of  time.  The  time,  in  my  judgment,  is  not  far  tlistant  wlien 
a  tax  on  a  few  articles  of  luxury  will  })ay  the  interest  on  tlie  public 
debt  and  pay  our  expenses.  I  have  no  doubt  we  shall  go  througli  the 
same  process  of  legislati(»n  that  our  ancestors  did  after  the  war  of  the 
Ilevolution,  and  as  tiiosc  wlio  went  before  us  did  after  the  war  of  1S12. 
All  these  taxes  will  disappear  in  a  short  time,  and  perhaps  a  tax  on 
whisky  and  tobacco  and  on  im|)orted  goods,  a  few  simple  taxes,  may 
be  able  to  pay  the  interest  on  the  public  debt  and  the  expenses  of  the 
Government.  Therefore  the  only  (piestion  is  whether  we  should  sur- 
render this  small  matter  in  order  to  accomplish  a  great  object.  It  seems 
to  me  we  ought  to  do  it.  If  the  Secretary  of  the  Treasury  can  nego- 
tiate this  loan  by  surrendering  this  small  income  tax,  and  thus  effect  a 
saving  of  interest  ecpiivalent  to  twenty  \y^r  cent,  of  all  the  interest  paid 
by  the  United  States,  it  is  certainly  a  very  good  bargain,  and  it  does 
not  rc([uirc  a  very  shrewd  man  to  see  it. 

The  other  provision  was  that  there  ought  to  be  a  fixed  period  before 
whieli  the  principal  .•-hould  not  be  j)uid.  That  was  a  point  ujxtn  which 
I  myself  long  hesitated;  and  I  agreed  to  it  for  the  reason  that  but 
a  very  small  portion  of  the  public  debt  can  be  converteil  now  into  a 
five  per  cent,  loan,  because  but  a  small  portion  of  it  is  due.  The  hold- 
ers of  the  seven-thirties  will  av;ul  themselves  of  the  privilege  to  con- 
vert them  into  live-twenties.  There  is  not  very  much  pressing  upon 
the  Secretary  of  the  Treasury,  but  whatever  it  is,  he  must  pay  it,  and 
he  must  issue  a  loan  of  some  form  ;  and  the  only  (piestion  is  whether 
it  shall  be  a  five  or  a  six  per  cent.  If  you  do  not  pass  this  bill,  he  is 
compelled  to  issue  a  six  per  cent,  loan  because  he  c<in  not  negotiate 
any  other.  He  says  he  can  not,  and  that  is  the  general  judgment.  It 
is  the  general  judgment  of  gentlemen  who  oppose  this  bill  that  he  can 
not  negotiate  a  five  ])er  cent,  loan  of  any  kind  even  with  this  bill,  and 
therefore  that  he  will  be  compelled  to  issue  a  six  jier  cent. 

The  very  fact  that  he  is  not  compelled  to  borrow  a  large  sum  of 
money  enables  him  to  go  into  the  market  now  like  a  rich  man  who  has 
a  boundless  inheritance,  a  large  estate,  on  which-  he  wants  to  borrow  a 
very  small  sum  of  money  ;  he  can  get  it  on  good  terms,  but  he  says  he 
can  not  get  it  unless  the  payment  of  the  principal  is  postponed  for 
twenty  or  thirty  years.  Suppose  he  does  issue  two  hundred  million 
or  five  hundred  million  five  per  cent,  bonds  under  this  bill ;  the  objec- 
tion is  that  we  may  want  to  pay  off  the  principal  sooner.  Surely  we 
would  pay  off  the  six  per  cent,  bonds  first,  and  we  cannot  expect  to 
pay  off  all  this  enormous  debt  within  thirty  years.  All  the  bonds  that 
he  could  probably  issue  within  a  year  or  two  would  fall  very  far  short 
of  the  amount  that  would  still  remain  unpaid  under  the  most  favorable 
circumstances  in  thirty  years  from  this  time.     Xext  year,  after  he  has 


FUNDING  THE   NATIONAL  DEBT.  HI 

established  a  five  jx-t  cent,  loan  under  this  bill,  it  may  be  that  he  can 
i;o  into  the  market  and  ;^et  a  better  loan  still,  a  better  l)ond,  on  more 
favorable  terms,  and  thus  reduce  the  rate  of  interest  on  the  balance  of 
the  debt  as  it  matures.     I  have  no  doubt  he  can  do  it. 

I  now  come  to  consi«k'r  an  objection  to  this  bill  made  with  a  good 
deal  of  force,  especially  by  my  Democratic  friends,  that  the  loans  of 
the  I'nited  States  are  exempt  from  State  taxation.  Althou<;h  this  is  a 
very  important  (juestion,  it  has  never  been  <liscussed  in  the  Senate  ;  and 
I  tliink  that  unless  Senatoi^s  have  been  rcipiirt'd  to  examine  the  deci- 
sions of  the  rourts  of  the  I'nited  States,  they  })robably  have  not  seen 
how  far  the  couits  have  gone  in  settling  it.  1  lay  it  down  as  a  premise 
that,  in  the  absence  of  alt  stipulations  about  taxati<tn  in  a  law,  no  State 
can  tax  a  (iovernnjcnt  security  ;  it  is  entirely  inconsistent  with  the 
supreme  power  of  the  National  (iovernment  to  borrow  money.  This 
tjuestion  is  settled  more  clearly  than  almost  any  (piestion  of  constitu- 
tional law  which  has  ever  been  mooted  in  this  (iovernment.  The  lii*st 
cjtse  involving  it  that  came  before  the  Supreme  Court  of  the  United 
States  was  the  celebrated  case  of  McCuUoch  vs.  The  State  of  Mary- 
land, in  which  the  ])rinci])le  was  «lecided  that  no  tax  could  be  levied  by 
a  State  up<»n  any  agent  empIoye<l  by  the  National  (iovernment  in  the 
execution  of  its  vested  poweiY.  That  case,  however,  did  not  reach  the 
paiticular  j)oint  that  I  am  n(»w  diseu.ssing ;  but  subsequently  the  case 
of  Weston  i'M.  The  City  Council  of  Charleston  arose  in  l.s2y,  and  is 
reported  in  2  IVters,  ])j«ge  44l>,  and  upon  the  very  i>oint  now  in  discus- 
sion. Chief  .Justice  Majshall  was  still  ujion  the  bench,  the  siime  judge 
who  liad  decided  the  case  of  McCulloch  vs.  The  State  of  ^Maryland. 
The  city  of  Charleston,  under  the  authority  of  a  law  of  the  State  of 
South  ('amlina,  levied  a  tax  uj»<>n  bonds  of  the  I'nited  States  held  by 
a  citi/en  of  Charleston.  The  (piestion  was  submitted  to  the  Supreme 
Court  of  the  State  of  South  Carolina,  and  it  was  decided  there  by  a 
majority  that  the  State  had  a  right  to  tax  a  (iovernment  security  or 
the  income  derived  from  it.  A  dissenting  o])inion  was  given  by  one  of 
the  judges  of  that  court  which  is  hi«chly  creditable  to  him,  and  I  think 
presents  the  case  very  clearly.  I  will  read  a  short  extract  from  that 
t»pinion  before  I  read  anything  from  the  decision  of  Chief  Justice  Mar- 
shall. This  ca.se  arose  at  the  beginning  of  the  nullitication  crusade,  and 
the  very  principles  subsecjuently  involved  in  the  contest  through  which 
we  have  recently  ])assed  were  then  under  discussion  in  South  Carolina. 

Judge  Iluger,  in  giving  his  dissenting  opinion,  said  : 

I  .irn  nnwillinp,  on  so  important  a  r|ncstion,  merely  to  express  my  dissent  from 
the  judjnnent  of  tho  court.  It  is  now  for  tlie  first  time  agitated,  and  ought  to  he 
fully  disrussed,  that  it  might  he  hetter  understood.  It  attects  the  use  of  a  power, 
as  essential  to  the  General  (Government  in  periods  of  ditticulty  and  (hmger,  as  any 
other  which  the  pe<.ple  have  dilegated  to  it.  If  the  City  Council  of  Charleston 
can  tax  the  stock  of  the  United  States,  co  nomine,  the  States  can  ;  and  if  the  States 
can,  it  is  impossihle  not  to  perceive  that  the  fiscal  operations  of  the  General  Gov- 
ernment may  be  completely  frustrated  by  the  States.  It  will  be  in  vain  for  Con- 
gress to  pass  acts  authorizing  the  Secre'tary  of  the  Treasury  to  borrow  money,  if 
the  holders  of  their  stock  can  be  taxed  for  having  done  so  by  the  States.  Congress 
may  f)ffer  ten  per  cent,  for  loans,  but  who  will  lend,  if  the  States  can  appropriate 
the  whole  to  tlieir  own  use  ? 


112  SPEECHES  AND  REPORTS   OF  JOHN   SHERMAN. 

He  then  proceeds  to  sliow  that  the  power  to  tax  at  all  involves  the 
power  in  the  States  to  nullify  by  taxation  the  i)uwer  of  the  National 
Government  to  borrow  money,  and  says : 

No  Government,  not  revolutionary,  has  ever  atteniptcd  to  tax  its  own  stock, 
and,  among  others,  for  two  very  satisfactory  reasons: 

i.  Because  siicli  a  tax  nmst  necessarily  operate  injuriously  upon  all  future  loans; 
and 

2.  Because  there  is  in  fact  a  violation  of  contract  in  so  doin^r,  and  therefore 
immoral  and  impolitic. 

Under  the  influence  of  these  reasons,  the  Legislature  of  this  State  has  refused  to 
tax  the  stock  of  tlie  United  States;  but  it  api>ears  that  the  City  Council  of  Charles- 
ton have  thouglit  diflferently,  and  have  taxed  it.  .  .  . 

If  they  can  do  so  at  all,  they  nuiy  do  so  to  any  exk'nt;  it  is  etjually  within  their 
power  to  tax  twenty  per  cent,  or  one  hundred  per  cent,  as  one  half  per  cent.  What 
shall  govern  their  discretiou  it  is  impossihle  to  foresee.  A  State  or  a  few  States 
may  concur  in  a  policy  at  variance  with  that  of  the  (ioverniiient,  nay,  in  hostility 
to  it.     This,  unfortunately,  has  been  already  witnessed. 

He  prophesies  the  very  case  that  occurred  a  few  yeai*s  afterward 
in  that  State : 

They  may,  indeed,  be  indisposed  to  dissolve  the  Union  and  declare  war,  when 
they  might  have  no  objection  to  counteract  Congress,  and  control  its  measures  by 
the  exercise  of  a  power  strictly  constitutional.  Seven  tenths  of  the  stocks  of  the 
United  States  are  owned  in  the  cities  of  Boston,  New  York,  Philadelphia,  Balti- 
more, and  Charleston. 

And  then  he  proceeds  to  discu.ss  the  power  of  cities  and  States  to 
tax  the  Government  stock,  and  shows  that,  if  it  were  conceded,  the 
single  State  of  New  York  might  have  it  in  its  power  to  destroy  the 
Government  of  tlie  United  States  by  preventing  it  frojn  borrowing 
money. 

The  case  w^as  brought  up  to  the  Sui)reme  Court  of  the  T"^nitcd 
States,  wliere  it  was  elaborately  discussed  by  ^Ir.  Hayne  and  Mr. 
Legare,  then  among  the  ablest  counsel  in  the  country.  I  will  read 
from  the  decision  of  Chief  Justice  Marshall : 

This  brings  us  to  the  main  question.  Is  the  stock  issued  for  loans  made  to  the 
Government  of  the  United  States  liable  to  bo  taxed  by  States  and  corporations? 

Congress  has  power  "to  borrow  money  on  the  credit  of  the  United  States." 
The  stock  it  issues  is  the  evidence  of  a  debt  created  by  the  exercise  of  this  power. 
The  tax  in  question  is  a  tax  upon  the  contract  subsisting  between  the  (Jovernment 
and  the  individual.  It  bears  directly  upon  that  contract  while  subsisting  and  in 
full  force.  The  power  operates  upon  the  contract  the  instant  it  is  framed,  and  nmst 
imply  a  right  to  alfect  that  contract. 

If  the  States  and  corporations  throughout  the  Union  possess  the  power  to  tax  a 
contract  for  the  loan  of  money,  what  shall  arrest  this  princiide  in  its  application  to 
every  other  contract?  What  measure  can  Government  adopt  which  will  not  be 
exposed  to  its  influence?  But  it  is  unnecessary  to  pursue  this  principle  through  its 
diversified  application  to  all  the  contracts  and  to  the  various  operations  of  Govern- 
ment. No  one  can  be  selected  which  is  of  more  vital  interest  to  the  community 
than  this  of  borrowing  money  on  the  credit  of  the  United  States.  No  power  has 
been  conferred  by  the  American  people  on  their  Government,  the  free  and  unbur- 
dened exercise  of  which  more  deeply  affects  every  member  of  our  republic.  In 
war,  when  the  honor,  the  safety,  the  independence  of  the  nation  are  to  be  de- 
fended, when  all  its  resources  are  to  be  strained  to  the  utmost,  credit  nmst  be 
brought  in  aid  of  taxation,  and  the  abundant  revenue  of  peace  and  prosperity  must 
be  anticipated  to  supply  the  exigences,  the  urgent  demands  of  the  moment. 


FUXDIXG  THE  NATIONAL  DEBT.  113 

Tlicn  he  goes  on  to  discups  tlie  question  at  great  length,  and  comes 
to  the  conchipion,  in  which  tlie  Conrt  was  nnanimous,  that  in  tlie  ab- 
>enee  of  all  stijMilatidn  on  the  subject  no  State  could  be  allowed  to  tax 
a  Government  security,  siinj)lv  because  to  do  so  would  enable  the  States 
to  destroy  the  j)<>wer  of  the  National  (Tovernment,  to  j)revent  it  from 
prosecuting  war,  and  from  maintaining  the  authority  of  the  Ignited 
States.  This  i)rinci}»lc  lias  never  been  controverted  and  never  been 
(l<»ubted  by  any  judge  on  the  bencli  of  the  Supreme  Court  of  the 
I'liited  States.  It  lias  been  ac(juiesced  in  by  every  judge  who  has  sat 
u])on  tliat  bench.  It  has  never  since  been  controverted  by  any  State 
of  the  Tnion.  It  has  never  been  attemjited  bv  any  party  in  the  Union 
to  set  aside  that  decision.  This  exemjition  is  ko  clear  a  principle  of 
constitutional  law,  in  my  judgment,  that  it  cannot  be  assailed  or  gain- 
said. The  same  (piestion  was  again  brought  bef(»re  the  Su]ircnic  Conrt 
of  the  I'nited  States  in  a  case  from  the  State  <»f  Pennsylv;inia,  when 
( 'hief  Justice  Taiiev  sat  up»»n  the  bench — the  c;ise  of  1  )obbiTis  v.s.  The 
( 'ommissionei"s  of  Krie  County.  The  Court  ic:.tHrmed  the  ])rinciple, 
lefei'ring  to  this  case,  repeating  it,  and  apj>lyiiig  lliis  doctrine  to  a  tax 
levied  by  the  State  of  IVnnsylvania  on  a  (iovernment  officer.  Again 
the  (juestion  was  lirought  before  tlie  Su])ren»e  Court  of  the  Ignited 
States  during  the  recent  war,  in  a  case  reported  in  2  P»Iack — tlie  case 
of  The  r»ank  of  ( 'ommerce  vs.  The  Tax  Commissioners  f»f  New  York 
city,  where  the  opinii^i  was  given  by  Mr.  .lu.-tice  Nelson.  The  (]ues- 
tion  arose  there  as  to  t!ie  j)ower  of  the  State  of  New  York  to  tax  Ciov- 
ernment  securities  in  tlie  possession  of  the  I^ank  of  Commerce,  a  cor- 
])oration  of  that  State,  ancl  the  Supreme  Court  unanimously  decided 
that  a  tax  could  not  be  levied  in  anv  form,  from  the  very  nature  of  the 
case,  on  a  (ioveniment  security.  It  should  be  rcmenibercd,  too,  that 
up  to  the  time  of  this  last  decision  no  provision  had  been  contained  in 
any  loan  law  expressly  declaring  that  the  Government  securities  should 
be  exempt  from  State  and  local  taxation.  It  was  decided  npon  the 
general  principle  involved,  and  without  regard  to  any  stipulation  made 
by  Congress.  This  last  decision  was  in  1802,  and  it  was  that  winter, 
for  the  first  time,  that  we  put  in  the  stipulation  in  one  of  our  loan 
laws. 

I  might  add,  if  it  was  necessary  to  add  to  these  authorities,  that 
the  same  question  was  np  again  during  the  last  term,  and  again  decided 
in  the  same  way,  in  the  case  I  now  hold  in  my  hand.  This  case  was 
the  taxation  by  the  State  of  New  Y'ork  of  the  shares  of  a  national 
l)ank  ;  and  a  n'lajority  of  the  Court  drew  a  distinction  between  a  tax 
upon  a  share  in  the  l)ank  and  a  tax  upon  a  Government  security;  and 
they  also  based  their  decision  u})on  the  express  declaration  of  Congress 
that  these  shares  should  be  taxed.  The  Chief  Justice,  however,  and 
Judge  AVayne  and  Judge  Swayne  diflFered,  and  held  that  from  the 
nature  of  the  security  itself,  in  any  form  or  shape,  the  Government 
security  could  not  be  taxed.  The  liiajority  of  the  Court  drew  the  dis- 
tinction between  the  shares  in  the  bank\and  tlie  bonds  held  by  the 
bank,  and  allowed  the  shares  to  l)e  taxed.  In  my  judgment,  such  was 
the  intent  of  Congress.  It  was  a  subject  that  was  very  much  dis- 
cussed here  at  the  time,  and,  although  1  was  opposed  to  the  tax,  yet  it 
8 


lU  SPEECHES  AXD  REPOIiTS  OV  JOHN   SHERMAN. 

was  finally  carried.  The  distinction  made  by  the  (.'ourt  was  taken  by 
Senators,  that  the  takint?  of  sliares  in  a  bank  was  a  rfinvestuiciit  of  the 
funds  and  a  change  of  the  form  of  securitv. 

The  question  may  be  asked,  Why  put  in  tliis  stijudation  if  the  hiw 
was  so  clear  ?  The  answer  is  just  as  cijnclusive,  tliat,  as  we  were  com- 
pelled to  borrow  money,  it  wits  important  to  inform  all  who  chose  to 
loan  it,  in  the  most  authentic  manner,  (jf  their  rii^hts  and  |)rivile<;es 
under  tlie  Constitution.  Xo  doubt  many  a  man,  u|>on  the  faith  of  the 
direct  pledge  of  C(»ngress,  suj)enidded  t(i  the  decision  of  the  Supreme 
Court,  loaned  us  his  money  in  time  (»f  war,  when  he  would  not  have 
done  it  if  it  was  to  be  subject  to  local  taxation. 

I  say,  then,  tliat  no  Senator  should  vote  again-^t  this  bill,  or  any 
bill  of  a  similar  character,  on  the  idea  that  it  is  n<)t  now  wise  to  ex- 
empt Govermncnt  securities  from  State  taxati»»n.  This  is  the  settled 
principle  of  constitutional  law,  whether  it  is  put  in  the  laws  or  not  ; 
and  the  only  (piestion  is  whether  by  omittiiii;  to  jmt  it  in  you  will  give 
the  lenders  the  power  to  make  a  better  bargain  with  you. 

I  have  no  doubt  that  Congress  may,  as  a  part  of  the  contract,  and 
before  tlie  loan  is  issued,  say  that  the  States  may  tax  the  security. 
But,  Mr.  President,  what  eft'ect  would  that  have  {  Could  you  sell 
such  bonds  i  Would  y(»u  allow  the  Scjuthern  States  now  to  tax  (tov- 
ernment  securities  i  AV  ould  vou  allow  them  to  have  the  power  over 
your  public  credit  wliich  would  be  inv(dved  in  their  power  to  destroy 
the  income  from  Gtjvernment  securities  { — Ijccause,  jus  Judge  linger 
says  in  the  fii"st  decision  made,  if  you  give  them  the  power  to  tax  one 
mill  you  cannot  restrain  it.  Xo,  sir,  the  contract  between  tlie  I'nited 
States  and  all  the  citi/ens  of  the  world  is  a  contract  higher  than  any 
imposition  levied  l)y  a  State  ;  and  w.e  ought  no  more  to  tolerate  the 
idea  of  levying  a  tax  upon  tlie  securities  (jf  tlie  United  States,  except 
by  the  United  States  itself,  than  Great  Britain  would  allow  any  for- 
eign Power  to  levy  in  Great  Britain  a  tax  on  British  securities. 

It  must  be  remembered  that,  by  exjnvss  provision  inserted  in  all  the 
acts  passed  during  the  recent  war,  United  States  bonds  are  exemj^t 
from  State  taxation.  All  the  debt  now  outstanding  is  exempt.  Even 
the  bonds  issued  under  the  recent  acts  will  be  so  exempt.  Suj)pose 
you  refuse  in  this  bill  to  so  exempt  a  bond  bearing  but  five  per  cent, 
interest,  or  actually  provide  that  they  shall  be  taxable.  Who  would 
buy  them  ?  "Who  would  surrender  their  present  securities  i  How 
could  you  fund  your  debt  ?  Xo  device  could  be  more  perfect  to  con- 
tinue the  present  high  rates  of  interest.  And  what  good  would  result 
to  State  or  nation  i  Xonc  whatever.  The  State  could  not  tax  the 
present  bonds,  and  the  holders  would  not  take  your  new  ones.  The 
only  way  is  to  stand  by  the  inviolability  of  the  bonds  as  declared  by 
the  Supreme  Court  and  upheld  by  every  party  or  president  to  this  time. 

I  now  wish  to  meet  the  argument  so  often  and  forcibly  made,  that 
it  is  unjust  to  exempt  United  States  securities  from  local  taxes.  And, 
sir,  I  admit  that  if  this  is  regarded  as  a  privilege  to  the  holder  it  is 
indefensible  ;  but  it  is  the  privilege  of  the  Government,  not  of  the 
fund-holder.  It  is  the  supreme  power  of  the  whole  people  to  borrow 
money  on  the  most  favorable  terms  that  is  taxed  and  limited  bv  a  tax 


FUNDING  THE   NATIONAL  DEBT.  115 

in  the  contract.  Such  an  exemption  is  only  justifiable  on  the  ground 
that  it  enables  the  Government  to  Ijorrow  money  on  better  terms.  In 
the  contract  of  borrowing  the  lender  considers  tiie  rate  of  interest,  the 
security  of  the  principal,  and  the  burdens  of  taxation.  If  no  taxes  are 
to  be  deducted  from  his  interest,  and  the  ]>rincipal  is  absolutely  sure 
and  easily  convertible  into  money,  he  is  williiig  to  part  with  his  nioney 
at  a  low  rate  of  interest.  This  is  the  reason  of  the  exemption,  and  the 
Government  is  presumed  to  receive  the  taxes  in  the  more  favorable 
tenns  of  the  loan. 

IJut,  sir,  when  the  tax-payer  sees  that  the  Government  is  ]>aying  a 
hi<^her  rate  of  interest  than  the  law  allows  to  a  citizen,  the  exem])tion 
will  be  felt  to  be  wrong.  AVith  the  j)resent  rate  of  interest  there  will 
be  a  constantly  growing  jealousy  between  the  bond-holder  and  tax- 
payer. The  latter  will  compUiin  that  his  ])roj»erty  is  burdened  with  all 
the  expense  <»f  (Jovernment  while  his  neighbor  enjoys  his  full  income 
free  from  all  burdens.  This  feeling  is  founded  ujion  so  clear  a  sense 
of  what  is  right  that  no  wise  legislator  will  disregard  it.  It  is  true  that 
a  C(»ntract  once  made  can  not  be  violated,  whether  it  costs  much  or  lit- 
tle ;  public  faith  demands  an  exact  and  specific  performance;  but  ;in 
adjustment  ttf  this  ditlicult  j)rob!em  ought  to  be  made  that  will,  while 
it  preserves  intact  the  rightful  j)ower  of  the  (Government  to  borrow 
money  free  from  local  taxes,  recpiire  property  in  the  funds  to  aid  in 
the  support  of  the  (ioveniment.  I  have  shown  that  this  can  not  be 
done  with  safety  to  the  Tnited  States  by  allowing  States  to  tax  our 
securitiis.  Two  other  m(»<les  have  been  suggested:  first,  to  tax  direct- 
ly by  act  of  Congress  the  public  securities  at  a  rate  e(pial  t<»  local  taxa- 
tion ;  and  secondly,  to  reduce  the  rate  of  interest. 

A  proposition  has  l)cen  made  by  !Mr.  Hayes,  one  of  our  Tax  Com- 
missioners, to  levy  a  direct  tax  on  a*ll  United  States  bonds  held  in  this 
country  of  one  j>er  cent,  on  the  ]>rincijKil  of  the  bond,  or  to  reserve  one 
sixth  of  the  interest  j>ayable  on  a  six  per  cent.  Ixmd.  Such  a  tax  ap- 
plied to  our  present  securities  W(»ula  be  a  breach  r»f  public  faitli. 
Congress  may  have  the  jiower  t()  do  it,  using  the  word  power  in  its  un- 
restricted sense ;  but  it  would  be  unjust,  a  fraud  upon  f»ur  creditors, 
and  would  forever  impair  our  public  credit.  It  is  an  iiulirect  violation 
of  a  contract  made  in  good  faith.  It  is  true  the  United  States  did  not 
stipulate  that  it  would  not  tax  the  bonds,  an<l  the  United  States  may 
prt»])erly  levy  an  income  tax  upon  public  securities  of  any  amount,  as 
It  may  upon  other  incomes;  but,  when  the  United  States  selects  this 
particular  kind  of  j)roperty  as  the  only  kind  of  property  upon  which  it 
will  levy  a  sjiecific  tax,  it  is  a  violation  of  public  faitli.  To  levy  the 
same  tax  .on  this  kind  of  property  that  you  levy  upon  other  property 
would  n<»t  be  unjust  ;  but  to  select  it  out  and  put  upon  it  exclusively 
an  income  tax  of  sixteen  and  two  thinks  per  cent.,  in  order  to  defeat  in 
this  way  the  stipulated  exemption  from  State  taxation,  would  be  a  vio- 
lation of  the  public  faith. 

This  question  of  taxing  Govemment  securities  is  far  from  being  a 
novel  one.  It  has  been  resorted  to  in  arbitrary  governments  many 
times.  In  Fi-ance  in  the  time  of  Louis  XI\".  and  Louis  XV.,  and 
es]x?cially  during  the  regency  that   intervened,  forced  taxes  on  2iul»lic 


116  SPEECHES   AND   REPORTS  OF  JOHN  SHERMAN. 

funds  were  resorted  to,  until  the  credit  of  that  country  -was  entirely 
destroyed.  It  was  proposed  in  England  in  1717,  but  was  linnly  re- 
sisted. I  have  here  a  paper  attributed  to  the  celebrated  Henley,  Earl 
of  Oxford,  written  in  that  year,  on  the  inviolable  nature  of  public 
securities,  and  the  arguments  have  not  lost  their  force  by  time,  lie 
says : 

Your  project  of  raising  nionoy  for  this  year's  service,  or  of  paying  deltts  by 
taxing  or  lowering  the  interest  of  tlie  fiiiuls,  meets,  I  tliink,  with  too  iiiuch  apjiro- 
bation  among  some  people  who  k)ok  no  further  than  themselves  and  consider  only 
the  present  diliiculty,  regardless  of  the  eonseqnences  of  their  jtroceedings.  The 
importance  of  the  case  seems  to  require  that  everybody  slioidd  contril)nto  what 
they  can  to  set  this  matter  in  a  true  light,  and  examine  without  prejudi<'e  how 
much  the  interest  of  our  country,  its  reputation  and  honor,  its  future  good  or  evil, 
may  be  afTected  by  it.  ...  I  can  not  l)ut  think  that  conscience  is  concerned,  and 
natural  honesty  and  public  justice  and  the  credit  of  tl:e  nation — everything  tiiat  is 
sacred  and  inviohible  in  property  is  nearly  atfeeted  ;  all  obligations  will  be  in  a  way 
of  being  canceled,  and,  in  a  word,  an  indelible  character  of  injustice  cast  upon 
us.  .  .  . 

To  support  and  maintain  a  man's  private  credit,  it  is  absolutely  necessary  that 
the  world  iiave  a  fixed  opinion  of  the  liouesty  and  integrity  as  well  as  ability  of  a 
person.  If  there  be  good  reason  to  object  against  the  one  or  the  other  of  these,  liis 
credit  sinks;  no  one  chooses  to  deal  with  him,  nor  does  any  one  care  to  trust 
him.  .  .  . 

This  true,  this  only  foundation  of  credit  takes  in  all  cases  and  all  persons,  public 
a3  well  as  i)rivatc,  national  as  well  as  personal.  Just  and  honorable  practices,  fair 
and  open  dealings,  a  strict  performance  of  contracts,  a  steady  observance  of  engage- 
ments, will  necessarily  gain  credit  everywhere;  and  common  experience  teaches  us 
that  a  breach  in  these  as  necessarily  destroys  it.  .  .  .  And,  indeed,  a  readiness  and 
willingness  to  perform  one's  engagements  is  such  a*  fundamental  of  credit  that  all 
the  affluence  of  money  and  the  most  immenso  riches  are  of  no  consequence  if  there 
be  ground  for  the  least  suspicion  of  disingenuity.  The  ability  of  a  |»erson  without 
natural  justice  rather  makes  a  man  cautious  than  forward  to  deal  with  hini. 

If,  therefore,  the  legisUiture  of  any  country  should  decline  standing  to  its  con- 
tracts or  endeavor  to  impose  other  conditions  than  what  at  first  were  stipulate<l,  I 
ask,  would  not  such  a  conduct  as  necessarily  impair  the  public  credit  as  it  would 
the  credit  of  a  private  person  ?  Has  it  not  the  same  tendency  to  make  the  lenders 
jealous  of  their  security  ?  Who  will  venture  to  lend  the  public  a  second  time  if 
ever  they  tind  themselves  not  treated  according  to  tlieir  contract?  May  there 
never  be  emergencies  which  may  again  oblige  the  ])ublic  to  borrow  money?  And 
if  such  case  should  happen,  ni)on  what  foundation  must  they  proceed  if  an  instance 
can  be  produced,  an  act  of  the  legislature  which  can  never  be  forgot  nor  ever  be 
repaired,  to  show  that  legal  security  is  not  a  security,  and  that  engagements  are  not 
to  be  understood  literally?  What  is  the  natural  consequence  of  this  but  that  no 
man  will  lend  the  Government  for  the  future,  but  at  such  interest  and  such  ad- 
vancements as  are  full  equivalents  to  the  hazards  people  may  run  in  lending? 

The  whole  of  this  very  able  paper  lias  a  close  application  to  the 
questions  before  us,  and  would  well  repay  the  reading  ;  and  the  remedy 
he  proposes  is  the  one  I  propose.     He  says : 

If  the  lender  be  left  at  his  liberty  to  receive  his  money  or  let  it  lie  at  lower 
interest  (in  case  where  funds  are  redeemable),  no  cause  can  he  given  of  complaint. 
No  injury  is  done,  no  hardship  is  ofiered.  Tlie  integrity  and  honesty  of  the  bor- 
rower is  evident,  and  credit  is  indisputable.  But  if  the  borrower  be  his  own  judge 
and  his  own  cause,  and  flies  to  an  act  of  power  because  he  can  do  it,  it  as  necessa- 
rily sinks  his  credit  as  it  takes  away  its  foundation. 

And,  sir,  this  brings  me  to  the  plain  and  just  remedy  for  all  com- 
plaints of  unequal  taxation.     Let  us,  in  strict  accordance  with  our  en- 


FUNDIXG  THE  XATIOXAL  DEBT.  II7 

gagements,  sell  our  improved  credit.  Let  us  go  into  the  market,  and, 
with  our  resources  fully  shown,  our  honor  unimpaired,  our  securities 
free  from  all  burdens,  sell  our  bonds  on  the  most  favorable  terms;  and 
thus  we  shall  receive  in  advance  all  the  taxes  we  could  levy  upon  our 
securities,  We  will  soon  get  more  than  the  one  per  cent,  which  Mr. 
Hayes  proposes  to  levy.  This  policy,  adopted  in  England,  has  reduced 
the  rate  of  interest  on  public  securities  from  six  to  three  per  cent.,  and 
has  made  the  British  consol  the  highest  standard  of  credit  in  the  civil- 
ized Morld. 

Fortunately,  our  loans  are  now  just  in  a  condition  when  we  can 
commence  this  reduction  of  interest.  I  showed  awhile  ago  that  we  had 
!j;177,<MM»,(>(>0  of  public  debt  within  our  reach  now,  and  if  it  was  known 
that  no  other  but  a  five  per  cent,  loan  could  be  had,  and  that  all  matur- 
ing bonds  wcTc  to  be  paid  off  in  money  by  the  sale  of  five  per  cent, 
bonds,  public  creditors  would  quickly  convert  their  securities  into  such 
a  h>an.  Large  institutions,  among  them  one  of  the  largest  in  the  State 
of  New  ^'ork,  have  made  a  ])roposition  to  convert  their  five-twenty 
bonds,  maturing  in  ^fay  next,  into  this  five  per  cent.  loan.  If  I  had 
my  own  way,  I  would  not  give  tliem  a  thirty-year  five  per  cent,  bond  ;  I 
would  give  a  ten-forty  five  per  cent,  bond,  retaining  the  principle  of 
redeemableness,  Avith  a  view  to  still  lower  intere.-t ;  1»ut  the  Secretary 
thinks  he  can  not  now  negotiate  such  a  loan  as  tliat,  and  therefore,  f()i' 
the  ])resent,  I  would  give  those  tlie  most  ready  to  adoj)t  the  reduction 
policy  the  most  favorable  form  of  loan,  but  as  soon  as  possible  would 
reserve  the  power  to  reduce  the  rate  of  interest  by  the  payment  of  the 
principal  as  soon  as  a  l)ond  without  these  exemptions,  or  at  a  lower  rate 
of  interest,  wouhl  sell  at  par.  Tliis  ];roceFS  must  be  gradual.  It  will 
not  do  for  Senators  to  vote  against  this  ])iil  because  they  think  five  per 
cent,  free  of  taxes  is  too  high.  AVe  must  get  it  down  first  to  five  per 
cent.,  then  to  four,  and  then  to  three,  all  the  while  faithfully  observing 
our  contracts  ;  and  we  can  do  it. 

It  is  not  probable,  if  this  bill  passes,  that  during  the  present  year 
more  than  Sl(i0,< »(»(►,(»()()  of  five  per  cents  will  be  sold,  because  more 
than  that  Mould  not  be  needed  to  meet  the  accruing  indebtedness, 
nnless  it  should  be  necessary  to  sell  more  to  pay  liounties  to  soldiers  or 
some  extraordinary  expenditure.  Next  year  the  Secretary  would  have 
the  p(»wer  to  pay  off  !Sf]0( »,00().0(K)  of  the  five-twenties  if  he  could  sell 
these  five  per  cent,  bonds.  But  it  is  important  to  pass  the  law  this 
session  in  order  to  give  him  ample  time  to  meet  the  obligations  that 
are  imposed  upon  him. 

I  say,  therefore,  that  in  eveiy  view  which  I  can  take  of  this  bill  it 
is  a  wise  measure,  intended  to  save  interest  upon  the  public  debt,  to 
adjust  on  correct  principles  equality  of  taxation,  and  to  lighten  the 
enoi-mous  burdens  upon  our  people.  And  there  is  another  feature 
which  commends  it  to  my  favor.  If  this  bill  passes  in  the  form  in 
which  it  now  stands,  the  fund-holders  will  themselves  pay  off  the  prin- 
cipal of  the  pultlic  debt.  The  one  per  cent,  saved  on  the  rate  of  in- 
terest will  pay  off  ever\'  dollar  of  this  debt  in  thirty-six  years.  When 
this  matter  is  dragged  into  politics,  as  it  will  be,  and  the  tax-payer  says 
to  the  fund-holder  "  Your  property  is  exempt  and  free  from  all  tax," 


118  SPEECHES  AXD   REPORTS   OF  JOHN  SHERMAN. 

the  fund-holder  may  say,  "  No,  my  friend,  it  is  not.  Your  money  you 
can  loan  to  your  neighbor  at  six  per  cent,  interest,  and  the  law  enables 
you  to  collect  the  ])rincipal  at  pleasure;  I  have  already  paid  for  this 
])rivile<i,e  by  deduetiiii^  one  sixth  of  my  income ;  I  have  surrendered 
the  principal  sum  loaned  by  me  for  an  annuity  for  thirty-six  years,  and 
my  share  of  the  taxes  will  pay  off  every  dollar  of  the  debt  within  one 
generation."  lie  may  refer  to  the  report  of  Mr.  Hayes  showing  that 
the  average  tax  in  the  United  States  is  one  per  cent.,  and  that  sum,  an- 
nually api)lied  with  the  consent  of  the  fund-holder,  and  paid  by  him 
alone,' would  pay  the  debt. 

I  accept  the  justice  of  the  princijile.  I  say  that  we  can  not  go  before 
the  people  and  preserve  the  e.\emj)tion  from  local  tax  unless  we  show 
that  the  United  States  will  get  some  benefit  from  it ;  and  by  surrendering 
this  one  per  cent,  tlie  fund-holdei"s  will  be  stronger  and  more  secure  than 
they  were  before.  They  will  feel  safer  in  the  ])ayment  of  the  princi])al ; 
they  wHl  know  that  the  one  per  cent,  thus  saved  is  laid  aside  under  the 
operations  of  this  law  and  applied  to  the  j)ayment  of  the  ])rinci[)al  of 
the  public  debt;  that  it  will  pay  oft"  the  i)rincipal  of  that  del)t  in  due 
time  and  without  any  danger  of  the  misapplication  of  the  fund,  for  it 
will  be  applied  eacli  year,  thus  adding  to  the  value  of  the  remaining  funds. 

The  passage  of  this  bill  is  now  an  imperative  necessity.  It  is  not 
my  bill;  it  is  not  my  idea.  I  think  it  is  too  favorable  to  the  fund- 
holders.  I  think  that  a  ten-forty  five  per  cent,  loan  might  be  put  upon 
the  market  at  ])ar ;  but  the  Secretary  of  the  Treasury  says  that,  without 
the  two  stipulations  to  which  I  have  referred,  he  does  not  think  that  he 
can,  to  use  the  ordinary  language  of  the  day,  Hoat  a  live  per  cent.  loan. 
I  am  therefore  willing  to  give  these  stipulations  to  him,  hoping  that 
next  winter  we  can  repeal  the  clause  exempting  the  bonds  from  income 
tax,  and  then  let  him  issue  a  clear  live  per  cent,  loan,  I  do  not  think 
he  will  be  able  to  issue  over  a  hundred  millions  liefore  that  time.  I*er- 
haps  next  winter  we  may  shorten  the  period  during  which  the  principal 
may  be  redeemable ;  and  perhaps  in  a  few  years,  if  our  country  goes 
on  prospering  as  it  is  now  prospering,  we  may  reduce  the  rate  of  in- 
terest as  England  has  done,  first  one  half  per  cent.,  then  another  half, 
keeping  the  body  of  the  bonds  always  Avithin  our  reach.  The  position 
of  our  public  debt  is  just  in  that  condition  now,  under  the  established 
policy  of  those  who  have  regulated  our  finances,  that  it  is  within  our 
reach,  so  that  we  can  soon  fund  the  whole  of  the  public  debt  and  re- 
duce the  rate  of  interest  on  all  or  nearly  all  of  it. 

There  is  another  collateral  advantage  which  will  be  derived  from 
this  bill.  I  refer  to  the  provision  in  the  fourth  section.  It  will  be  re- 
membered that  the  holders  of  the  seven-thirty  notes  have  the  right  by 
the  terms  of  the  option  printed  on  the  back  of  those  notes  to  convert 
them  into  five-twenty  six  per  cent,  bonds  at  maturity,  or  to  demand 
the  money.  Two  hundred  and  forty  millions  of  these  notes  come  due 
in  the  month  of  August  next  year,  and  six  hundred  millions  in  the 
May  following.  Under  the  condition  of  the  present  laws,  the  Secre- 
tary of  the  Treasury  will  be  compelled  to  accumulate  and  hold  in  hand 
two  hundred  and  forty  millions  in  order  to  meet  the  possible  option  of 
the  holders  of  the  seven-thirties. 


FUNDING  THE  NATIONAL  DEBT.  119 

What  would  be  the  effect  ?  The  withdrawal  of  $240,000,000  of 
money  from  the  circulation  of  the  country,  when  it  is  now  being  re- 
duced under  the  opcrati(jns  of  tlie  recent  law,  would  be  disastrous.  It 
would  be  withdrawing  one  half  of  the  circulating  medium  in  order  to 
meet  an  obligation  when  every  particle  of  that  money  is  necessary  for 
the  use  of  the  people.  Section  four  of  this  bill  pro\ades  that  the 
holders  of  the  seven-thirty  notes  shall  give  a  reasonable  notice  of  their 
choice  to  take  either  tlie  money  or  the  bonds.  They  have  the  right  to 
make  that  choice,  and  nobody  proposes  to  abridge  that  right.  They 
have  the  right  to  do  it  at  the  time  stated,  and  nobody  proposes  to  de- 
prive them  of  it.  What  is  proposed  is  simply  to  require  them  to  give 
a  reasonable  notice  of  their  choice  of  the  alternative  which  they  have, 
and  tliat  is  put  at  six  montlis.  Some  think  that  is  too  long  and  may 
complain  of  it.  I  do  not  think  it  is,  for  the  large  amount  involved.  It 
M'orks  no  injury,  Ijecause  the  bill  provides  that,  in  case  tliey  do  not  give 
their  notice  of  the  option,  they  get  their  money  and  the  Secretary  can 
provide  for  it.  Tlie  probaljility  is  that  the  great  mass  of  those  notes 
will  be  converted  into  live-twenty  bonds  without  cost ;  and  one  effect 
of  having  a  five  per  cent,  loan  upon  the  market  would  be  to  float  this 
large  mass  of  indebtedness- into  the  five-twenties  as  the  holders  have  a 
rigiit  to  do,  while  if  you  issue  six  per  cent,  bonds  none  of  these  holders 
will  avail  themselves  of  the  option  until  the  last  moment,  and  then  by 
demanding  the  money  will  greatly  embaiTass  the  Government. 

It  has  been  said  in  some  of  the  public  prints  that  this  provision  is 
a  vi(jlation  of  the  contract.  It  is  no  more  a  violation  of  the  contract 
than  the  notice  which  is  required  l)y  law  in  the  case  of  a  tenancy  from 
year  to  year.  If  I  am  renting  a  house  for  a  year  or  more,  I  am  bound 
to  give  notice  of  my  intention  to  retain  it.  It  is  a  power,  substantially, 
that  Governments  have  always  exercised.  Take  the  original  converti- 
bility clanse ;  we  did  not  repudiate  that  clause,  but  we  provided  that 
the  right  of  convei-sion  sliould  be  exercised  before  a  given  time.  There 
was  some  complaint  made  in  the  Xew  York  papers  that  this  was  a  vio- 
lation of  the  public  faith,  that  we  were  repudiating  our  obligations ; 
but  it  was  not  general.  There  are  several  precedents  for  this  provision  ; 
but  the  most  striking  case  was  the  one  just  alluded  to,  Avliich  was 
adopted  after  full  debate  and  consideration.  The  United  States  notes 
originally  issued,  and  still  outstanding,  had  printed  on  the  face  of  them, 
"  The  holder  of  this  note  may  convert  it  into  a  bond  bearing  six  per 
cent,  interest  in  coin,  and  payable  after  five  years  and  within  twenty 
years."  It  was  found  that  tliis  privilege  or  option  attached  to  the 
notes  prevented  the  sale  of  the  bonds,  because  no  one  would  avail  him- 
self of  that  option,  having  the  right  to  do  it  at  any  time ;  and  there- 
fore we  provided  that  he  should  exercise  that  option  by  the  1st  of  July 
following  or  he  should  cease  to  have  it.  I  have  now  one  of  these  notes. 
The  privilege  printed  on  the  face  of  it  does  not  now  exist ;  yet  no  one 
complains,  as  the  right  was  not  exercised  at  the  time  stated.  It  is  a 
general  principle  of  law  tliat,  wherever  a  party  has  a  right  to  do  or  not 
to  do  a  particular  thing,  a  reasonal)le  notice  of  his  choice  may  be  re- 
quired. That  is  a  principle  of  municipal  law  as  well  as  of  public  law. 
It  is  required  by  nations  generally,  and  inserted  in  many  treaties. 


120  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

And  now,  Mr.  President,  I  have  thus,  witliout  any  ])reparation  ex- 
cept the  few  ti<::ures  and  papers  before  nie,  presented  the  reasons  for 
my  earnest  su])port  of  this  bill.  This  is  Hke  most  tinaneial  (piestions, 
wiiich  atti-act  but  httle  attention  thou<^li  tliey  deei)ly  allVet  the  nearest 
interest  of  every  citizen,  his  food,  his  clothin*;:,  his  liome,  and,  more 
important  than  all  else,  the  honor  of  his  country.  Our  attention  has 
been  so  occupied  with  political  questions  atl'ectin^  more  keenly  the  in- 
terests of  parties  and  partisans,  that  all  the  comjdicated  problems  of 
finance  tlirust  upon  us  by  the  war  have  not  occupied  as  much  (»f  the 
time  of  this  Senate  as  some  unimportant  i)oliti(.'al  measures.  I  almost 
owe  you  an  apology  for  occu])yin<jj  your  time  so  Ion:,',  but  I  trust  in  a 
short  time  the  waves  of  the  recent  war  will  settle  in  ])eace  anil  quiet, 
and  that  all  of  us  will  h)ok  to  the  material  interests  of  a  great  country, 
all  of  which  are  in  our  hands.  I  am  so  hopeful  of  tlie  future,  after 
escaping  all  the  perils  of  the  ]>ast,  that  I  may  not  see  the  clouds  that 
others  see.  War  is  apt  to  be  folhtwed  bv  tinancial  distress,  and  we  may 
be  affected  by  the  impending  war  in  luirope.  Our  bonds  now  hehl 
abroad  may,  and  no  doubt  will,  come  back  to  us,  and  for  a  time  will 
depress  our  securities.  l>ut  war  in  Europe  will  open  to  us  new  mar- 
kets. It  will  restore  our  commerce.  We -can  well  aiford  to  redeem 
our  bonds  with  the  superabundant  jiroduce  of  the  West.  Our  cotton 
crop  will  yield  us  exchange  enough  to  absorb  all  the  secuinties  held 
abroad.  Who  can  say  that  after  the  first  panic  the  timidity  of  money 
may  not  cause  it  to  fiee  from  war  in  Europe  and  seek  safety  in  our  na- 
tional securities  ? 

Sir,  what  we  need  now  is  confidence  in  ourselves,  in  our  resources, 
and  in  our  destiny.  Our  country  has  been  for  yeai*s  the  refuge  of  the 
laboring  man,  where  he  has  found  employment,  intlependenee,  and  free- 
dom. It  will  soon  be  the  refuge  of  ca})ital.  It  may  become  the  place 
of  deposit  of  the  wealth  of  the  world.  Why  should  it  not  be  ?  We  as 
a  nation  have  always  observed  our  obligations.  We  have  twice  paid  oif 
a  national  debt.  We  have  unexampled  resources  in  men,  in  land,  in 
iron,  gold,  coal,  and  in  all  the  elements  of  wealth.  Why,  then,  should 
we  talk  about  taxing  our  national  debt  i  Why  place  it  in  the  power  of 
every  village  corporation  to  afi'ect  our  national  credit  i  Why  enter  the 
money  market  offering  usurious  interest  ?  Why  pay  now  more  than 
any  good  merchant  in  New  York  will  pay  ?  AVhy  traffic  our  loans,  a 
mortgage  on  all  our  industry,  on  worse  terms  than  bankrupt  nations  of 
Europe  offer?  Go,  backed  by  your  resources,  your  unclouded  and  un- 
disputed empire,  the  love  and  faith  of  your  people,  the  respect  of  all 
nations — go,  I  say,  with  all  these,  and  with  confidence  in  yourselves, 
to  the  people,  who  hold  your  bonds,  and  you  will  be  able  to  borrow 
money  at  five  per  cent.,  yea,  before  long,  at  four  per  cent.  Go  not  to 
the  money-changers.  If  they  are  allowed  to  fix  the  rate  of  your  inter- 
est, they  will  continue  it  as  it  is  with  all  its  exemptions,  until  the 
people,  fired  at  an  injustice,  will  do  wrong  to  correct  it.  I  conclude 
as  I  commenced,  that  to  compel  the  Secretary  of  the  Treasury,  bv  de- 
nying him  this  legislation,  to  issue  more  six  per  cent,  bonds  is  a  politi- 
cal crime. 


THE  TARIFF.  121 

THE  TARIFF. 

7.V  THE  SEXATE,  JANUARY  23,  1S67. 

The  Senate  having  under  consideration  the  bill  to  provide  increased  revenue 
from  imports,  Mr.  Sherman  said  : 

!Mr.  Pkksidknt  :  Before  the  vote  is  taken  on  the  amendment  of  the 
Senator  from  Kliode  Ishmd,  I  think  it  ri^ht  that  I  should  state  the  gen- 
eral views  which  have  controlled  my  action  as  a  meniber  of  the  Com- 
mittee on  Finance,  and  whicii  will  control  my  vote  on  this  and  the 
various  ])ro])()sitions  of  amendment  that  will  be  submitted  to  the  Senate. 

I  listened  yesterday  with  great  pleasure  to  the  speech  of  my  honor- 
able friend  from  New  Jersey  [Mr.  Cattell],  and  was  generally  pleased 
with  its  tenor  and  scope.  It  s<nmded  like  a  good  old-fashioned  Whig 
])rotective  speech — the  school  in  which  I  was  educated,  the  faith  in 
which  I  wiLs  taught,  and  in  which  I  yet  have  coutidence.  ]>ut,  sir,  it 
seems  to  me  that  the  Senator  from  Ncxn;  Jersey,  in  his  zeal  f<»r  protec- 
tion, forgets  that  we  are  now  legislating  under  j)eculiar  circumstances, 
and  are  c«)mpelled  to  look  at  u  state  of  facts  far  dillerent  from  those 
that  existed  before  the  recent  war. 

In  considering  so  c<»m])licated  a  subject  as  a  tariff,  nothing  can  be 
more  deceptive  than  tlie  ap[)licati<in  of  such  general  ])lirases  as  a  ''pro- 
tective tariff,"  a  "revenue  tarilT,'"  a  "free-trade  taritf."  Every  law 
imjiosing  a  duty  <tn  imj'ortcd  goods  is  nece.-sarily  a  restraint  on  trade. 
It  imposes  a  bunlen  upon  the  j>urchase  and  sale  of  imported  goods  and 
tends  to  prevent  their  im])ortation.  The  expression  a  "free-trade 
taritf  involves  an  ab-urdity.  Free  trade  implies  a  trade  without  re- 
>triction,  while  any  taritf  is  a  res-triction  on  trade.  A  duty  of  ten  per 
cent,  is  a  limitation  on  trade  as  well  as  a  duty  of  one  hujidred  percent., 
and  they  differ  only  in  degree.  So  the  ]>hrase  a  '*  protective  tariff  " 
may  be  ai)plied  to  every  bill  imposing  duties  on  impoi-ted  goods. 

The  first  tariff  act,  passed  soon  after  the  fonnation  of  the  Constitu- 
tion, was  called  a  "protective  tariff."  One  of  its  leading  objects,  as 
declared  by  "Washington,  was  to  foster  and  protect  American  manufac- 
tures, aiul  yet  tlie  general  rate  of  duties  was  but  ten  per  cent,  ad  valorem. 
On  the  <»ther  hand,  the  tariff  of  1S40  is  commonly  known  as  a  "free- 
trade  tariff,"  and  yet  the  rate  of  duty  levied  by  it  averaged  twenty-four 
and  a  half  j)er  cent.  Every  duty  on'  imported  merchandise  gives  to  the 
domestic  nianufacturer  an  advantage  e(pial  to  the  duty,  and  to  that 
extent  every  tariff  is  a  protective  tariff.  When  the  duty  is  so  high  as 
to  prevent  importation  it  ceases  to  be  a  "tariff"  and  becomes  a  "com- 
mercial regulatic^n."  So  the  general  term  a  "  revenue  tariff  "  as  descrip- 
tive of  a  tariff  is  deceptive,  and  is  simply  tautology.  Every  tariff  bill 
is  a  " revenue  tariff."  The  word  " tariff"  implies  revenue,  and  means 
a  rate  of  taxation  on  imported  goods.  It  is  simply  a  mode  of  taxation 
adoj)ted  by  all  commercial  nations  as  the  most  certain,  convenient,  and 
least  expensive  fonu  of  taxation.  The  common  meaning  attached  to 
the  phrase  a  "revenue  tariff"  is  a  general  ad  valorem  tax  on  imported 


122  SPEECHES  AND  REPORTS   OF  JOHN  SIIERMAX. 

goods,  without  reo^arcl  to  domestic  manufacture.  Such  a  tariiT  lias 
never  existed  in  any  commercial  country,  least  of  all  in  (xront  I  Britain, 
where  the  duties  are  carefully  levied  to  encouraii^e  their  own  manufac- 
tures. They  do  not  now  levy  duties  on  manufactures,  for  the  same 
reason  that  we  do  not  care  to  levy  a  duty  on  anthracite  coal.  By  a 
vast  accumulation  of  capital,  and  by  severe  connnercial  restrictions 
maintained  for  one  hundred  yeai's,  tliey  have  a  substantial  monopoly 
of  certain  important  branches  of  industry.  They  do  not  levy  duties  on 
such  goods  because  none  are  imported  into  Great  IJritain,  and  the  tariff 
on  them  would  produce  as  little  revenue  as  your  duty  on  anthracite 
coal. 

These  general  phrases,  if  not  always  deceptive,  are  totally  inappli- 
cable to  any  tariff  law  that  any  one  would  jn-opose  for  the  United  States 
now.  Free  trade,  if  it  means  a  mutual  exchange  of  connnodities  with 
foreign  nations  M'itliout  restrictions,  is  impossible.  Our  necessities 
compel  us  to  tax  every  form  of  property  or  production.  Every  hour 
of  domestic  labor  contributes  some  portion  of  its  product  to  the  wants 
of  the  nation.  Under  these  circumstances  it  is  the  plainest  principle 
of  political  economy  that  we  should  so  frame  our  tariff  laws  as  to  pro- 
duce the  largest  possible  income  from  imported  goods.  Revenue  is 
the  first,  highest,  and  most  pressing  \vant,  and  it  must  be  so  levied  as 
to  do  the  least  harm  to  our  own  industry.  It  is  in  the  application  of 
this  obvious  principle  that  all  the  difficulty  in  framing  a  tariff  law 
exists.  This  can  not  be  done  by  applying  any  general  rate  or  rale  to 
all  articles,  We  must  discriminate  l)etween  articles  of  luxury  and 
articles  of  necessity  ;  between  articles  that  may  be  produced  in  our 
country  and  articles  mainly  produced  abroad ;  between  raw  materials, 
necessary  to  domestic  manufacture,  and  completed  products  of  industry. 
The  rate  of  duty  must  be  modified  by  a  multitude  of  circumstances  as 
varied  as  human  knowledge,  and  with  details  far  more  difficult  than 
any  subject  of  legislation. 

N^or  can  we  consider  the  question  now  as  we  should  have  done  be- 
fore the  war.  Tlien  we  had  an  opportunity  to  choose  between  imported 
articles ;  we  might  have  thrown  off  the  duty  upon  necessities,  such  as 
coffee  and  tea  and  various  articles,  because  such  duties  were  not  neces- 
sary for  revenue  nor  useful  for  protection ;  but  now  we  are  compelled 
to  levy  high  duties  ujDon  everything,  not  only  upon  articles  of  absolute 
necessity,  the  duty  upon  which  will  undoubtedly  add  to  the  cost  of  the 
articles,  but  also  upon  all  articles  of  American  production,  and  even 
upon  raw  materials  that  are  indispensable  as  the  basis  of  our  manufac- 
tures. We  cannot  now  regard  the  subject  in  the  same  light  or  from 
the  same  stand-point  that  we  did  in  olden  times  when  the  tariff  was  the 
great  controversy  between  parties  in  this  country.  We  have  now  to 
consider  it  in  the  light  of  facts  created  by  the  war.  The  first  and 
obvious  inquiry  of  every  Senator  in  discussing  the  question  is,  how 
much  is  it  necessary  to  raise  by  a  tariff  on  imported  goods  ?  And  here 
I  may  say  that  all  the  revenue  tliat  we  are  required  to  raise  in  gold 
must  be  raised  by  duties  on  imported  goods.  While  we  have  a  depre- 
ciated currency  it  would  be  idle  to  require  domestic  taxes  to  be  paid  in 
gold.     It  would  be  to  legalize  a  paper  currency  and  then  to  repudiate 


THE  TARIFF.  123 

it.  In  regard  to  imported  goods  the  case  is  different.  All  imported 
goods  are  bought  with  gold  ;  all  transactions  in  imported  goods  are 
based  upon  gold.  Imported  goods,  the  product  of  foreign  countries, 
can  be  purchased  only  hy  the  money  known  in  the  commerce  of  the 
world.  Therefore,  in'  imposing  duties  upon  imported  goods,  it  is  no 
hardsliip  to  levy  them  in  gold,  for  thus  the  whole  cost  of  an  article  of 
that  description,  when  it  enters  into  consumption,  represents  so  much 
in  gold.  But  if  an  attempt  were  made  to  \e^^  in  gold  our  domestic 
taxes,  it  would  be  very  difficult  to  collect  them,  for  it  would  impose  on 
our  people  a  burden  they  could  not  bear.  It  is  manifest  that  we  must 
raise  all  the  gold  we  require  for  Government  purposes  by  means  of 
duties  on  imported  goods. 

By  the  financial  policy  adopted  during  the  war— it  is  not  necessary 
for  me  now  to  discuss  the  -propriety  or  expediency  of  that  policy — we 
are  required  to  raise  a  very  large  sum  of  money  in  gold.  The  annual 
interest  upon  the  outstanding  gold  bonds  of  the  United  States,  accord- 
ing to  a  statement  furnished  me  from  the  Treasury  Department 
brought  down  to  tlie  1st  of  January,  ISGT,  is  882,048,531.  By  the 
terms  of  all  the  outstanding  notes  bearing  interest  in  currency,  except 
the  compound-interest  notes,  they  are  convertible  into  gold  bonds 
bearing  six  per  cent,  interest.  That  conversion  must  be  made  in  about 
a  year.  AVhen  those  notes  are  converted  the  amount  of  annual  inter- 
est that  will  be  required  of  tlie  Treasury  of  the  United  States  will  be 
§131,353,977.40.  To  this  must  be  added  the  amount  needed  to  pay 
the  expenses  of  our  foreign  intercourse,  and  our  other  gold  liabilities, 
partly  growing  out  of  treaties,  which  it  is  estimated  will  amount  to 
s6,0»'iO,000  per  annum.  The  expenditures  for  foreign  intercourse, 
M-hich  are  disbursed  in  foreign  countries  principally,  must  necessarily 
be  paid  in  gold,  the  currency  of  the  world.  ^Mien  we  have  added 
enougli  for  tins  item,  it  will  be  evident  that  the  amount  of  gold  required 
to  carry  on  the  operations  of  the  Government  for  the  present  fiscal 
year  will  not  be  less  than  Sl40,000,000  in  gold. 

In  addition  to  this  there  are  bonds  which,  l)y  the  policy  of  the 
Government,  are  to  be  paid  in  gold,  and  whicli  will  mature  before  the 
end  of  the  next  fiscal  year,  amounting  to  nearly  sixteen  million  dollars, 
namely,  on  the  31st  of  December,  1867,  $7,613,000,  and  on  the  1st  of 
July,  1868,  88,169,000.  These  must  be  paid  in  gold  ;  but  prol)ably 
they  can  be  provided  for  out  of  the  large  amount  of  gold  on  hand,  and 
need  not  be  considered  .in  this  calculation.  But  at  any  rate  it  will  be 
necessary  to  raise  $140,000,000  in  gold. 

It  is  tlierefore  sinq^lv  an  absurdity  to  talk  now  about  a  free-trade 
tarift';  and  to  talk  al>out  a  protective  tariff  is  unnecessary,  because  the 
wit  of  man  could  not  possibly  frame  a  tariff  that  would  produce  $140,- 
000,000  in  gold  without  amply  protecting  our  domestic  industry.  To 
the  extent  that  the  duties  are  levied  upon  articles  that  may  be  pro- 
duced in  this  countrv  the  tariff  operates  as  a  protection.  It  is  very 
clear  that  upon  an  ordinary  vear's  importation  the  rate  of  duty  that 
would  have  to  be  le\ned  upon  "importations  in  order  to  produce  $140,- 
000,000  would  not  be  much  less  than  fifty  per  cent,  ad  valorem,  even 
if  we  could  prevent  all  undervaluation  or  smuggling. 


124:  SPEECHES   AXD   REPORTS   OF  JOHN   SHERMAN. 

I  assume,  then,  Mr,  President,  tliat  the  necessarv  object  of  this  bill 
is  to  produce  $140,000,000  in  gold,  and  that  ^ve  may  projierlv  leave 
the  question  of  protection  to  be  settled  as  a  matter  of  detail,  with  the 
certainty  that  any  tariff  which  will  yield  the  necessary  revenue  will 
sufficiently  protect  American  industry.  The  degree  of  protection  on 
different  articles  can  only  be  determined  by  a  careful  inquiry  into  a 
multitude  of  details,  while  the  paramount  object — to  raise  revenue  to 
the  amount  of  $14:t),000,()()0  in  gold — nuist  always  be  kept  in  view. 

It  is  sometimes  said  that,  as  this  is  the  great  ol>jeet,  it  is  not  neces- 
sary to  change  the  present  tariff,  which  Avill  produce  that  amount,  and 
has  in  fact  "during  the  last  fiscal  year  yielded  SlTl>,oJ:t),030.  The 
answer  is,  that  during  the  last  fiscal  year  our  importations  were  swollen 
beyond  any  former  experience  of  this  country,  and  can  not  be  relied  on 
as  a  basis  for  the  future.  Under  the  very  same  law  the  year  before  the 
amount  of  gold  revenue  was  only  $8-l-,!)2>!,2»)0.  It  is  manifest,  there- 
fore, that  we  can  not  depend  for  the  next  fiscal  year  upon  the  present 
tarilf  to  produce  anything  like  the  amount  that  it  did  in  the  last  fiscal 
year,  and  even  during  the  current  fiscal  year  the  estimated  receipts 
from  customs  are  far  less  than  they  were  in  the  last. 

The  peculiar  circumstances  by  which  we  were  then  surrounded 
show  that  no  estimate  of  future  receipts  can  be  based  on  the  amount  of 
the  receipts  during  the  last  fiscal  year.  AVhen  the  war  closed  the 
Southern  States  were  entirely  destitute  of  domestic  or  foreign  fabrics. 
They  were  not  only  without  clothing,  but  they  were  without  the  articles 
necessary  to  human  life,  of  domestic  and  foreign  manufacture.  The 
stock  on  hand  in  the  Northern  States  was  largely  reduced.  Hence  the 
moment  the  war  was  over  large  importations  fiowed  in,  and  of  neces- 
sity still  larger  demands  were  made  for  our  domestic  manufactures. 
But  now  that  cause  has  ceased  ;  the  vacuum  has  been  supjilied.  Not 
only  so,  but  by  the  sudden  fall  of  gold,  which  fell  much  more  rapidly 
than  the  prices  of  labor  or  of  other  commodities,  goods  manufactured 
abroad  became  cheaper  in  proportion  than  American  goods.  The 
American  manufacturer  could  not  adapt  his  prices  to  the  fall  of  gold 
because  of  the  high  prices  of  labor  and  material,  and  these  could  not 
be  reduced  owing  to  the  high  rate  of  taxation  and  tlie  increased  cost  of 
food  and  of  aU  the  elements  which  enter  into  jjroduction.  If  the 
American  manufacturer  could  have  reduced  the  cost  of  his  production 
in  the  same  ratio  that  gold  was  reduced  he  would  not  have  been  dis- 
turbed by  the  fall  of  gold.  The  valuable  statistics  presented  to  us  by 
Mr.  Wells  show  that  while  gold  at  times  went  down  to  thirty  and  even 
to  twenty-five  per  cent,  premium,  during  all  that  time  tlie  ordinary 
addition  to  the  cost  of  food  was  from  ninety  to  one  hundred  and  forty 
per  cent.,  and  the  addition  to  the  usual  cost  of  manufacturing  was 
from  seventy  to  ninety  per  cent. ;  so  that  the  fall  in  the  price  of  for- 
eign goods,  which  were  paid  for  in  gold,  was  far  greater  than  the  fall 
in  the  prices  of  domestic  commodities.  The  domestic  manufacturer 
was  suddenly  called  upon  to  compete  with  the  foreign  market  when 
the  advantage  was  some  thirty  or  forty  per  cent,  in  favor  of  the  for- 
eigner. 

It  was  evident  under  these  circumstances  that   domestic  fabrics 


THE  TARIFF.  125 

must  fall  oif,  and  that  large  quantities  of  foreign  goods  would  flow  in 
to  take  their  place.  This  led  to  enormous  importations,  and  it  pro- 
duced a  very  large  gold  revenue  during  the  last  year.  But  such  a 
revenue  can  not  exist  longer  without  utter  destruction  to  our  producing 
interests.  It  is  also  clear  that  if  the  present  relative  condition  of  the 
prices  of  labor,  commodities,  and  food,  is  maintained,  nearly  all  our 
domestic  manufactures  nnist  cease  to  exist.  It  is  impossible  under  the 
present  rates  to  maintain  domestic  manufactures  unless  one  of  two 
things  occurs :  either  the  price  of  labor  must  fall,  or  the  price  of  gold 
must  rise.  The  numerous  gentlemen  who  submitted  the  result  of  their 
observations  to  the  Committee  on  Finance  admitted  that  if  they  could 
reduce  the  price  of  labor  they  could  also  reduce  the  price  of  their  fab- 
rics, and  without  additional  duties  compete  with  the  foreign  manufac- 
turei's  ;  but  they  all  said  that  was  impossible  ;  the  laborer  now  was  get- 
ting barely  enough  to  maintain  life ;  there  were  indeed  strikes  all  over 
the  country ;  sonic  ])e(*uliar  branches  of  industry  Avere  able  to  pay  very 
large  prices  for  labor,  but  in  many  cases,  especially  with  the  woolen 
and  some  other  interests,  the  price  of  labor  had  not  advanced  in  pro- 
portion to  the  price  of  food,  so  that  the  laborer  was  really  receiving 
less  now  than  he  did  before  the  war,  although  nominally  he  had  dou- 
ble thtt  wages  he  had  before.  The  reason  was  that  the  prices  of  food, 
of  clothing,  and  of  all  the  commodities  he  consumed,  have  not  declined 
sutticiently  to  enable  him  to  live  uj)on  a  less  sum  of  nominal  money. 

If  the  present  tarilf  hnv  be  continued  in  force  we  cannot  ex2)ect  it 
to  yield  more  tlian  one  hundred  and  twenty-five  to  one  hundred  and 
thirty  million  dollars.  It  is  clearly  necessary,  then,  looking  at  this 
subject  simply  in  a  revenue  point  of  view,  to  increase  the  duties  on 
imported  goods  and  to  i-eceive  a  lai'ger  amount  of  duties  in  gold. 

It  is  not  necessary  for  me  to  picture  the  disastrous  consequences 
that  would  result  to  this  countiw  if  we  failed  to  pay  our  interest  in 
gold — failed  to  meet  our  obligations.  The  absolute  necessity  that 
Aveighs  upon  us  is,  scrupulously  to  observe  the  public  faith.  During 
the  war  we  were  compelled  to  nuike  contracts  that  may  appear  to  our 
})eople  to  be  onerous  ;  and  yet  any  man  of  ordinary  jiatriotism  feels 
that  we  must  observe  those  contracts  to  their  fullest  extent.  It  is  evi- 
dent, therefore,  that  an  absolute  necessity  rests  upon  us  to  raise,  by 
some  mode  of  taxation,  an  amount  of  money  suflicient  to  enable  us  to 
meet  our  public  engagements.  The  weight  of  these  engagements  has 
never  yet  rested  on  the  people  of  this  country.  The  reason  has  been 
that  the  interest  on  half  the  public  debt  was  payable  and  paid  in  paper; 
but  by  the  very  tenns  of  our  obligations  the  whole  of  that  interest  will 
soon  be  payable  in  gold  ;  and  then  we  must  meet  the  burden  that  Avill 
come  upon  us  of  paving  it  in  gold. 

If  your  tariif  shoirld  yield  but  81^0,000,000  in  gold  when  we  have 
to  pay  8140,000,000  in 'gold,  the  Secretary  of  the  Treasury  will  be 
compelled  to  go  into  the  open  market  and  buy  820,000,000  of  gold  to 
meet  the  deticiency.  AVhat  Avonld  then  be" our  financial  condition? 
If,  instead  of  selling  gold  now  day  by  day,  he  were  compelled  to  borrow 
or  buy  it  in  the  open  market  to  meet  the  interest  on  the  public  del)t, 
wliat  would  be  the  consequence  ?     The  price  of  gold  would  rise.     The 


126  SPEECHES  AND  REPORTS  OF  JOUN  SHERMAN. 

public  engae'ements  could  be  uiet  only  by  a  sale  of  our  securities  in  a 
foreign  mai-ket.  That  would  1)e  the  saddest  spectacle  that  could  possi- 
bly be  presented.  It  is  manifest,  therefore,  tiiat  we  must  levy  such 
duties  upon  imported  goods  as  will  place  us  beyond  all  danger  of  fail- 
ing to  meet  our  obligations. 

'Then,  Mr.  President,  when  you  come  to  apply  the  duties  to  the 
various  articles  of  importation,  it  becomes  a  simple  matter  of  routine. 
I  shall  not  waste  much  time  in  going  into  the  various  details  now,  be- 
cause the  questions  will  come  up  from  time  to  time,  as  they  are  pre- 
sented ;  but  there  are  certain  matters  uj>on  which  the  Committee  have 
acted  that  it  would  be  well  to  state  in  general  terms. 

The  most  ol)vi()us  sources  of  revenue  in  a  tariff  bill  are  items  usually 
classed  as  luxuries.  In  levying  duties  upon  these  articles  there  is  but 
one  rule  laid  down,  not  merely  by  the  English  and  French  writers,  l)ut 
by  every  nation  that  attempts  to  raise  a  revenue  from  imports,  and  that 
is  to  levy  as  high  a  rate  as  possible  on  them  without  reducing  their 
consumption.  The  luxuries  are  mostly  contained  in  three  items : 
spirits,  wines,  and  tobacco.  These  are  undoubtedly  the  first  objects 
\Yhicli  should  be  taxed  ;  and  in  most  countries,  but  especially  in  Eng- 
land and  France,  they  yield  a  very  large  portion  of  the  revenue.  We, 
however,  are  unhap]iily  placed  in  regard  to  these  articles,  as  we  produce 
them  ourselves.  We  make  our  own  whisky  and  ])rodu('e  our  own 
tobacco  ;  and  therefore  we  do  not  and  can  not  look  to  these  items  as  so 
great  a  source  of  revenue  as  they  do  in  other  countries,  where  they 
produce  no  tobacco,  but  impiirt  all  they  use,  and  where  it  consequently 
can  be  taxed  at  the  custom-house. 

The  rates  of  duty  prescribed  by  the  Senate  amendment  on  these 
articles  are  substantially  the  rates  of  duty  prescribed  by  the  House  bill, 
except  in  one  important  particular — in  the  article  of  wine.  It  M'as 
found  on  examinati(^n,  and  it  is  shown  clearly  by  Mr.  Wells's  report, 
tliat  M'ine  of  a  cheap  quality,  really  inferior  to  our  ordinary  cider,  is 
imported  in  enormous  quantities  at  the  valuation  of  less  than  twenty 
cents  a  gallon,  and  pays  a  duty  of  some  twenty  or  thirty  cents,  and  is 
sold  to  our  people  in  n'lany  cases  at  four  dollars  a  dozen  bottles,  or 
about  one  dollar  a  gallon.  This  is  really  not  the  wine  of  France,  or 
the  wine  of  the  country  from  which  it  purports  to  come,  but  an  adul- 
terated article  prepared  for  the  American  market,  having  no  market 
value  in  the  country  of  its  production,  and  sent  here  at  a  merely  nom- 
inal price.  It  is  found  that,  by  the  operation  of  the  present  tariff,  the 
Government  gained  comparatively  little  revenue  from  it.  Last  year 
the  revenue  from  wines  amounted  to  about  four  millions.  The  Com- 
mittee have  proposed  to  substitute  a  uniform  tax  of  fifty  cents  a  gallon, 
which,  in  my  opinion,  is  rather  too  small,  but  which  will  yield  a  nmch 
larger  sum  than  the  present  ad  valorem  duty.  J  am  inclined  to  think 
that  while  a  larger  rate  of  duty  would  probably  prevent  the  importa- 
tion^ of  a  considerable  portion  of  the  wine,  the  amount  of  revenue 
received  would  be  greater  even  on  a  smaller  quantity.  The  Commit- 
tee thought  proper  to  adopt  a  specific  duty  of  fifty  cents  a  gallon,  and 
I  am  willing  to  try  the  experiment.  In  regard  to  tobacco  the  law  is 
left  substantially  as  it  is,  except  in  regard  to  the  single  item  of  cigars, 


THE  TARIFF.  I07 

on  which  the  rate  is  somewhat  reduced  because  it  was  found  th^it  the 
present  rate  tended  to  prevent  importation  and  to  promote  smugghno-. 

The  next  items  which  are  always  regarded  in  framing-  a  tariS  bill 
are  such  articles  of  common  use  as  are  called  comforts,  or  perhaps  lux- 
uries— in  this  country  they  are  the  comforts  of  all  classes  of  the  people 
— sugar,  tea,  and  coffee.  The  House  of  Eepresentatives,  I  think  witli- 
out  carefully  examining  tlie  subject — certainly  it  was  done  witliout  the 
sanction  of  the  Connnittee  of  Ways  and  Means — threw  off  one  half 
the  duty  on  tea  and  colfee,  on  the  ground  that,  as  tea  and  coffee  were 
used  by  all  classes  of  our  people,  Ave  ought  not  to  tax  them  so  high. 

Tlie  truth  is  that  the  ad  valorem  tax  on  both  coffee  and  tea  is  far 
below  the  general  average  of  our  tariff  laws,  six  cents  a  pound  on  cof- 
fee and  twenty-live  cents  a  pound  on  tea,  amounting  to  about  from 
thirty  to  iifty  per  cent,  ad  valorem.  If  we  had  no  need  of  revenue, 
if  Me  were  in  a  position  to  throw  off  taxes,  if  we  had  no  system  of  in- 
ternal taxation,  if  we  had  no  taxes  more  oppressive  and  more  burden- 
some than  those  on  tea  and  coffee,  they  would  be  the  first  we  should 
throw  off  ;  but  it  is  manifestly  improper  now  to  dispense  with  a  revenue 
of  eight  or  ten  million  dollars  merely  to  relieve  our  people  from  j)aying 
a  tax  that  does  not  weigh  heavily  upon  them.  By  doing  so  we  would 
compel  the  imposition  of  Sl2,<i(»u.ouo  in  ])aper  money  upon  our  domes- 
tic productions.  The  ("oniiiiittee  on  Finance,  therefore,  thought  it 
wise  to  restore  the  old  rate  of  taxation,  and  that  yields  on  the  articles 
I  have  already  named — wines,  tobacco,  spirits,  sugar,  tea  and  coffee — 
from  fifty-five  to  sixty  million  dollars,  or  about  two  fifths  of  all  the 
revenue  that  is  necessary  to  be  pi-oduced  from  imported  goods.  These 
articles  are  more  staj)le  in  their  yield,  more  uniform  in  tlieir  consump- 
tion than  any  other  articles  on  the  list.  Although  used  to  some  extent 
by  all  the  people,  the  great  body  of  them  are  used  by  those  who  are  able 
to  pay  for  them.  I>esides,  the  duties  on  these  articles  are  more  easily 
and  more  surely  collected.  The  duties  are  specific,  and  there  can  be 
under  this  bill  no  undervaluation.  Besides,  the  articles  are  heavy ; 
they  can  not  be  smuggled  in  ;  their  quantity  is  easily  ascertained. 
They  are  articles  that  in  all  countries  are  looked  upon  as  the  main 
sources  of  revenue.  We  cannot  afford  to  throw  off  now  a  certain 
revenue  of  810,000,000.  At  a  time  when  we  are  compelled  to  levy 
internal  taxes  upon  every  branch  of  our  industry,  when  the  widow 
and  the  orphan,  when  the  fanner  and  the  manufacturer,  when  the 
Ldjoring  man  and  all  classes  of  our  citizens  are  compelled  to  jjay  large- 
ly increased  prices  for  their  food  and  clothing  by  our  system  of  inter- 
nal taxation,  we  certainly  ought  not  to  throw  off  this,  the  easiest  and 
best  form  of  taxation. 

We  come  now,  Mr.  President,  to  the  duties  on  manufactures,  and 
that  for  the  first  time  presents  the  question  of  protection.  In  regard 
to  the  articles  I  have  already  discussed,  although  we  do  produce  to- 
bacco and  wine  in  this  country,  the  question  of  protection  is  not  neces- 
sarily involved,  and  we  regard  simply  the  question  of  revenue. 

it  is  necessary  in  levying  duties  to  discriminate  in  favor  of  our  own 
industry  on  all  articles  that  can  be  produced  in  this  country  by  the  or- 
dinai-y  application  of  skill  and  labor.     It  is  manifestly  the  duty  of  the 


128  SPEECHES  AND   REPORTS   OF  JOHN  SHERMAN. 

country  to  protect  American  industry  to  that  extent,  not  simply  on  ac- 
count of  the  old-fashioned  argument  that  we  used  to  have  before  the 
war,  that  as  a  policy  it  is  better  to  diversify  our  industry,  and  manufac- 
ture all  that  is  necessary  for  our  own  consumption,  but  on  other  "grounds. 
We  must  now  protect  American  mamitactures,  not  merely  against  for- 
eii>-n  competition,  but  also  against  the  elfect  of  our  own  laws.  This  is 
really  all  the  protection  they  now  need. 

If  you  converse  with  intelligent  men  engaged  in  the  business  of 
manufacturing,  they  will  tell  you  that  they  are  willinjj^  to  com2)ete  with 
England,  France,  Germany,  and  all  the  countries  of  Europe,  at  the  old 
rates  of  duty.  If  you  reduce  their  products  to  a  specie  basis,  and  put 
them  upon  the  same  footing  they  were  on  before  the  war,  the  present 
rates  of  duty  would  be  too  high.  It  would  scarcely  be  necessary  for 
any  branch  of  industry  to  be  protected  to  the  extent  of  the  present 
tariff  law.  They  do  not  ask  protection  against  the  pauper  labor  of  Eu- 
rope, but  they  ask  protection  against  the  creation  of  our  own  laws. 
These  are  our  paper  currency  and  our  internal  taxation. 

Foreign  cai)ital  in  Canada,  and  elsewhere,  is  not  compelled  to  cany 
on  business  under  the  dejjressing  intluences  that  surround  us.  Manu- 
facturers abroad  pay  no  internal  taxes ;  they  do  not  have  to  buy  with 
paper  money  at  the  inflated  prices  always  ]>roduced  by  paper  money. 
Take  the  case  of  the  manufacturer  of  iron.  If  he  were  at  liberty  to  hire 
his  labor,  buy  his  provisions,  and  the  articles  which  enter  into  tlie  pro- 
duction of  iron,  upon  the  gold  basis,  he  could  compete  with  the  labor 
of  Europe.  The  advantages  of  freight  and  other  advantages  would 
enable  him  to  do  it.  But  if  you  compel  him  to  pay  two  hundred  per 
cent,  for  his  food — and  more  than  half  the  cost  of  all  the  iron  produced 
in  this  country  is  food — if  you  compel  him  to  pay  largely  increased 
prices  for  clothing  for  his  laborers ;  if  you  add  largely  to  the  cost  of 
everything  that  enters  into  the  elements  of  his  production,  as  a  matter 
course  he  can  not  compete  with  those  M'ho  are  not  subjected  to  similar 
burdens.  It  is  not  British  or  foreign  competition  that  produces  distress 
among  the  manufacturing  interests  of  this  country  at  this  time;  it  is 
the  eifect  of  our  laws. 

The  chief  evil  arises  from  a  depreciated  currency.  The  inevitable 
eifect  of  paper  money  is  to  advance  prices  far  beyond  the  difference 
between  paper  and  gold,  and  indeed  it  is  sometimes  held  to  be  one  of 
the  virtues  of  paper  money  that  it  does  advance  prices  and  give  higher 
wages  to  labor.  I  do  not  wish  now  to  enter  into  an  argimient  on  that 
question ;  but  we  know  that  the  existence  of  paper  money  does  tend  to 
raise  the  prices  of  commodities  in  this  country,  and  that  the  American 
manufacturer  can  not,  with  paper  money  and  with  high  prices  caused 
by  taxation,  compete  with  foreign  productions.  What,  then,  has  he  a 
right  to  ask  ?  He  has  a  right  to  ask  that,  if  the  laws  impose  upon  him 
additional  burdens,  they  should  give  him  additional  protection.  That 
is  the  demand  made,  and  it  is  impossible  to  resist  it. 

It  may  be  asked  then,  why  continue  our  present  paper  money ;  why 
continue  our  internal  taxation  ?  I  wish  we  could  dispense  with  them  ; 
but  certainly  it  is  now  impossible.  If  we  could  come  back  to-morrow  to 
the  specie  standard,  and  remove  all  the  taxes  that  we  have  imposed  upon 


TEE   TARIFF.  •  129 

our  labor,  we  should  all  be  glad  to  do  it.  I  suppose  there  is  not  a  Sen- 
ator within  the  sound  of  my  voice  who  will  not  admit  that  a  specie 
basis  is  the  natural  condition  of  trade  ;  that  for  a  currency  there  ought 
to  be  something  stable  and  intrinsically  valuable,  made  so  by  the  labor 
necessary  to  produce  it.  Everybody  admits  that  gold  and  silver  are  tlie 
only  real  standard  of  value  ;  that  that  which  regulates  exchanges  must 
be  the  production  of  lal)or.  (iold  and  silver  are  the  product  of  labor 
in  its  most  permanent,  convenient,  and  unclianging  form,  and  constitute 
tlierefore  the  best  standard  of  currency.  But,  Mr.  President,  we  were 
driven  to  the  use  of  paper  money :  we  could  not  have  carried  on  the 
war  without  it ;  the  circumstances  by  which  we  were  surrounded  com- 
pelled us  to  resort  to  it ;  and  I  believe  that  every  sensilde  man  M'ho  ex- 
amines our  affairs  nuist  admit  that  without  the  free  use  of  our  credit, 
coined  into  money,  we  could  not  have  carried  on  the  operations  of  the 
v/ar,  because  we  should  not  have  had  a  circulating  medium  with  which 
to  pay  our  soldiers  for  their  services,  and  to  feed  their  wives  and  chil- 
dren while  they  were  away  irom  them. 

It  is  sometimes  said  the  foreigner  has  to  pay  his  duties  in  gold, 
while  tlie  manufacturer  ])ays  his  taxes  in  paper  money,  and  also  pays 
the  additional  cost  of  labor  in  paper  money,  and  they  say  the  difference 
between  gold  and  paper  money  is  a  sufficient  protection.  That  argu- 
ment would  be  valid  but  for  this  important  fact,  that  the  price  of  labor 
and  of  commodities  is  far  more  advanced  than  the  price  of  gold.  Gold 
is  the  chea])est  commodity  in  the  market.  The  importer  has  the  bene- 
lit  of  that  condition  of  affairs ;  he  has  a  cli^cr^millation  in  his  favor,  be- 
cause while  the  cost  of  American  manufactures  has  increased  about  a 
hundred  per  cent.,  the  price  of  gold  is  only  aliout  thirty-six  per  cent, 
above  that  of  paper.  It  is  apparent,  then,  that  the  system  of  paper 
money  is  a  discrimination  in  favor  of  the  importer  of  foreign  goods. 
That  discrimination  was 'made  manifest  in  its  effects  by  the  enormous 
importations  made  during  the  past  year;  and  l)y  the  fact  that  when 
gold  went  down  twenty-five  per  cent.,  importations  increased,  while 
the  prices  of  domestic  conmiodities  and  of  labor  did  not  materially  fall 
during  that  time.  AVhile  gold  went  down  from  two  hundred  to  one 
hundred  and  twenty-five,  the  price  of  labor  was  not  materially  affected. 
The  large  demand  for  foreign  and  domestic  supplies  kept  up  the  mar- 
ket. Thus  the  manufacturer  met  a  competition,  not  growing  out  of 
foreign  labor,  but  resulting  from  our  own  laws,  which  prescribed  cur- 
rency for  him  and  gold  for  the  importer. 

I  do  not  know  that  I  have  made  myself  understood  ;  but  this  is  the 
leadinir  reason  whv  it  is  necessary  to  give  to  the  American  producer,  m 
all  the  different  stages  of  production,  some  countervailing  protection  to 
balance  the  effect  of  paper  monev.  . 

Another  reason  is,  that  the  system  of  internal  taxation  which  our 
necessities  compelled  us  to  adopt,''throws  upon  the  American  producer 
an  enormous  burden  which  the  foreigner  does  not  have  to  bear.  Take 
the  case  of  a  shop  or  a  mill  in  Canada,  on  our  frontier,  where  labor  is 
one  half  what  it  is  here :  do  you  suppose  that  an  American  producer 
can  compete  with  the  Canadian  manufacturer?  Take  the  case  of  Eng- 
land, which  is  more  striking  yet,  where  by  a  long  existing  system  they 
9 


130  SPEECHES  AND   REPORTS   OF  JOHN   SHERMAX. 

have  reduced  the  cost  of  production  to  the  lowest  possible  limit,  where 
by  their  plan  of  taxation  they  favor  all  manner  of  production,  where 
the  cost  of  labor  is  reduced  and  the  duties  imposed  amount  to  but  little, 
and  where  the  manufacturer  gets  his  raw  material  free:  is  it  possible 
for  the  American  to  compete  with  the  English  manufacturer  when  he 
has  to  contril)ute  to  So  10,000,000  internal  taxation?  It  is  impossible. 
We  were  compelled  by  the  necessities  of  war  to  levy  directly  a  tax  of 
five  per  cent,  on  his  productions;  we  levy  a  tax  of  five  per  cent,  on  his 
income;  we  levy  a  large  tax  upon  every  element  Avhich  enters  into  the 
cost  of  his  labor.  It  has  been  estimated,  and  I  think  correctly,  that  the 
actual  taxes  upon  American  manufactures,  direct  and  indin-ct,  amount 
to  about  twenty  per  cent,  on  the  ca}>ital  enij)loyed.  j\Ir.  AVells,  in  his 
report,  clearly  shows  that  the  various  taxes  levied  upon  cotton  manu- 
factures amount  to  about  twenty-two  per  cent,  upon  the  capital  em- 
ployed. 

Is  it  possible  for  American  manufactures  to  be  maintained,  for 
American  workshops  to  be  continued,  unless  the  (xovernment  is  willing 
to  give  some  protection  against  its  own  laws  i  Can  the  maimfactiirer 
pay  these  enormous  taxes  upon  the  basis  of  paper  money,  and  yet  com- 
pete with  labor  in  Europe,  where  the  manufacturer  pays  no  taxes, 
where  he  has  his  raw  material  free,  where  every  element,  is  in  his 
favor  ?  I  think  it  is  impossible.  If,  therefore,  we  would  protect  our 
American  industry  against  our  own  laws,  we  must  make  the  duties  on 
foreign  goods  connnensurate  with  the  taxes  imposed  upon  our  manu- 
factures, and  thus  enable  them  to  continue  the  competition  that  has 
been  carried  on  for  years. 

It  is  not  necessary  for  me  to  go  into  familiar  facts  to  show  that  the 
eifect  of  domestic  competition  is  to  clieapen  the  price  of  ])roducts. 
Under  the  stimulus  of  our  laws  great  numbers  of  American  manufac- 
tures have  grown  up  with  a  rai)idity  unexampled  in  the  history  of  any 
country.  England  was  more  than  one  hundred  years  in  building  up 
her  system  of  manufactures.  Oui-s  have  been  built  up  since  1828.  At 
that  time  Xew  England  was  a  mere  commercial  community  ;  now  it  is 
a  manufacturing  community.  At  the  time  when  the  great  friend  of 
America,  the  Earl  of  Chatham,  said  that  the  laws  of  England  should  be 
so  framed  that  no  shoe-nail  could  be  made  in  America,  we  could  scarcely 
make  one.  We  imported  everything.  There  was  scarcely  a  factory  in 
America ;  and  so  it  continued,  without  slight  progress,  for  fifty  years. 
American  manufactures  took  their  birth  in  1828  under  the  heavy  re- 
strictive duties  of  the  tarilf  law  of  that  year.  Since  that  time  they 
have  grown  to  amazing  proportions,  until  they  are  now  in  value  ten 
times  the  importations  of  the  country. 

I  was  somewhat  surprised  at  the  tables  produced  by  my  friend  from 
Xew  Jersey  yesterday,  and  especially  the  table  prepared  by  Mr.  Del- 
mar,  show  that  in  1860  the  annual  productions  of  this  country — 
agricultural,  mechanical,  etc. — amounted  to  $6,700,000,000  in  gold.  I 
thought  it  was  pretty  large,  and  I  should  like  to  see  the  elements  of 
Mr.  Delmar's  figures ;  but  he  foots  up  8'^jT55,587,957.  A  large  pro- 
portion of  these  productions  were  in  manufactures  which  have  been 
built  up  within  the  last  thirty  or  forty  years. 


THE   TARIFF.  131 

Of  the  §310,000,000  of  taxes  levied  upon  productions  in  the  form 
of  internal  revenue,  about  $170,000,000  is  paid  directly  or  indirectly 
l)y  manufactures.  True  it  is  finally  collected  again  from  the  consumer ; 
but,  as  it  is  added  to  the  price  of  the  commodity,  the  manufacturer 
must  reduce  his  price  to  compete  with  the  foreigner,  or  he  must  aban- 
don the  market. 

Under  these  circumstances  it  is  apparent  that  the  present  rates  of 
duty,  althougli  higher  than  they  have  ever  been  before,  must  be  in- 
creased, or  there  must  be  a  reduction  in  the  price  of  labor  in  this  coun- 
try, or  an  increase  in  the  price  of  gold.  I  think  we  have  thoroughly 
tried  the  last  experiment.  Then,  unless  we  give  to  the  American 
manufacturer  some  increased  protection  against  our  laws,  the  price  of 
labor  must  fall  and  tlie  price  of  food  rise.  The  people  will  have  to 
meet  the  internal  taxes  with  less  daily  pay,  and  the  result  will  be 
that  we  shall  have  distress  and  complaints :  not  repudiation,  I  know, 
but  dissatisfaction  with  the  laws.  While  imported  goods,  the  products 
of  foreign  industry,  are  flowing  into  this  country  in  great  quantities, 
our  own  industry  is  being  depressed,  our  manufactures  broken  down, 
our  shops  shut  up. 

Now  I  come  to  a  part  of  this  bill  \Yl»icli  is  the  only  one  which  in- 
duced me  to  engage  in  this  discussion,  and  that  is  the  part  relating  to 
the  proposed  duties  on  agricultural  ])roducts.  Here  there  is  a  conflict 
of  interest  between  agricultural  and  manufacturing  industry,  or  at  least 
there  is  su]-»posed  to  be ;  but  I  ])elieve  there  is  not  and  ought  not  to  be. 
The  manufacturer  generally  looks  upon  everything  he  has  to  buy  as  a 
raw  material,  and  everything  that  he  has  to  sell  as  a  finished  product. 
The  revenue  conmiissioncr  has  fallen  into  the  same  error,  and  he  calls 
wool  a  raw  product.  AVool  is  not  a  raw  product  to  the  farmer,  though 
it  may  be  to  the  manufacturer,  because  to  the  faraier  it  is  the  completed 
product  of  his  industry.  So  of  tlie  cereals ;  wheat,  flaxseed,  rye,  barley 
are  not  raw  materials  to  the  farmer,  but  they  are  raw  materials  to  the 
manufacturer  who  consumes  them.  They  are  the  result  of  labor ;  they 
are  the  complete  product  of  the  labor  of  the  farmer.  His  raw  material 
is  his  land  and  his  lal)or,  while  his  product  is  wool,  wheat,  barley,  etc. 

Mr.  President,  if  in  the  present  condition  of  affairs  we  levy  duties 
on  imported  goods  so  as  to  give  the  farmer  no  protection  against  com- 
peting labor,  we  do  an  act  "of  gross  injustice,  and  such  a  tariff  cannot 
l)e  enduring.  We  very  well  know  that  the  great  body,  I  believe  four 
fifths,  perliaps  five  sixths,  of  our  people,  are  engaged  in  agriculture. 
Tliey  usually,  on  account  of  the  weight  and  bulk  of  their  articles,  do 
not  require '^ anything  like  the  protection  that  other  industries  do,  be- 
cause the  very  bulk  of  their  products  gives  them  an  advantage  in  the 
home  market.  But  if  they  are  compelled,  on  ordinary  articles  of  their 
production,  to  compete  on  equal  terms  with  the  cheap  labor  of  other 
countries  thev  will  naturally  be  dissatisfied. 

How  do  you  maintain  the  doctrine  of  protection  in  a  tariff?  You 
sav  to  the  farmers,  "  Protect  our  industry,  build  up  our  manufactures, 
and  we  will  start  shops  in  your  neighborhood  and  consume  your  prod- 
ucts ;  we  will  give  you  tlie  benefit  of  a  home  market."  That  is  all  very 
well  and  very  plausible,  and  it  has  induced  the  great  body  of  the  farm- 


132  SPEECHES  AND  REPORTS  OF  JOHN   SIIERMAX. 

ing  community  in  tliis  country  to  be  wliat  are  called  protectionists. 
Ohio,  always  an  agricultural  State,  was  a  protectionist  State,  and  the 
farmers  were  prol)ably  as  nmch  pn^tectionists  as  any  other  class.  AVhy  ? 
Because  they  believed  that  by  building  up  manufactures  in  this  country 
they  would  have  the  benetit  of  the  home  market.  But  if  a  manufac- 
turer in  Ilhode  Island  who  consumes  a  million  pounds  of  wool,  after  he 
has  got  the  benetit  of  all  the  protection  he  wants  on  his  woolen  goods 
and  has  raised  the  price  of  them  to  the  farmer  wdio  has  to  buy  them, 
says,  "  I  can  buy  my  wool  cheaper  in  South  America,  and  am  opposed 
to  duties  upon  wool,  because  it  is  a  raw  material,''  you  will  find  that 
the  farmer  will  be  discontented.  You  must  extend  protection  to  every- 
thing that  is  made  up  by  labor,  and  you  cannot  stoj)  short  of  it.  If 
wool  is  a  raw  article  to  the  manufacturer,  cloth  is  a  raw  article  to  the 
tailor.     The  j^rincijde  is  correct  as  to  wool,  or  it  is  wrong  as  to  cloth. 

In  ordinary  times  protection  is  not  necessary  to  the  farmer,  because 
with  the  advantage  he  possesses  in  a  rich  soil  and  cheap  land  he  can 
compete  with  the  products  of  other  countries.  Our  agricultural  indus- 
tries do  not  often  want  protective  duties  and  have  rarely  called  on 
Congress  for  them  ;  but  now,  when  the  prices  of  all  connnodities  are 
raised  by  liigli  extraordinary  prices,  the  farmer  has  a  nglit  to  demand 
and  does  demand  that  the  same  protection  should  be  extended  to  him 
as  to  other  industrial  interests. 

I  wish  in  this  connection  to  make  some  reference  to  the  report  of 
Mr.  Wells  on  wool,  and  I  do  it  with  sincere  respect  for  him,  because  I 
know  from  personal  observation  that  he  is  not  only  industrious  and 
able  in  the  discharge  of  the  duties  imposed  upon  him  by  law,  but  I  be- 
lieve that  he  is  as  well  qualified  from  his  experience  and  intellect  to 
discharge  those  duties  as  any  man  in  the  United  States  ;  but  at  the  same 
time,  in  regard  to  some  interests  that  affect  my  own  constituents,  he  has 
fallen  into  many  errors. 

He  is  opposed  to  the  proposed  increase  of  the  duty  on  wool,  and 
has  supported  his  opinion  with  all  the  reasons  that  can  possibly  be 
given,  and  he  bases  it  mainly  upon  the  assertion  that  every  cent  added 
to  the  duty  on  wool  costs  the  consumer  of  the  wool  S6,Vh)0,000,  and 
therefore  that  a  duty  of  ten  cents  a  pound  would  add  to  the  cost  of  the 
wool  and  woolens  consumed  in  this  country  some  sixty  million  dollars. 
There  is  a  great  deal  of  fallacy  in  this  mode  of  reasoning.  Suppose 
you  were  to  apply  that  principle  to  another  protective  duty.  Suppose 
we  should  turn  round  to  the  iron  men  and  say,  "  Here,  your  duties  on 
iron  add  to  the  cost  of  all  the  iron  jDroduced  in  this  country  the  full 
amount  of  duty,  and  the  consumer  has  to  pay  that  additional  value,  and 
all  this  costs  the  people  of  the  United  States' too  nmch."  If  that  is  the 
mode  of  reasoning,  there  is  an  end  of  all  protection.  You  must  sliow 
that  all  classes  of  t<lie  community  get  the  benefit  of  this  principle  or  you 
must  abandon  it  altogether.  You  cannot  maintain  that  it  is  a  hardship 
for  the  w^ool  interest  to  demand  protection  any  more  than  the  iron  or 
other  interests.  Take  the  case  of  cotton  manufactures,  the  duties  on 
which  are  fixed  in  tliis  bill  at  from  fifty  to  sixty  per  cent.  Undoubt- 
edly to  a  considerable  extent  these  duties  are  added  to  the  cost  of  the 
articles  to  the  consumer;  and  I  might  make  a  formidable  array  of 


THE  TARIFF.  133 


fioiires  to  show  that,  in  order  to  sustain  the  manufacturers  who  are  the 
constituents  of  my  friend  from  Rhode'  Island,  the  people  of  Ohio  are 
compelled  to  contribute  out  of  their  pockets  a  number  of  millions  of 
dollars.     That  would  not  be  a  fair  mode  of  argument,  and  yet  it  is 
precisely  the  mode  of  argument  with  which  we  are  met  in  regard  to 
the  duty  on  wool.     It  is  strange  that  the  manufacturers,  who  have  been 
aided  by  protective  duties,  should  resort  to  free-trade  arguments  when 
tlie  faruicrs  demand  a  far  less  rate  of  protection  than  they  have  received. 
But  there  is  an  element  of  en'or  in  the  computation  itself  as  well  as 
in  the   principle  of   the  computation.      The  Commissioner,  without 
o-iviug  us  the  basis  of  his  computation,  declares  that  there  are  one  hun- 
3red  and  seventeen  million  pounds  of  woolen  goods  manufactured  and 
consumed  in  this  country,  and  that  there  are  imported  thirty-three 
million  pounds  of  woolen  goods.     He  thus  puts  the  whole  quantity  of 
woolens  consumed  in  this  country  at  one  hundred  and  fifty  million 
pounds.     Then  he  says,  as  it  takes  four  pounds  of  raw  wool  imported 
into  this  country  to  make  one  pound  of  woolen  cloth,  therefore  the 
amount  of  wool  consumed  in  this  countrs'  must  be  six  hnndred  million 
pounds.     That  is  absurd.     The  largest  quantity  of  foreign  wool  im- 
ported into  this  country  in  one  year  was  never  over  eighty-four  milhon 
pounds,  and  the  average  is  about  sixty  millions  ;  the  largest  clip  of  wool 
ever  grown  in  this  country,  and  that  was  last  year,  was  one  hnndred 
million  pounds,  while  the  average  is  eighty  millions;  showing  but  an 
acr-rregate  of  one  linndred  and  eighty-four  million  pounds,  or  enough 
to  niake  forty-six  million  pounds  of  cloth  instead  of  one  hundred  and 
seventeen  million  pounds.  ^    -,  .    ,  •    i  •    ^i     £         t 

AVhat  is  the  use  of  taking  a  computation  of  this  kind  m  the  tace  ol 
plain,  palixible  facts  {  The  wool  imported  in  the  form  of  woolen  goods 
I  leave  out  of  view,  because  the  computation  is  that  one  hundred  and 
seventeen  million  pounds  of  woolen  goods,  aside  from  those  impx)rted 
are  consumed  in  this  country.  That  would  show  a  production  of  wool 
here  amounting  to  about  four  hundred  and  sixty-eight  million  pounds. 

The  wool-growers  never  pretended,  and  no  one  that  1  have  ever 
seen  pretended,  that  the  clip  of  this  country-  was  over  a  hundred  million 
pounds.  It  is  generally  estimated  at  eighty-four  or  eightv-live  millions, 
While  the  highest  quantity  of  wool  ever  imported  into  this  coumry  was 
but  eighty-four  millions,"'  and  the  average  but  sixty  millions,  iwo 
years  ago  it  was  only  forty  millions,  and  last  year  eighty-four  million 
pounds Vere  imported,  the  highest  importation  ever  made.    _ 

Let  us  examine  the  reasoning  upon  which  the  Commissioner  bases 
his  estimate.     He  says  : 

The  number  of  sets  of  woolen  maeliinerv  or  series  «f .  ^^^^^^„%^„"^P;^*J^^^r'^^ 
United  States,  rcrortc.l  to  the  Wool--Manutaotnrers'  Association  m  October  18b& 
was  4,100,  consun'in,'  2.252,545  pound,  of  sooure-l  u-oo   and  -^^^ftes  for  wool  pei 
week:  but  these  returns,  it  was  stated,  did  not  probably  indicate  more  than  ttiree 
fourths  to  four  fifths  of  the  sets  then  in  actual  operation. 

T>on  a  statement  that  in  a  certain  week  in  October  the  quantity 
consulned  in  the  woolen  factories,  then  driven  to  their  extreme  was  o 
much  and  then  multiplying  that  by  fifty-two  we  have  the  ^^^J  ^^^^ 
computation.     That  is  an  insufficient  mode  of  reasomng.     I  have  no 


134  SPEECHES   AND  REPORTS  OF  JOUN   SHERMAN. 

doubt  tluit  the  duty  on  wool  will  add  somewhat  to  the  cost  of  the 
woolens  consunied  bv  the  people  of  the  United  States.  To  what  extent 
it  is  difficult  to  say,  because  it  is  always  difficult  to  estimate  how  much 
of  the  duty  will  be  paid  by  the  importing  merchant,  how  much  by  the 
foreigner  who  raises  the  wool,  how  much  by  the  consumer,  and  how 
much  of  it  will  be  cheapened  by  the  increa^sed  manufacture  or  by  the 
increased  competition  in  domestic  products.  These  are  unknown  cpian- 
tities  about  which  men  may  theorize  as  much  as  they  choose.  I  take 
it  though  as  a  general  princi})le,  and  admit  beforehand  that  every  duty 
adds  to  the  cost  to  the  consumer. 

There  is  another  statement  here  made  in  regard  to  this  matter  in 
wliich  I  think  the  Commissioner  must  have  fallen  into  an  error,  and  I 
intend  to  call  his  attention  to  it  this  morning.  He  endeavoi-s  to  show 
that  the  wool  interest  is  a  prosperous  one ;  that  the  growth  of  wool,  is  a 
prosperous  and  proiitalde  branch  of  industry  in  this  country,  and  he 
quotes  from  a  gentleman  who  is  highly  esteemed  by  men  eni;aged  in 
this  business,  Mr.  Randall,  who  M'rote  a  book  called  the  "■practical 
Shepherd."     He  quotes  from  Mr.  Randall,  who  says : 

How  very  striking  is  the  fact  that,  during  thirty-eight  years  [ending  January  1, 
1862],  and  with  all  the  disturbing  causes  to  the  wool  market,  there  has  not  been  a 
single  year  in  which  tlie  average  price  (42'8)  for  the  wool  marked  "  medium,"  would 
not  now  i)ay  the  actual  cost  of  producing  our  heavy-fleeced  American  merino  wool*. 
...  Of  the  ]iroduction  of  how  many  other  of  our  great  staples  of  industry  can  as 
much  be  said  ? 

In  this  Mr,  Randall  says  that  the  average  price  they  have  received 
for  their  wool,  according  to  statements  up  to  a  certain  time,  was  forty- 
two  and  eight  tenths  cents  per  pound,  Mr.  Randall's  statement  was 
written  in  18G3,  and  was  based  upon  calculations  made  prior  to  January, 
1862,  and  prior  to  any  increase  on  the  price  growing  out  of  the  war. 
The  computation  made  by  him  was  litei-ally  true,  that  at  forty-two  and 
eight  tenths  cents  per  pound  for  wool,  the  average  rate,  the  business  of 
sheep-growing  would  be  a  remunerative  one.  If  the  wool-grower  now 
had  forty-two  and  eight  tenths  cents  per  pound  in  gold  for  his  wool — 
and  that  was  what  Mr.  Randall  was  talking  about — it  would  be  all  he 
wants,  all  he  could  ask.     But  now  tliLs  same  report  goes  on  and  says : 

The  present  prices  of  New  England,  New  York,  and  Ohio  unwashed  wools  (New 
York  price  current,  November  3,  1866)  range  from  thirty  to  forty-six  cents  per 
pound,  and  at  these  rates  it  is  claimed  that  the  business  of  wool-growing,  particu- 
larly in  the  States  of  New  York,  Pennsylvania,  and  Ohio,  is  very  far  from  remu- 
nerative. 

This  report  shows  that,  while  for  a  period  of  years  before  1862  the 
price  of  wool  was  forty-two  and  eight  tenths  cents  in  gold,  it  is  now 
less  than  that  in  currency.  Is  it  possible  that  the  wool-growers  can 
continue  their  industry  upon  this  basis  ?  Does  it  not  appear  from  the 
very  facts  here  stated  that  the  cost  of  that  wool,  and  of  the  labor  of 
its  production,  has  been  increased  by  the  paper  currency  and  internal 
taxation,  while  the  price  of  the  product  has  not  increased  ?  Can  you 
suppose  the  men  thus  engaged  in  an  industry  which  yields  one  hundred 
ixdllion  pounds  of  wool,  or  at  the  old  rates  §12,000,000,  can  carry 
it  on  without  some  protection  ?     The  manufacturer  in  South  America 


THE  TARIFF.  135 

can  buy  liis  wool  cheaper  than  he  can  in  Ohio.  The  cost  of  freight 
from  ()hio  is  as  great  as  the  cost  from  South  America — the  precise 
rates  I  can  not  tell — water  transportation  is  so  much  cheaper.  Is  it 
possible  for  the  wool-grower  thus  to  compete  ?  Unless  you  give  him  a 
protection  equivalent  to  the  advance  of  prices  since  we  have  substi- 
tuted paper  money  for  gold,  can  you  expect  him  to  be  satisfied  ?  The 
wool-growers  of  this  country,  as  a  rule,  are  among  the  small  farmers  of 
tlie  country.  Most  of  the  sheep  are  owned  in  small  flocks  of  from  one 
hundred  to  two  hundred.  Very  few  of  the  farmers,  comparatively, 
have  large  flocks.  AVhen  they  see  that  their  product,  upon  which  they 
rely  to  help  pay  internal  taxes,  has  not  advanced  in  price  one  cent  be- 
yond Avhat  it  was  at  the  beginning  of  the  war,  and  that  they  are  now 
with  insufficient  protection  called  upon  to  compete  with  South  Amer- 
ica and  all  the  clieaj)  wool-producing  countries,  you  must  expect  them 
to  be  dissatisfied. 

The  average  duty,  as  shown  by  tlie  tables  here,  paid  on  South 
American  wool,  is  a  little  over  four  and  a  half  cents  a  pound.  Certain 
wools  are  brought  in  at  three  cents;  certain  wools  at  six  cents;  certain 
wools  at  twelve  cents.  The  average  as  shown  by  the  tables  is  four  and 
a  half  cents.  The  gold  value  of  the  wool,  according  to  this  statement, 
was  before  the  war  f()rty-two  and  eight  tentlis  cents;  so  that  the  actual 
protection  which  the  farmer  now  gets  to  compensate  for  the  derange- 
ment of  the  cuiTcncv,  for  his  share  of  internal  taxes,  is  only  one  tenth 
of  the  cost  of  wool  in  18G2. 

When  these  two  rival  interests  met  together  in  a  convention  called 
by  the  manufacturers  themselves,  and  the  whole  matter  was  there  dis- 
cussed, it  was  agreed  between  them,  after  full  discussion,  that  the  rates 
of  duty  reported  l)y  the  Senate  bill  should  be  given  them,  and  they 
were  satisfied  Mitli  them,  and  have  never  called  them  in  question.  The 
manufacturers  then  made  the  claim  that  if  the  duty  was  j^ut  on  wool 
they  ought  to  have  a  corresponding  duty  on  the  cloth.  That  was  freely 
yielded.  The  principle  is  ])roper";  that  is,  if  a  duty  is  levied  upon  the 
raw  article,  an  equivalent  amount  should  be  added  to  the  duty  on  the 
product  in  order  to  enable  the  xYmerican  manufacturer  who  converts 
that  wool  into  cloth  to  compete  Mith  the  foreign  manufacturer.  I  trust 
that  in  the  present  tariif  the  arrangement  between  the  wool-growers 
and  the  wool-manufacturers  will  be  carried  out.  I  would  prefer  myself 
to  take  it  in  the  veiy  words  they  have  given  us,  so  that  if  they  are  not 
satisfied  hereafter  they  camiot  complain  of  the  proper  Committees  of 
Congress  for  any  mistake.  I  would  take  them  at  their  word.  I  think 
their  demand  is  a  reasonable  one,  and  I  would  be  willing  to  give  it  to 
them  as  they  ask  it,  so  that  if  there  is  anything  wrong  in  the  practical 
working  of  their  scheme  they  themselves  may  have  the  responsibility 
of  it. 

It  is  said,  I  know,  that  there  was  a  very  important  class  of  our  peo- 
ple not  consulted  when  this  arrangement  Mas  made.  That  is  true  :  the 
consumers  were  not  consulted,  and  the  consumers  have  to  pay  the  in- 
creased cost ;  but  all  other  l>ranehes  of  industry  in  which  these  same 
consumers  are  interested  are  sufiiciently  protected  by  the  duties  imposed 
by  this  bill.     The  duties  on  mooI  and  the  duties  on  all  agricultural 


136  SPEECHES   AXD   REPORTS   OF  JOHN   SHERMAN. 

products  provided  for  in  this  l>ill  are  less  per  cent,  ad  valorem  than  the 
duties  on  manufactures.  Tiiis  is  properly  so,  because  they  are  so  bulky 
that  they  protect  themsehes  in  great  measure,  and  because  on  account 
of  the  cheapness  of-  our  land  we  have  the  advantage  over  foreigners 
and  have  less  need  for  protection. 

Here,  in  order  to  save  me  from  addressing  the  Senate  again,  I  may 
sav  that  there  is  another  agricultural  interest  in  which  the  people  of 
Indiana  and  Ohio  arc  very  largely  interested,  and  that  is  tlaxseed.  Uy 
the  present  tariff,  with  which  they  are  much  dissatisfied,  the  duty  on 
flaxseed  is  a  little  less  than  eleven  cents  a  bushel.  There  is  a  nominal 
duty  of  sixteen  cents,  but  a  reduction  is  made  from  that  duty,  of  the 
drawback  on  the  cake  made  fr<»m  imported  seed,  which  reduces  the 
duty  in  favor  of  the  farmer  to  about  ten  and  a  half  cents.  The  effect 
of  that  drawback  is  that  cake  made  from  American  seed  is  not  worth 
as  much  in  Xew  York  by  five  cents  a  bushel  as  the  foreign  cake  of  the 
same  quality.  That  discrimination  is  made  against  our  own  industry. 
The  duty  then  is  really  less  than  eleven  cents  a  bushel,  and  at  present 
prices  it  is  only  about  five  per  cent,  ad  valorem  i  while  on  the  other 
hand,  on  flaxseed  oil,  wliich  is  nothing  but  the  expressed  juice  of  the 
flaxseed  imported  from  India,  there  is  a  duty  of  twenty-three  cents  a 
gallon,  or  what  is  equivalent  to  a  duty  of  about  fifty-one  cents  on  a 
bushel  of  seed,  so  that  the  discrimination  made  against  the  agricultur- 
ist is  about  forty  cents  a  bushel.  There  is  great  com])laint  al)out  this. 
That  the  crusher  ought  to  have  some  protection  there  is  no  doubt, 
though  I  think  myself  the  crushing  of  the  India  seed  is  one  of  those 
forced  unnatural  trades  that  can  only  be  sustained  by  a  very  high  rate 
of  taxation,  but  as  it  is  in  existence  I  am  willing  to  give  it  a  fair  pro- 
tection. That  is  one  point  of  difference  between  the  House  and  Sen- 
ate bill,  and  as  I  do  not  intend  to  enter  into  the  discussion  of  the 
question  hereafter  I  will  simply  say  that  the  House  had  the  subject 
before  them  a  long  time,  and  after  much  controversy  settled  it,  I  think, 
on  a  proper  basis,  by  givino;  thirty  cents  duty  on  the  seed  and  thirty 
cents  a  gallon  on  the  oil,  which  is  equivalent  to  a  protection  of  thirty- 
seven  and  a  half  cents  per  bushel  to  the  crusher  of  imported  seed.  If 
the  oil  is  imported  in  the  seed  it  will  pay  a  duty  of  thirty  cents  a 
bushel,  wliich  will  produce  two  and  a  quarter  gallons  of  oil  or  fourteen 
cents  a  gallon.  If  imported  as  oil  it  will  pay  a  duty  of  thirty  cents  a 
gallon,  giving  to  the  crusher  a  protection  of  'sixteen 'cents  a  gallon  for 
the  simplest  form  of  mechanical  labor.     Surely  this  is  enough. 

Mr.  President,  there  is  but  one  other  part  of  this  bill  to  which  I 
wish  now  to  call  the  attention  of  the  Senate,  and  that  but  for  a  few 
moments.  The  Secretary  of  the  Treasury  in  his  annual  report  states 
that  the  extent  of  the  undervaluations  and  fraudulent  importation  of 
foreign  goods  amounts  to  about  twenty  per  cent,  of  the  whole.  That 
this  is  true  is  kno^vii  to  every  one  in  trade.  In  certain  articles,  which 
are  solely  manufactured  for  the  American  market,  the  invoice  prices 
are  merely  nominal,  and  as  most  of  the  duties  are  ad  valorem  they 
pay  merely  nominal  amounts.  The  loss  from  this  source  and  from 
smuggling,  according  to  the  report  of  the  Secretary,  is  835,(K)O,00O  a 
year.     It  is  manifest  that  this  ought  to  be  corrected.     It  is  said  that  on 


THE   TARIFF.  137 

account  of  this  system  of  undervaluation  many  branches  of  our  foreign 
trade  have  got  into  the  hands  of  unprincipled  men.  Merchants  who 
liave  their  chief  office  al)road  invoice  their  goods  and  consign  tliem  to 
an  agent  here,  so  that  we  have  no  responsible  person  to  punish  for  a 
violation  of  onr  hiws.  The  present  remedy  is  to  seize  the  goods  and 
go  through  a  long  litigation. 

In  England  custom-house  oaths  are  not  recognized,  and  the  value 
of  imported  goods  is  ascertained  by  inspection.  If  in  the  opinion  of 
the  proper  appi'aisers  the  goods  are  undervalued,  the  Government  sim- 
ply says  to  the  importers,  '*  I  will  take  these  goods  at  your  price,  and 
allow  you  a  reasonable  protit  on  them,"  and  they  are  sold  for  public 
use.  The  result  lias  been  in  England,  I  am  told,  that  all  systems  of 
undervaluation  liave  been  broken  uj).  The  same  plan  has  been  adopted 
in  the  treaty  between  France  and  Italy,  a  copy  of  which  I  have  before 
me,  so  that  goods  imported  from  Italy  to  France,  or  vice  versa,  and 
wlien  received  at  the  custom-house  ascertained  by  inspection  to  be 
undei'valued  to  the  extent  of  live  per  cent.,  are  seized  and  sold  for  the 
(xox'ernment.  The  importer  receives  his  own  valuation  for  the  goods 
together  with  a  protit  of  live  j)er  cent.  If  he  complains  he  is  suffi- 
ciently answered  by  saying,  "  We  took  your  goods  at  your  own  price, 
at  your  own  valuation  ;  if  there  is  an  error  you  made  it  yourself." 
The  result  has  been  that  undervaluation  is  too  dangerous  to  be  practiced. 

This  device  has  been  aj)})licMl  in  many  cases  in  both  England  and 
France  with  great  advantage.  The  Committee  on  Finance  have  there- 
fere  introduced  into  the  bill  a  ])rovision  somewhat  similar  to  the  P^nglish 
regulation,  except  that  the  Engli.-h  law,  where  the  goods  sell  for  more 
than  ten  per  cent,  in  addition  to  the  valuation,  allows  the  custom-house 
officei-s  one  lialf  of  the  excess.  The  Committee  on  Finance  thought  it 
best  not  to  insert  that  feature,  for  the  present  at  lenst,  until  the  system 
was  tried.  The  section  contained  in  tliis  bill  authorizes  the  custom- 
house officers,  in  the  case  of  undervaluation  to  the  extent  of  ten  per 
cent.,  to  seize  the  goods  as  tlie  property  of  the  United  States  and  sell 
them.  If  tlie  importer  complains  about  it  he  is  paid  at  his  own  value, 
and  ten  per  cent,  allowed  him  for  proHts  and  for  exjienses  of  importa- 
tion and  sale. 

"With  these  general  observations  I  leave  this  bill.  Although  some 
portions  of  it  do  not  meet  my  views,  and  I  shall  probably  vote  for 
moditications,  yet  I  believe  the  bill  as  a  whole  will  be  beneficial.  The 
bill  of  the  House,  in  my  judgment,  was  defective  in  several  important 
particulars.  In  tlie  first  place,  by  throwing  off  half  the  duty  on  tea 
and  coffee,  it  reduced  the  duties  on  those  articles  more  than  we  can 
bear.  Another  objection  to  the  House  bill  Avas,  that  on  many  articles 
the  rates  of  duty  were  made  so  high  as  absolutely  to  prohiltit  their  im- 
]iortation,  and  consequently  to  utterlv  destroy  the  revenue  from  them. 
The  present  bill,  founded  upon  Mr.  Wells's  bill,  but  very  materially 
modified  by  the  Committee  on  Finance,  will  give  every  industry  of  the 
country  a  fair  and  reasonable  pnjtection.  It  will  not  reduce  the  aggre- 
gate re\'eiiue  from  manufactured  goods.  From  the  statements  made  to 
us  I  believe  that  under  it  every  industrial  interest  in  our  country  can 
be  ]>rosecuted  with  reasonable  "success  under  favorable  circumstances, 


138  SPEECHES  AXD  REPORTS  OF  JOHX  SIIERMxVN. 

and  yet  at  the  same  time  there  will  be  such  a  competition  between  the 
foreign  and  domestic  producer  as  to  yield  us  a  fair  revenue  on  imjiorted 
goods. 

Nor  am  I  alarmed  by  the  statement  made  by  my  friend  from  New 
Jersey  yesterday,  that  the  amount  of  goods  imported  into  this  country 
was  the  enormous  sum  of  $305,000,000.  We  must  import  goods  to 
get  revenue  ;  and,  when  I  reflect  that  $305,000,000  is  only  live  per  cent, 
of  the  magnificent  production  he  shows  we  have  annually  made  in  this 
country,  I  do  not  think  we  need  be  frightened  at  the  amount  of  imjKirted 
goods.  We  can  not  entirely  break  up  the  importation  of  goods  without 
surrendering  our  revenue.  AVe  dare  not  do  that.  The  necessity  rests 
upon  us  of  raising  $14(>,<)00,(i0(>  of  gold.  We  nmst  not,  therefore,  ma- 
terially affect  the  trade  between  foreign  countries  and  our  own.  All 
that  our  own  people  can  ask  is,  that  such  reasonable  protecti(^n  shall  l)e 
given  to  them  that  our  currency  and  our  system  of  internal  taxation 
shall  not  operate  injuriously  to  their  interests. 


THE  PUBLIC   DEBT. 

AV  THE  SEXATF,   DECEMBER  27,  18G7. 

Mr.  Sherman  made  the  following  report  : 

The  Committee  on  Finance,  to  whom  was  refeiTcd  so  much  of  the 
President's  messao-e  as  relates  to  the  public  debt,  and  the  report  of  the 
Secretary  of  the  Treasury  on  the  state  of  the  finances,  is  called  upon 
to  report  upon  three  important  subjects  necessarily  connected  with 
each  other : 

First.  The  funding  of  the  public  debt,  and,  as  an  incident  to  it, 
the  redemption  of  the  bonds  commonly  known  as  the  five-twenty 
bonds ; 

Second.  The  taxation,  State  and  national,  of  the  public  securities ; 
and 

Third.  The  redemption  and  conversion  of  the  United  States  notes 
or  legal-tender  currency. 

Questions  are  presented  in  regard  to  each  of  these,  the  solution  of 
which  ought  not  to  be  delayed.  There  are  disputes  as  to  the  mode  of 
the  payment  of  the  public  debt  seriously  affecting  the  public  credit ; 
there  is  wide-spread  complaint  as  to  the  exemption  of  public  securities 
from  taxation  ;  and  the  evils  of  a  depreciated  and  unconvertible  cur- 
rency are  so  manifest,  both  in  public  and  private  business,  that  the 
early  attention  of  Congress  is  properly  called  to  them  by  the  executive 
authorities. 

It  should  be  the  effort  of  Congress  not  merely  to  declare  and  obey 
the  existing  law,  but  to  adopt  a  comprehensive  policy  that  will  preserve 
the  public  faith,  restore  confidence  to  the  j^eople  and  stability  to  our 
business  interests,  and  yet  appeal  to  the  sense  of  justice  of  our  constitu- 


THE  PUBLIC  DEBT.  I39 

ents  if  it  is  unhappily  dra\\Ti  into  tlie  arena  of  "party  politics.  Finan- 
cial matters  oiiglit  not  to  be  in  any  sense  partisan,  but  tliey  may  become 
so.  Unless  Congress  can  adopt  a  policy  meeting  all  tlie  requisites 
named,  the  contest  on  these  most  delicate  and  difficult  questions  may 
be  transferred  to  the  polls,  where  the  heat  of  party  strife  may  lead  to 
dangerous  results. 

It  is  impossible  to  overstate  the  importance  of  these  questions. 
Xext  to  the  existence  of  government  itself,  and  the  security  of  per- 
sonal riglits,  come  the  protection  of  2:)ropei'ty,  the  preservation  of  the 
public  credit,  the  adjustment  of  taxes,  and  the  regulation  of  the  cur- 
rency. Neai-ly  all  the  legislation  of  peace  is  tlie  legislation  of  finance. 
The  action  of  Congress  on  these  subjects  ailects  the  value  of  all  prop- 
erty in  the  United  States;  the  reward  of  all  labor ;  the  income  of  the 
rich  ;  the  wages  of  the  poor ;  tlie  pension  of  the  widow ;  tlie  enter- 
])rise  and  industry  of  all  classes  of  our  people ;  and  thus  touches  the 
home  and  heart  of  every  person  in  the  United  States.  Therefore,  in 
reporting  upon  these  questions,  your  Committee  appeal  to  the  gener- 
ous forbearance  of  each  Senator  not  to  condemn  until  he  is  convmced, 
to  criticise  with  kindness,  and  to  lend  us  the  aid  of  his  intellect  and 
experience  in  making  the  measure  ])roposed  such  a  one  as  will  accom- 
plish the  great  objects  we  all  have  in  view. 

Ik'fore  examining  the  several  provisions  of  the  bill,  your  Commit- 
tee begs  leave  to  state  tlie  present  condition  of  the  public  debt.  It 
consists  of  numerous  forms  of  public  securities,  nearly  all  of  which 
grew  out  of  the  urgent  necessities  of  the  late  war.  The  calls  for  money 
to  maintain  the  army  and  navy  were  so  imperative  that  many  different 
forms  of  loan  were  resorted  to,  and,  as  a  means  to  enable  the  Govern- 
ment to  reach  the  resources  of  the  people,  a  currency  was  improvised. 
This  currency  now  forms  a  part  of  thei)ublic  debt,  and,  being  a  legal 
tender  in  the  payment  of  debts,  is  in  the  nature  of  a  compulsoiy  loan 
without  interest.  It  has  proved  so  convenient  a  currency  that,  apart 
from  the  advantage  the  Goveniment  derives  from  it  by  the  saving  of 
interest,  it  has  been  and  now  is  of  great  importance  in  promoting  en- 
tequ'ise  and  the  exchange  of  domestic  products.  It  only  remains,  either 
by  reducing  the  amount  or  by  other  means  of  increasing  its  value  to 
the  standard  of  gold,  to  make  it  not  only  the  most  favorable  form  of 
loan,  but  the  best  national  currency  yet  devised.  During  the  war  the 
residue  of  the  public  debt  could  only  be  contracted  at  high  rates  of  in- 
terest and  upon  onerous  conditions,  caused  by  the  uncertainty  of  our 
ultimate  success,  and  by  the  efforts  of  a  portion  of  our  people  to  de- 
preciate the  public  credit.  For  this  reason  those  who  were  charged 
M'ith  the  national  finances  constantly  kept  in  view  the  principle  of  "  re- 
deemability "  of  the  principal  of  the  debt  within  a  short  time,  with 
the  conhdent  expectation  that  the  close  of  the  war  and  the  success  of 
the  national  cause  would  enable  us  to  redeem  it  by  a  loan  on  more 
favorable  terms.  The  necessity  of  funding  the  public  debt,  as  soon  as  ' 
possible  after  the  war  closed,  into  one  clearly  defined  loan,  at  as  low  a 
rate  of  interest  as  possible,  has  been  conceded  by  every  one.  The  only 
questions  are  as  to  the  most  favorable  tim.e  and  manner. 

AVhen  this  subject  M-as  under  discussion  a  year  or  two  ago,  two 


140  SPEECHES  AND  REPORTS   OF  JOHN   SHERMAN. 

chief  difficulties  were  alleged  to  lie  in  the  way.  One  was  tlie  com- 
pound-interest notes,  now  either  paid  otf  or  ])rovided  for;  the  other 
was  the  option  of  the  holders  of  the  three-year  seven-thirty  notes  to 
demand  payment  in  money,  or  to  convert  them  at  their  maturity  into 
five-twenty  bonds.  These  are  now  either  converted  or  in  such  a  state 
of  conversion  that,  for  our  purposes,  we  may  estimate  the  !5!2><r), 587,100 
of  seven-thirty  notes  now  outstanding  as  a  part  of  our  five-twenty 
bonds,  into  which  it  is  the  option,  the  interest,  and  no  doubt  the  pur- 
pose of  the  holders  to  convert  them. 
Our  public  debt  is  stated  thus : 

Statement  of  the  Ptifjlic  Debt  of  the  United  States  on  December  1,  18G7. 

DEUT  BEARING  COIN  IXTEKEST. 

Five  per  cent,  bonds,  ten-forties,  and  old  fives $205,532,850  00 

Six  per  cent,  bonds  of  IStJT  :ind  18GS 14,r,!tn,;tn  80 

Six  per  cent.  l)onds,  1881 282,731,550  00 

Six  per  cent,  tive-twenty  bonds 1,324,41 2, 5.')0  00 

Navy  pensioa  fund , 13,imi(),(mh)  iiQ 

$1,840,307,891  80 

riEBT    BEARING    CUKRENCT    INTEREST. 

Six  per  cent,  bonds lftl8,G01,000  00 

Tlncc-ycar  compound-interest  notes 62,249,360  00 

Three-year  seven-thirty  notes 285,587,100  00 

Three  per  cent,  certificates 1 2,855,000  00 

379,292,460  00 

MATIRED    DEBT    NOT    PRESENTED    FOR    PAYMENT. 

Three-year  seven-thirty  notes,  due  Aupust  15,  1867. .  .  82,855,400  00 
Compound-interest  notes,  matured  June  10,  July  15, 

August  15,  and  Oetober  15,  1807 .' 7,005,750  00 

Bonds,  Texas  indemnity 2t'.0,0()0  00 

Treasury  notes,  acts  July  17,  1861,  and  prior  thereto.  163/Hl  64 

Bonds,  April  15,  1842 54,061  64 

Treasury  notes,  Slarch  3,  1863 868,240  00 

Temporary  loan 2,880,900  55 

Certificate  of  indebtedness 31,000  00 

'- 14,178,363  83 

DEBT    BEARING    NO    INTEREST. 

United  States  notes S356  212  473  00 

Fractional  currency "   30,'929]984  05 

Gold  certificates  of  deposit.  .  .    18,401  400  00 

'- '■ 405,543,857  05 

Totaldebt $2,639,382,572  68 

Amount  m  treasury,  coin $100,690,645  69 

Amount  in  treasury,  currency 37  486  175  24 

138,176,820  93 

Amount  of  debt  less  cash  in  treasury $2,501  205  751  75 

HUGH  McCULLOCH, 

Secretary  of  the  Treasury. 

A  portion  of  this  debt  may  be  dismissed  from  our  view.     The 
bonds  commonly  known  as  the  long  bonds  of  1881,  §282,731,520,  were 


THE  PUBLIC  DEBT.  141 

negotiated  on  tlie  gold  basis,  and  are  neither  redeemable  nor  payable 
until  1881.  The  ten-forty  bonds,  about  8200,000,000,  also  are  neither 
payable  nor  redeemable  until  1874,  and  both  principal  and  interest  are 
payal)le  in  gold.  The  smaller  items  of  debt,  amounting  to  $122,574,075, 
will  be  paid  from  the  funds  on  hand  or  current  receipts,  and  maybe  dis- 
missed from  our  consideration.  This  leaves  the  live-twenty  bonds,  inclu- 
ding with  them  the  seven-thirties,  in  the  aggregate  amounting  to  $1,010,- 
000,000,  which,  with  legal  tenders  and  fractional  currency  amounting 
to  §387,142,457,  compose  the  body  of  the  public  debt  of  the  United 
States.  A  large  portion  of  this  debt  is  now  redeemable  at  the  pleasure 
of  the  Ignited  States,  and  the  whole  of  it  will  become  so  in  a  compara- 
tively short  time.  Your  committee  are  of  the  opinion  that  now  is  the 
time  to  provide  for  the  redemption  of  these  bonds,  as  they  become  re- 
deemal)le,  by  a  new  loan  on  more  favorable  terms  to  the  United  States, 
and  also  to  secure  to  the  holder  of  the  United  States  notes,  as  soon  as 
practicable,  tlieir  full  value  in  gold.  Such  a  currency,  convertible  into 
gold,  with  a  public  del)t  bearing  as  low  a  rate  of  interest  as  practica- 
ble, with  the  nght  again  to  redeem  the  principal  when  more  favorable 
terms  can  be  had,  with  a  moderate  provision  to  diminish  the  principal 
annually,  supported  by  a  system  of  taxes  levied  as  far  as  practicable  on 
imported  goods,  luxuries,  ami  incomes — these  are  elements  of  a  finan- 
cial system  which  your  Committee  seek  to  establish. 

Before  examining  the  ])recise  terms  of  this  debt,  and  the  measures 
proposed  by  your  committee,  it  is  proper  to  inquire  whether  this  com- 
prises the  whole  of  tlie  public  debt.  It  is  sometimes  asserted  that  an 
unliquidated  debt  of  a  vast  aiul  uncertain  amount  exists,  not  included 
in  the  statement  of  the  public  debt.  Upon  this  point  the  most  vague 
and  indefinite  opinions  prevail,  not  oidy  in  this  country,  but  in  Europe. 
Nothing  can  have  a  more  injurious  effect  ujxtn  the  ])ublic  credit  than 
the  supposed  existence  and  concealment  of  any  jjortion  of  the  debt. 
No  comprehensive  financial  ])olicy  can  be  adopted  that  does  not  em- 
brace every  portion  of  it.  Your  Committee  have  therefore  sought  to 
ascertain  tlie  extent  and  amount  of  unadjusted  claims  likely  to  be  estab- 
lished against  the  Government.  The  amount  of  claims  pending  which 
have  arisen  under  existing  law,  and  are  likely  to  be  allowed  by  the  ac- 
counting officers,  is  less  than  §40,000,000,  and  this  M'ill  be  scattered 
through  several  yeai-s,  and  paid  out  of  funds  already  or  hereafter  to  be 
appropriated  from  cun-ent  receipts.  This  is  exclusive  of  bounties  under 
the  act  of  the  last  Congress,  the  estimated  amount  of  which  yet  to  be 
paid  is  §45,000,000.  These  are  estimated  for  as  a  part  of  the  current 
expenditure,  thus  swelling  the  estimates  for  the  current  and  next  fiscal 
.year  far  beyond  the  sums  needed  for  the  ordinary  current  expenses 
for  the  year.  And  so,  since  the  war,  large  sums,  amounting  to  over 
$200,000,000,  properly  chargeable  as  a  part  of  the  public  debt,  have 
been  paid  from  the  current'rcceipts  as  a  part  of  the  current  expendi- 
ture, and  this  sum  should  properly  be  added  to  the  §207,000,000  of  the 
liquidated  debt  paid  since  the  1st  of  August,  1805.  A  more  detailed 
statement  of  the  unliquidated  debt  will  be  submitted  to  the  Senate  at 
a  later  period  of  the  session ;  but  for  present  purposes  tlus  debt  may 
be  regarded  as  a  part  of  the  current  expenditure,  and  need  not  be 


142  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN". 

considered  in  any  jUan  for  funding  the  public  debt,  and  will  depend 
entirely  upon  the  future  action  of  Congress.  This  fact  will  restrain 
Congress  from  adopting  princii^les  which  will  swell  its  amount.  Every 
new  bounty  bill,  every  new  railroad  subsidy,  every  new  and  unusual 
expenditure  for  internal  improvement,  every  new  })rinciple  adopted  in 
the  settlement  of  claims  growing  out  of  the  war,  will  involve  new  taxes 
or  new  loans.  Therefore,  as  an  incident  to  every  such  measure,  there 
should  be  a  new  tax  levied  or  a  new  loan  made.  The  vague  and  indefi- 
nite appropriations  of  money  by  Congress,  growing  out  of  the  vast 
expenditure  during  the  war,  can  no  longer  be  continued  without  the 
utter  destruction  of  the  national  credit,  or  such  an  increase  of  our  taxes 
as  will  bring  back  to  these  halls  new  faces  and  new  names.  It  is  idle 
to  disguise  the  fact  that  the  increase  of  our  extraordinary  expenses  and 
the  weight  of  taxes  have  alarmed  the  people. 

Dismissing  the  unliquidated  debt  as  depending  entirely  upon  the 
future  prudence  of  Congress,  we  come  to  consider  the  present  condition 
of  the  live-twenty  loans. 

As  all  of  these  are  of  the  same  legal  character,  differing  only  in 
their  dates  and  time  of  redeemability,  it  will  only  be  necessary  to  ex- 
amine the  laws  under  which  the  original  bonds  were  issued.  These 
bonds  were  issued  under  the  act  of  Congress  passed  February  25, 1862, 
entitled  "  An  act  to  authorize  the  issue  of  United  States  notes,  and  for 
the  redemption  or  funding  thereof,  and  for  funding  the  floating  debt 
of  the  United  States." 

The  notes  to  be  issued  are  provided  for  by  the  first  section,  and 
were  limited  to  the  sum  of  one  hundred  and  iif ty  millions  of  dollars, 
fifty  millions  of  which  were  to  be  exchanged  for  that  amount'  of  what 
were  known  as  demand  notes.  These  new  notes  were  declared  "to 
"be  receivable  in  payment  of  all  taxes,  internal  duties,  excises," debts, 
and  demands  of  every  kind  due  to  the  United  States  except  duties  on 
imports,  and  of  all  claims  and  demands  against  the  United  States  of 
every  kind  whatsoever,  except  for  interest  upon  bonds  and  notes,  which 
shall  be  paid  in  coin,  and  shall  be  lawful  money  and  a  legal  tender  in 
]3ayment  of  all  debts,  public  and  jjrivate,  within  the  United  States,  ex- 
cept duties  on  imports  and  interest  as  aforesaid." 

This  act  does  not  rest  the  value  of  these  notes  solely  upon  the 
clauses  making  them  a  legal  tender,  and  receivable  for  all  public  dues ; 
but  it  further  provides,  as  an  additional  and  the  highest  inducement 
for  the  people  to  take  them,  that  the  holder  of  any  of  them  may  de- 
posit them  with  the  Treasurer  of  the  United  States,  and  "shall  receive 
in  exchange  therefor  duplicate  certificates  of  deposit,  one  of  which 
may  be  transmitted  to  the  Secretary  of  the  Treasury,  who  shall  there-- 
upon  issue  to  the  holder  an  equal  amount  of  bonds  of  the  United  States, 
coupon  or  registered,  as  may  by  said  holder  be  desired,  bearing  interest 
at  the  rate  of  six  per  centum  per  annum,  payable  semi-annually,  and  re- 
deemable at  the  pleasure  of  the  United  States  after  five  years,  and  pay- 
able twenty  years  after  the  date  thereof."  Thus  these  notes  were  in- 
vested with  every  possible  security  and  value  that  could  be  given  to 
them,  except  only  that  the  holder  could  not  demand  their  payment  in 
coin.     In  lieu  of  such  payment,  the  holder  had  the  right  to  pay  them 


THE  PUBLIC  DEBT.  I43 

for  taxes,  and  for  all  public  or  private  debts ;  and,  coin  not  being  at- 
tainable, he  might  demand  for  them  at  their  face  the  highest  form  of 
national  security  with  interest  at  six  per  centum,  payable  in  coin.  The 
second  section  of  this  act  provides  "  that,  to  enable  the  Secretary  of  the 
Treasury  to  fund  the  Treasury  notes  and  floating  debt  of  the  United 
States,  he  is  hereby  authorized  to  issue  on  the  credit  of  the  United 
States  coupon  bonds  or  registered  bonds  to  an  amount  not  exceeding 
$500,000,000,  redeemable  at  the  pleasure  of  the  United  States  after 
five  years,  and  payable  twenty  years  from  date,  and  bearing  interest  at 
the  rate  of  six  per  cent,  per  annum,  payable  semi-annually." 

On  the  11th  of  July,  1862,  before  any  of  the  five-twenty  bonds 
were  negotiated,  Congress  authorized  the  further  issue  of  $150,000,000 
of  the  United  States  notes,  with  a  like  provision  to  convert  them  into 
bonds  at  par. 

On  the  3d  of  March,  1863,  before  any  considerable  amount  of  the 
five-twenty  bonds  were  negotiated,  Congress  authorized  the  further 
issue  of  $150,000,000  United  States  notes,  and  by  the  same  act  pro- 
vided that  the  holders  of  United  States  notes  issued  under  and  by 
virtue  of  said  acts  should  present  the  same  for  the  pui-pose  of  exchang- 
ing the  same  for  bonds,  as  therein  provided,  on  or  before  the  1st  day 
of  July,  1863,  and  that  thereafter  the  right  so  to  exchange  the  same 
should  cease  and  determine.  The  same  act  provides  for  the  issue  of 
$400,000,000  of  Treasury  notes,  bearing  intei-est  at  six  per  cent.,  which 
''  for  their  face,  excluding  interest,"  were  made  "  a  legal  tender  to  the 
same  extent  as  the  United  States  notes."  This  act  provides  "  that  the 
interest  on  said  Treasury  notes,  and  on  certificates  of  indebtedness  and 
deposit,"  shall  be  paid  in  lawful  money."  JSTothing  was  said  in  this  act 
as  to  how  the  principal  was  payable,  but  all  have  been  redeemed  in 
lawful  money. 

After  these  acts  took  effect  the  five-twenty  bonds  were  negotiated. 
These  several  acts  form  tlie  contract  under  which  they  were  issued. 
Ko  subsequent  act  of  Congress  can  vary  that  contract  without  the  con- 
sent of  the  holder  of  the  bond  ;  and  the  contract  must  be  construed  ac- 
cording to  the  intention  of  the  parties  at  the  time,  gathered  from  the 
words  of  these  laws,  and  from  the  previous  construction  put  by  the 
Government  upon  similar  words,  and  from  the  authorized  declarations 
of  the  agents  of  the  Government  in  negotiating  the  bonds.  Your  Com- 
mittee may  go  a  step  further,  and  say  that,  as  there  is  no  court  high 
enough  to  sit  in  judgment  upon  the  acts  of  the  Government  to  its  pub- 
lic creditors,  those  who  act  for  the  Government  are  bound  in  honor  to 
observe  the  strictest  faith.  In  dealing  with  this  question.  Congress 
does  not  act  as  the  mere  judge  or  jury  confined  by  the  written  law. 
We  are  chancellors  to  adininister  equity,  or  rather  we  are  arbitrators, 
chosen  by  the  people  of  the  United  States,  both  debtor  and  creditor, 
and  are  under  the  highest  obligation  to  do  what  is  just  and  right. 
There  is  no  appeal  from  our  decision,  and  no  power  can  reverse  our 
judgment,  except  that  popular  opinion  which,  sooner  or  later,  in  a  re- 
publican government  becomes  the  established  law. 

In  construing  this  contract  no  pressure  of  necessity  should  induce 
us  to  violate  any  provisions  of  it,  even  if  its  execution  is  difficult  or  its 


144  ■    SPEECHES   AND   REPORTS   OF  JOIIX   SHERMAN". 

terms  hard.  Public  credit  is  the  most  sacred  property  of  a  nation, 
its  reliance  in  war  or  danger,  wliicli,  once  impaired  or  tarnished,  entails 
upon  the  nation  an  irreparable  loss.  The  Government  of  the  United 
States  has  always  faithfully  ol)served  its  jiromises  to  the  public  crcditoi*s, 
and  will  not  now  sanction  any  violation  of  them ;  but  justice  to  its  peo- 
ple, who  must,  from  their  earnings  and  by  taxes,  make  good  these 
promises,  demands  that  we  should  nt>t  impose  burdens  upon  them  not 
required  by  a  fair  construction  of  public  engagements. 

The  question  now  arises  whether  these  nve-twenty  bonds  are  re- 
deemable at  the  expiration  of  five  years  from  their  date  in  any  other 
money  than  the  coin  of  the  United  States  ? 

If  this  question  rested  solely  upon  the  act  of  FebiTiary  25,  18G2,  and 
the  bonds  had  been  negotiated  under  that  act  alone,  it  "Would  be  mani- 
festly a  breach  of  faith  to  redeem  the  bonds  with  the  present  United 
States  notes.  They  are  very  different  fi-om  the  first  legal-tender  notes, 
which,  from  the  limited  amount  authorized,  and  the  privilege  to  con- 
vert them  into  bonds,  could  not  have  had  a  less  market  value  than  the 
bonds.  But  it  was  found  that  with  such  restrictions  upon  the  notes 
the  bonds  could  not  be  negotiated,  and  it  became  necessary  to  depreci- 
ate the  notes  in  order  to  create  a  market  for  the  bonds.  The  limit  of 
notes  was  trebled  and  the  right  to  convert  them  taken  away.  The 
amount  of  United  States  notes  in  circulation  when  the  bonds  were  ne- 
gotiated was  equal  to  the  amount  no\v  outstanding ;  so  that  the  ques- 
tion arises  whether  by  the  terms  of  these  several  acts  the  bonds  may  be 
redeemed  with  notes  of  the  precise  character  paid  for  the  bonds  when 
negotiated  by  the  United  States. 

The  law  docs  not  expressly  provide  that  the  principal  is  payable  in 
coin,  but  does  provide  that  the  interest  "  shall  be  paid  in  coin,"  thus 
raising  the  im])lication  that  the  principal  may  not  be.  To  meet  this 
imjjlication  it  is  shown  that  by  the  established  policy  of  the  Govern- 
ment the  principal  of  the  public  debt  has  always  been  paid  in  coin 
without  any  stipulation  to  that  efifect.  Your  Committee  have  examined 
the  various  loan  acts  of  the  United  States,  and  find  no  express  stipula- 
tion to  pay  in  coin  ;  but  coin  has  always  been  paid,  not  only  for  the  in- 
terest, but  for  the  principal,  both  funded  and  unfunded — both  for  bonds 
and  Treasury  notes.  This  establishes  the  presumption  that  all  public 
debts  are  payable  in  coin,  unless  the  law  under  which  they  are  issued 
expressly  provides  that  they  may  be  paid  in  a  different  mode ;  and  this 
stipulation  must  be  made  before  the  loan  is  negotiated. 

The  act  under  which  the  five-twenty  bonds  were  issued  also  pro- 
vides for  the  issue  of  United  States  notes,  and  declares  that  these  notes 
"  shall  be  lawful  money  and  a  legal  tender  in  papnent  of  all  debts, 
PUBLIC  or  private."  These  notes  were  issued  to  an  amount  of  $400,- 
000,000  before  the  bonds  were  negotiated.  It  is  claimed  that  this 
provision  negatives  the  implication  drawn  from  the  payment  of  pre- 
vious loans  in  coin,  especially  as  when  previous  loans  were  made  and 
jDaid  no  other  kind  of  money  existed,  or  could  have  been  contem- 
plated. 

It  is  said,  however,  that  the  distinguished  Secretary  of  the  Treasury 
who  negotiated  the  five-twenty  loan  gave  a  construction  to  this  act  at 


THE  PUBLIC  DEBT.  I45 

the  time  the  loan  was  offered ;  that  this  was  announced  to  the  people, 
and  npon  the  faith  of  this  the  loan  was  taken.  Your  Committee  can 
find  no  official  declaration  made  by  the  Secretary  on  this  subject  until 
after  the  loan  was  negotiated.  On  the  18th  of  May,  1864,  he  wi'ites  to 
Mr.  Hooper  that 

It  has  been  the  constant  usajre  of  the  Department  to  redeem  all  coupon  and 
registered  bonds  forming  part  of  the  funded  or  permanent  debt  of  the  United  States 
in  corn,  and  this  usage  has  not  been  deviated  from  during  my  administration  of  its 
affairs. 

The  five-twenty  sixes,  being  payable  twenty  y^ars  from  date,  though  redeemable 
after  five  years,  are  considered  as  belonging  to  the  funded  or  permanent  debt;  and 
so  ;ilso  are  the  twenty-year  sixes,  into  wliich  the  three-year  seven-thirty  notes  are 
convertible.  These  bonds,  therefore,  according  to  the  usage  of  the  Government,  are 
payable  in  coin. 

It  is  claimed  that  this  language,  used  long  after  the  bonds  were 
negotiated,  can  not  sliow  the  understanding  of  the  parties  when  the 
bonds  were  taken,  and  that  it  does  not  amount  to  a  construction  of  the 
law,  but  it  simply  affirms  an  admitted  fact  that  the  usage  of  the  Gov- 
ernment had  been  to  pay  all  its  bonds  in  coin.  The  same  declaration 
might  have  been  made  as  to  all  issues  of  Treasury  notes,  compound- 
interest  notes,  or  certificates  of  indebtedness,  all  of  wliich  are  now 
paid  in  lawful  money.  Again,  it  is  said  that  tlie  agent  employed  by 
the  Secretary  did,  in  his  advertisement,  affirm  that  the  principal  and 
interest  were  payable  in  coin ;  that  this  construction  was  acquiesced  in 
by  Congress,  and  induced  thousands  to  take  these  bonds  who  would 
not  otherwise  have  done  so.  To  this  it  is  replied  that  such  a  promise 
is  not  in  accordance  with  the  plain  language  of  the  law,  and  is  not  a 
binding  constniction  of  tlie  law.  No  doubt  the  agent  supposed  that 
before  the  five  years  expired  specie  pajmients  would  be  resumed.  ]^o 
one  supposed  that  two  years  after  the  war  was  over  greenbacks  would 
still  be  depreciated.  The  advertisement  was  a  supposition  of  a  state 
of  facts  to  occur  five  years  afterward,  rather  than  a  legal  construction 
of  a  public  law  accessible  to  all  men. 

And  it  is  contended  that,  conceding  that  the  agents  of  the  Govern- 
ment construed  the  law  as  binding  the  United  States  to  pay  the  princi- 
pal of  this  debt  in  coin,  yet  this  construction  was  not  so  generally 
acquiesced  in  and  adopted  by  both  parties  to  the  contract  as  to  create 
a  moral  obligation  which  the  United  Stages  is  bound  to  execute  to  pre- 
serve its  faith.  Is  it  true  that  this  constniction  was  so  generally  ad- 
mitted as  to  make  it  a  part  of  the  contract?  Congress  uniformly 
refused  to  declare  this  construction  as  to  the  five-twenty  bonds,  but 
did  do  so  as  to  the  ten-forty  Ijonds.  And  it  is  a  further  and  very  sig- 
nificant fact  that  every  State  in  the  Union,  witli,  perhaps,  the  excep- 
tion of  Massachusetts, 'put  a  different  construction  on  this  act.  ^  Every 
State  had  a  public  debt,  which  stood  in  precisely  the  same  position  as 
the  national  debt.  Their  bonds  had  uniformly  been  paid,  principal 
and  interest,  in  coin  ;  and  yet  under  the  law  they  held  that  their  public 
faith  was  complied  with  when  they  paid  either  principal  or  interest  in 
legal-tender  notes,  and  this  construction  was  acquiesced  in  by  their 
creditors.  So  corporations  and  private  citizens  who  had  contracted 
debts  which  by  law  and  custom  had  been  previously  paicl^in  coin  con- 

10 


146  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

sidered  themselves  released,  and  M'cre  released,  by  payment  in  legal 
tenders.  'No\f,  by  a  well-establislied  principle  of  the  law  of  contracts, 
when  it  is  sought  to  vary  the  meaning  of  the  words  of  a  contract  by 
a  cotemporaneons  construction,  it  must  be  shown  that  both  parties 
acquiesced  in  it,  and  understood  and  acted  upon  it  in  precisely  the 
same  sense,  otherwise  the  words  of  the  contract  must  govern.  AVIien 
a  general  rule  is  laid  down,  and  an  exception  is  made,  it  implies  that 
there  are  no  other  exceptions. 

Duties  on  imported  goods  and  interest  on  the  pul)lic  debt  are  ex- 
cepted from  the  legal-tender  clause.  This  implies  that  the  principal  of 
the  debt  is  not  excepted.  The  construction  drawn  from  the  paymqnt 
of  previous  loans  in  gold  is  answered  by  the  fact  that  the  act  under 
which  this  loan  was  issued  expressly  declares  that  a  note  shall  be  law- 
ful money  as  well  as  gold,  and  shall  be  receivable  in  payment  of  public 
debts. 

Your  Committee  have  deemed  it  their  duty  thus  to  present  the 
argument  in  favor  of  redeeming  the  bonds  in  legal-tender  notes,  for  it 
can  not  be  concealed  that  this  construction  has  been  adopted  by  many 
who  disclaim  all  purpose  of  evading  the  public  engagements.  Still  the 
admitted  facts  remain  that  these  bonds  were  generally  taken  u2)on  the 
supposition  that  they  would  be  paid  in  coin  ;  that  this  was  explicitly 
declared  by  the  authorized  agents  of  the  Government  in  negotiating 
the  loan ;  that  such  declaration  must  have  been  known  by  Congress 
and  was  not  negatived  ;  that  it  was  sanctioned  by  three  successive 
Secretaries  of  the  Treasury ;  that  upon  the  faith  of  it  the  bonds  have 
been  continually  higher  in  market  value  than  the  notes ;  and  that  a 
public  sentiment  both  in  this  country  and  in  Europe  M'ould  regard  it 
as  a  breach  of  public  faith.  Public  credit  is  so  sensitive  a  cpiality  that 
time  can  not  restore  it  when  impaired.  It  is  better  far  to  forego  a 
doubtful  privilege  if,  in  the  judgment  of  impartial  men,  we  have  no 
right  to  exercise  it.  But  the  doubt  should  be  promptly  removed.  The 
discussion  of  the  question  manifestly  impairs  the  public  credit.  Until 
it  is  settled  no  new  loan  can  be  negotiated.  The  public  mind  becomes 
accustomed  to  the  idea  of  repudiation,  and  the  wildest  schemes  of 
paper  money  worthy  of  the  days  of  John  Law  poison  the  fountains  of 
public  and  private  credit. 

It  has  been  proposed  that  Congress,  by  joint  resolution,  declare 
that  the  five-twenty  bonds  are  redeemable  only  in  gold.  This,  instead 
of  settling  the  question,  will  only  create  divisions  and  parties,  and  the 
resolution,  when  passed,  will  be  subject  to  agitation  and  repeal. 

These  considerations  induce  your  Committee,  without  deciding  the 
question,  to  propose  a  substitution  of  new  bonds,  clear  and  exphcit  in 
their  terms,  for  the  five-twenty  bonds  as  they  become  redeemable. 
This  exchange  must  depend  upon  the  voluntary  consent  of  the  holder, 
but  it  is  believed  that  the  great  body  of  them  will  readily  make  the 
exchange,  and  that  the  Government  will  be  able  to  sell  the  new  bonds 
at  a  rate  that  will  redeem  or  purchase  an  equal  amoimt  of  the  five- 
twenty  bonds.  It  is  the  manifest  interest  of  the  bond-holder,  as  well 
as  of  the  tax-payer,  to  have  his  rights  clearly  defined  and  settled  by 
Congress  aft^-  full  consideration,  so  that  they  will  not  be  affected  by 


THE  PUBLIC  DEBT.  147 

any  uncertainty  as  to  the  manner  of  payment.  If  this  exchange  is 
refused  by  the  bond-holder,  it  will  be  time  enough  to  determine 
whether  by  the  condition  of  his  bond  he  may  not  be  paid  in  lawful 
money. 

Will  this  proposition  operate  harshly  upon  the  public  creditor? 
He  holds  a  security  now  redeemable.  Xo  one  can  affirm  that  his  right 
to  receive  gold  is  clear  and  unqueSttonable.  The  doubt  now  does  im- 
pair the  value  of  his  security,  and  may  lead  to  measures  that  will 
seriously  aifect  it.  The  security  substituted  is  of  equal  intrinsic  value 
to  that  he  surrenders ;  it  is  explicit  in  its  terms,  and  secures  a  reason- 
able rate  of  interest,  free  from  all  taxes.  He  has  already  received  the 
interest  in  coin,  according  to  the  stipulation  of  the  bond,  thus  securing 
a  higher  rate  of  interest  on  the  money  invested  than  is  allowed  by 
the  policy  of  our  laws  to  private  creditors.  Still,  if  your  Committee, 
after  a' careful  examination  of  the  law,  were  convinced  that  it  clearly 
required  the  payment  of  coin,  they  would  advise  that  it  be  paid  in 
coin.  The  meaning  of  the  contract,  and  not  its  profit  or  loss,  is  the 
true  rule  of  construction.  To  give  more  than  is  stipulated  to  the 
])nb]ic  creditor  is  to  do  injustice  to  the  tax-])ayer;  to  give  less  is  to 
violate  the  public  faith ;  and  we,  as  the  representatives  of  both  bond- 
holder and  tax-payer,  are  not  at  lilierty  to  do  either. 

Your  Committee  have  heretofore  considered  this  question  as  involv- 
ing only  the  application  of  the  present  United  States  notes,  limited  as 
they  are  to  ^-ti  m  i,oOO,0(,)0,  to  the  redemption  of  the  bonds. 

The  question  now  arises.  Can  the  United  States  in  good  faith  avail 
itself  of  the  de])reeiation  of  its  notes  to  issue  a  greater  amount  of  them 
than  was  provided  for  when  the  iive-twenty  bonds  were  sold,  and  with 
them  to  pay  the  bonds  i  AVhat  is  a  United  States  note  ?  It  is  a  prom- 
ise by  the  United  States  to  pay  a  specified  sum  on  demand.  ISTo  legal- 
tender  clause  applies  to  this  note.  It  is  conceded  that  tlie  money  of 
the  world,  gold  or  silver  coin,  is  the  only  money  that  can  redeem  this 
note. 

During  the  war  this  was  impracticable,  and  therefore  the  United 
States  gave  to  the  note  every  valuable  quality  possible.  It  was  made 
lawful  money  and  a  legal  tender  for  other  debts.  But  the  obligation 
to  pay  this  note  in  coin  at  the  earliest  moment  practicable  is  a  continu- 
ous obligation.  Our  failure  to  do  it  is  the  standing  reproach  of  our 
financial  system.  It  is  the  cause  of  all  the  discussions  that  have  arisen 
in  regard  to  our  bonds.  Until  our  promise  is  made  good  to  pay  the 
United  States  note  in  coin  or  its  equivalent,  on  demand,  we  must  suffer 
the  reproach  of  partial  repudiation.  This  does  not  consist  merely- in 
proposing  to  redeem  our  l)onds  in  lawful  money,  but  does  consist  in 
allowing  our  "  lawful  money,"  or  promises  to  pay  on  demand,  to  con- 
tinue to  be  less  valuable  than  gold  or  silver  coin. 

PajTnent  of  the  bonds  in  existing  notes  would  not  materially  affect 
the  market  value  of  the  l^onds,  for  that  value,  increased  as  it  would  be 
by  the  provisions  of  this  bill,  would  make  both  notes  and  bonds  ap- 
proach nearer  the  standard  of  gold.  The  present  issue  of  notes  is  held 
by  the  people,  and  can  not  be  drawn  into  the  Treasury  except  by  taxa- 
tion.    We  have  already  largely  diminished  internal  taxes,  and  can  not 


148  SPEECHES   AND  REPORTS   OF  JOHN  SHERMAN. 

hope  to  receive  over  830,000,000  in  currency  in  excess  of  our  expendi- 
tures. It  is  manifest  that  such  a  sui-jihis  revenue  is  insufticiont  to  re- 
deem our  l)onds  unless  aided  by  a  furtlier  issue  of  ncjtes  or  a  new 
loan. 

To  pay  oil"  tlie  original  tive-tweiity  loan,  tlie  only  <.>ne  now  redeem- 
able, will  require  )j>r)(»(>,00(>,0()0  more  of  pajier  money,  to  be  still  furtlier 
increased  as  other  loans  become  rede(?mable.  Tiic  alarmin«j  ])roj)osition 
to  do  tliis  has  been  made  on  the  ground  as  a  justiheati(»n  that  tlu'  bond- 
holders bought  these  bonds  with  I'nited  States  notes  when  <rohl  was 
hi^h,  and  are  compensated  by  repayment  in  le^ral  tenders.  It  is  true 
that  some  of  the  later  loans  were  ])aid  for  wlien  li'«ral  tendei*s  were 
largely  depreciated  by  their  excc.>v><ive  i.'isue  and  the  uncertain  result  of 
the  war,  but  the  first  loan  of  $r)(M>,(MM),(MM>  now  to  be  redeemed  was 
sold  at  ])ar  when  gold  averaged  about  thirty-five  pi'r  cent,  premium. 
By  reference  to  the  market  ])rice  of  gold  in  New  V(»rk  during  the 
sunmu'r  and  fall  of  1S«;;3,  it  appears  that  this  luan  was  sold  at  an  aver- 
age ]>rice  of  seventv-four  cents  in  gold.  'J'he  same  bond  can  now  be 
bought  in  the  niarl<et  in  New  York  at  seventy-six  cents  in  gold.  If 
you  pay  these  bonds  in  legal  tendei-s,  limited  in  amount  as  they  are 
now  to  less  than  840( »,<>(»( ».(»(»(»,  and  with  the  privileges  conferred  by 
this  bill,  the  hi»lder  of  the  bond  will  reali/.e  seventy-six  cents  in  gold, 
and  will  have  the  a<lvantage  td'  a  rapid  approximation  of  his  notes  or 
bonds  to  the  gold  standanl.  If  we  increii^^e  our  ])aper  money  to  an 
amount  sufficient  even  to  ])ay  the  lii-st  loan,  he  will  not  receive  over 
thirty  in  gold,  if,  indeed,  this  act  of  injustice  and  repudiation  does  not, 
by  destroying  the  ])ublic  credit,  utterly  dotroy  that  in  which  you  pro- 
pose to  pay  a  del»t  contracted  when  the  enemio  of  the  country  were 
confident  of  its  overthrow,  when  foreign  nations  and  a  large  j>ortion  of 
our  own  people  anticipated  the  permanent  division  of  the  I'nion.  This 
coui-se  once  entered  upon,  the  first  debt  thus  paid,  the  rest  will  follow; 
confidence  thus  destroyed,  all  values  affecte<l,  the  distress  of  the  peo- 
ple will  compel  them  to  resort  to  barter  and  gold,  and  to  the  utter  re- 
pudiation of  the  mass  of  pa]KM-  money.  So  it  was  with  the  continental 
money;  so  it  was  with  the  French  assignats.  Our  forefathers  had  the 
excuse  of  a  revolutionary  stniggle,  on  the  result  of  which  everything 
was  staked ;  while  the  French  revolution  was  a  volcano  whose  excesses 
are  acknowledged  by  all  as  the  reproach  of  mankind.  If  we  enter 
upon  a  similar  career,  we  have  no  excuse.  AVe  have  accomplished  all 
we  fought  for,  and  more  than  we  hoped.  No  one  doubts  now  our 
ability  to  meet  the  interest  of  our  debt,  and  rapidly  to  pay  the  princi- 
pal. Our  creditors  are  chiefiy  our  o^^ti  citizens,  or  those  who  trusted 
and  confided  in  us  and  in  our  cause.  It  is  not  our  enemies  we  owe 
abroad,  but  our  friends.  Our  debt  is  not  only  the  capital  of  the  rich, 
but  it  is  the  savings  of  the  poor,  the  M-idow,  and  the  orphan. 

Our  ''  greenback,''  which  it  is  ju-oposed  to  depreciate,  is  not  only 
the  standard  of  value  for  the  capitalist,  but  fixes  the  pension  of  the 
wounded  soldier,  the  value  of  the  workman's  labor  and  of  the  artisan's 
skill.  The  capitalist  may  raise  his  rent  or  his  price  as  we  depreciate 
the  standard,  but  the  laborer  can  not  increase  his  wages.  The  poor  feel 
more  severely  all  infiations  of  the  currency,  while  the  rich  often  urge 


THE  PUBLIC   DEBT.  149 

tlieni  in  order  to  add  to  the  prices  of  their  commodities  and  to  evade 
tlie  payment  of  taxes.  Now,  this  policy  is  desired  to  iioat  upon  the 
])eo])le'  lar<;e  stocks  of  goods  at  hi^di  prices.  It  is  to  shift  the  loss  from 
those  wluriiold  the  goods  to  thi^se  who  buy  and  consume  them.  Your 
( '(»mmittee  know  tliat  a  demand  often  comes  to  us  to  make  money  easy 
hv  increasing  the  amount.  We  need  not  refer  to  writers  on  political 
economy  to  show  that  an  increase  of  paper  circulation  does  not  add  to 
the  wealth  of  a  community  ;  it  only  adds  t(»  the  prices  of  commodities 
at  the  expense  of  the  consumer,  the  wages  of  labor  do  not  rise  with 
the  i)rice  of  food  and  of  rents.  Paper  money  conyertible  into  gold 
promotes  exchanges  and  adds  to  production.  Paper  money  not  con- 
vertible is  a  device  to  lessen  waps,  to  increase  capital,  to  add  to  the 
value  of  accumulated  wealth.  AVhen  it  perishes  by  failure  or  repudia- 
tion, it  is  mainly  in  the  hands  of  the  poor,  received  as  wages,  or  of  the 
middle  classes  engaged  in  active  business,  while  the  capitalists  by  in- 
yesting  in  property  escape  all  loss.  War  and  great  public  necessity  are 
held  to  justify  the  coining  of  public  credit  into  money,  but  the  device 
should  ceaMj  sis  rapidly  as  ]x>s«ible  after  the  necessity  passes  awaj'. 

Your  C'onnnittee  are  therefore  of  opinion  that  no  legal-tender  notes 
beyond  tlie  amount  now  authorized  by  law  should  be  issued  under  any 
])ressure  of  financial  <»r  i»<iUtical  necessity  until  they  are  convei-tible 
into  g(.ld  and  silver.  Our  duty  is  to  elevate  the  "greenback,"'  the 
standard  of  national  credit,  to  the  standard  (»f  goM,  the  money  of  the 
world.  Until  then  we  are  not  on  a  substantial  foundation.  Let  us 
make  the  dolhir  of  our  ])romise  in  the  p<K'ket  of  a  laboring  man  equal 
to  the  dollar  of  our  mint.  Tlie  rapidity  of  the  process  is  a  question  of 
public  policy.  It  may  be  by  gradually 'dimini.-hinjj:  the  volume  of  cur- 
rency, or  by  leaving  it  at  its  present  aniount  until  increased  business  or 
improved  credit  brings  the  currency  up  to  the  specie  standard.  The 
discretion  left  with  the  Secretary  to  <liminish  it  may  be  withdrawn, 
limited,  or  extended  as  public  policy  dictates;  but  no  necessity,  no 
plausible  pretext,  to  diminish  the  burdens  of  taxation  can  justify  us  in 
increasin<r  the  volume  of  lei;al  tendere.  Now  that  the  war  is  over,  we 
should  l.".(.k  squarely  and  hoi>efullv  to  the  time  when  we  shall  pay  gold, 
not  only  to  the  holder  of  our  bonds,  but  to  all  persons  in  public  or  pri- 
vate business. 

Not  only  is  this  ob\ious  public  policy,  but  it  is  the  express  agree- 
ment with  "the  public  creditoi-s.  On  the  30th  of  June,  1864,  at  the 
darkest  perio<l  of  the  war,  when  it  was  feared  that  the  amount  of  legal 
tenders  would  destroy  our  ability  to  boiTOW  money,  we  ])rovided,  in  the 
second  section  of  the  loan  act  (A  that  date,  "nor  shall  the  total  amount 
of  United  States  notes  issued,  or  to  be  issued,  ever  exceed  S400,000,- 
000,  and  such  additional  sum,  not  exceeding  850,000,000,  as  ^ may  be 
tempr.rarilv  required  for  the  redemption  of  temporary  loan  Ihis 
stipulation"  is  a  part  of  the  terms  upon  wliich  the  seven-tLirty  loan  was 
issued,  and  is  as  binding  upon  the  United  States  as  any  other  part  of 
the  contract.  It  received  the  unanimous  vote  of  Congress,  so  far  as 
the  journals  show,  and  was  plainly  demanded  by  public  policy  at  the 
time,  and  was  a  pledge  of  the  public  faith.  Shall  this  be  violated 
under  pretense  of  diminishing  the  public  burdens  (     Kvery-  increase  ot 


150  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

legal  tenders  iinpaii-s  the  value  of  our  public  securities.  If  we  may 
violate  this,  "we  may  violate  any  other  part  of  the  contract.  Your 
Committee  therefore  (lisniiss  as  inconsistent  with  tlie  public  faith  any 
scheme  of  paying  tlie  public  ilebt  in  legal  ten(lt'i"s  by  increasing  their 
volume  beyond  the  sum  of  S4<i0,()0(>,0(>0.  The  surplus  revenue  can 
readily  be  applied  to  the  payment  of  the  five-twenties,  as  is  now  <laily 
done  by  the  purchase  of  our  securities  in  the  oi)en  market.  Your 
Committee  are  satisfied  that  this  fund,  with  the  aid  of  such  a  loan  as 
is  provided  in  the  l)ill  herewith  submitted,  will  re<leem  the  five-twenty 
loans  as  they  l)ecome  redeemable,  with  a  large  saving  to  the  public 
treasury,  and  in  strict  accordance  with  the  ])ublic  engagements. 

It  now  remains  to  consider  the  terms  of  the  ])ro posed  loan,  and  the 
proper  means  to  restore  the  notes  of  the  United  States  to  a  specie 
value.  In  the  new  loan  your  Committee  deem  it  essential  to  a<ljust 
the  question  of  taxation.  State  and  national,  of  the  public  securities. 
The  exemj)tion  of  these  securities  from  State  and  local  taxes  has  been 
the  subject  of  wide-spread  comjdaint  and  irritati(»n.  It  is  diflieult  to 
reconcile  the  duty  of  the  United  States  to  ])re8erve  unimpaired  its  un- 
doubted power  to  borrow  money  on  the  public  cretlit  with  the  reason- 
able demand  that  all  pro])erty  should  bear  its  just  projwrtion  of  the 
burdens  of  taxation.  Your  Connuittee  can  only  claim  that  they  have 
given  the  subject  the  most  careful  consideration,  and  sulnuit  a  plan  as 
free  from  objection  as  any  that  has  been  ])roposed. 

The  exemption  of  j)ublic  securities  is  not  the  result  of  any  act  of 
Congress,  It  grows  out  of  the  provision  of  the  Constitution  of  the 
United  States  which  secures  to  Congress  the  power  to  bon*ow  money, 
and  out  of  the  supreme  nature  of  that  power,  which  cannot  be  affected 
or  limited  by  the  act  of  any  State  or  local  govenunent.  In  the  al>- 
sence  of  any  legislation,  the  Supreme  .Court  have  repeatedly  held  that 
no  State  can  lev^y  upon  money  invested  in  any  public  security  any  tax 
or  assessment  whatever,  on  the  ground  that  such  a  tax  is  inconsistent 
with  the  power  of  Congress  to  boiTOw  money.  If  a  State  may  tax  a 
security  of  the  United  States,  it  may  entirely  defeat  a  power  essential 
to  the  existence  of  the  Government,  These  decisions  have  been  so 
often  repeated,  and  are  founded  uj)on  reasons  so  conclusive  and  obvi- 
ous, that  they  may  be  considered  as  settled  constitutional  law.  It  is 
true,  Congress  may,  in  negotiating  a  loan,  reserve  to  the  State  the  ex- 
press power  to  levy  taxes  on  public  securities  held  within  the  State. 
This  reservation  would  become  a  part  of  the  contract,  and  would  be  a 
valid  stipulation. 

The  effect  of  State  taxation  would  be  that,  in  many  of  the  States 
where  the  taxes  are  high,  no  public  securities  would  be  held.  This 
would  be  especially  so  in  large  cities,  now  the  best  market  for  our 
securities,  and  where  local  taxes  often  amount  to  three  per  cent.  With 
such  a  provision,  no  loan  could  be  negotiated  except  at  such  rates  of 
interest  as  would  add  largely  to  the  public  burdens.  It  has  been  pro- 
posed to  limit  State  taxes  to  one  per  cent,  ;  but  this  is  a  discrimination 
as  liable  to  objection  as  an  entire  exemption,  and  yet  would  add  to  the 
public  Inn-dens  one  per  cent,  of  the  entire  loan.  It  would  not  meet 
the  local  demand  for  taxes  for  local  purposes.     Your  Committee  are 


THE  PUBUC  DEBT.  151 

therefore  of  opinion  that  it  would  not  be  wise  in  a  loan  law  to  waive 
tlie  constitutional  right  of  exemption  of  Government  securities  from 
State  taxes. 

But  that  all  pn)])^!^  protected  by  State  or  local  laws  should  bear  its 
share  of  taxation  is  so  plainly  the  demand  oi  justice  and  public  policy, 
tliat  your  Committee  deem  it  wise  to  reserve,  in  lieu  of  local  taxes,  a 
specific  rate  on  the  entire  del)t  liereafter  netrotiated,  and  to  distribute 
this  amoiig  the  States  according  to  their  population.  The  amount  thus 
reserved  Mill,  in  the  aggregate,  eipial  the  ju-obablc  amount  that  would 
be  collected  by  the  States  from  the  caj^ital  loaned  to  the  Government. 
From  the  nature  of  public  securities  being  easy  of  concealment,  readi- 
ly transferred  or  de])osited  out  of  the  State,  it  is  probable  that  but  a 
small  portion  would  be  reached  by  taxation ;  while  the  mode  suggested 
would  secure  each  State  a  tixed  sum,  collected  without  expense  and 
witli(jut  surrendering  the  j)ower  of  the  National  Govermnent  over  its 
loans,  or  of  im])cding  the  ready  transfer  of  the  public  securities. 

If  it  is  objected  that  the'distributi<m  ])rop(»sed  is  not  just  to  the 
States  whose  citizens  liold  a  larger  ]>roportion  of  the  bonds,  it  may  be 
replied  that  no  Ijetter  rule  of  distribution  can  be  proposed,  and  the  ad- 
vantage, if  any,  will  accrue  to  the  younger  and  })oorer  States,  where  any 
taxation  is  more  severely  felt. 

This  adjustment  will  i-elieve  the  V)ond-holder  from  the  reproach  of 
enjoying  State  law  and  local  ])rivileges  without  contributing  to  the  pub- 
lic expenses,  and  will  increase  the  demand  tor  jjublic  securities,  and  thus 
ena])le  the  (Tovemment  to  sell  them  at  more  favorable  rates.  The  ob- 
vious ]>ayment  ])y  tlie  bond-h(»lder  of  one  sixth  of  his  income  for  taxes, 
and  the  great  relief  the  distribution  of  so  large  a  sum  to  the  States  will 
give  them,  in  the  payment  <»f  State  debts  and  the  means  of  lessening 
taxes,  will  satisfy  the  "well-founded  complaint  now  made  by  the  owners 
of  real  and  personal  property. 

The  same  adjustment  is  proposed  in  regard  to  national  taxes.  It 
has  often  been  ccintended  that  a  nation  had  no  right  to  levy  taxes  upon 
money  loaned  to  it  by  its  own  or  foreign  citizens.  This  view  was  main- 
tained with  great  ability  by  Alexander  Hamilton  in  his  celeljrated  re- 
port on  public  credit,  made  January  !♦>,  17l«5;  but  the  practice  of  sev- 
eral European  nations,  as  well  as  of  the  United  States  duriiig  the  war, 
has  established  a  different  rule.  The  income  tax  of  Great  Bntain  and 
of  the  United  States  extends  to  incomes  derived  from  Government  se- 
curities ;  but  in  practice  this  tax  does  not  prove  a  productive  source  of 
revenue.  So  many  incomes  fall  below  81,00(t,  the  minimum  of  taxable 
incomes,  so  many  Ijonds  are  held  abroad  or  by  coqiorations  who  are 
taxed  in  a  <liffere'nt  way,  and  so  much  income  is  concealed,  that  the  in- 
ternal revenue  reports  show  that  but  a  small  sum  is  collected  as  the  rev- 
enue from  incomes  from  public  securities. 

It  has  been  suggested  that  a  special  tax  be  levied  l>y  Congress  on 
Government  securities.  Such  a  tax  would  be  a  palpable  violation  of 
public  faith,  unless  extended  to  all  other  securities,  as  State,  coqwra- 
tion,  or  personal  securities.  To  select  any  one  class  of  securities, from 
other  securities  producimx  t^  fixed  income,  and  to  levy  u])on  it  a  special 
burden,  would  not  only  be  an  unjust  taxation,  condemned  by  all  writers 


152  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

on  political  economy,  not  practiced  by  any  other  nation,  but,  as  vour 
Committee  believe,  would  be  inconsistent  with  the  Constitution  of  the 
United  States  and  likely  to  be  defeated  by  the  courts.  And  the  injus- 
tice of  such  a  tax  is  more  marked  when  the  security  selected  is  a  pul>- 
lic  security,  to  the  ]):iyment  of  which  the  faith  <»f  the  nation  is  j)led^ed, 
and  when  tlie  admitted  ])Ui'})ose  of  such  a  tax  is  to  neutralize  a  consti- 
tutional and  legal  exemption. 

As  an  adjustment  of  the  income  tax  now  levied,  your  Committee 
propose  a  like  reservation  as  for  the  States,  the  proceeds,  with  such 
other  funds  as  Congress  may  provide,  to  l»e  directly  applied  to  tlie  pur- 
chase or  payment  of  the  j)rii>cipal  of  the  debt. 

Tlie  other  provisions  in  regard  to  tlie  loan  are  similar  to  those  in 
existing  acts.  Your  Committee  deem  it  important  to  retain  the  prin- 
ciple of  redeemableness  after  a  short  period,  thus  enabling  the  (iovem- 
nient  to  avail  itself  of  a  favorable  state  of  the  money  market  by  still 
further  reducing  the  interest.  This  loan  will  secure  to  the  bond-holder 
a  net  five  per  cent,  annuity,  payable — princijjal  and  interest — in  coin, 
and  redeemable  after  ten  years.  Such  a  loan,  upon  the  basis  of  the 
present  circulation,  it  is  believed,  can  promptly  be  negotiated. 

Your  Committee  deem  it  proper  to  jirovide  for  a  foreign  loan,  to 
be  negotiated  at  the  discretion  of  the  Secretary  of  the  Treasury.  It 
is  computed  that  the  amount  of  our  securities  held  abroad  exceeds 
three  hundred  millions  of  (U)llars,  These  are  mainly  coujxm  l)onds  of 
the  first  issue  of  the  five-twenty  loan.  The  interest  is  payable  in  New 
York,  by  reason  of  which  the  holders  are  at  considerable  exj^ense  in 
collecting  their  coupons.  The  nature  of  these  l)onds  is  such  tiiat  they 
are  liable  to  be  thrown  suddenly  upon  our  market  by  war,  panic,  or 
other  causes.  For  this  reason  our  markets  are  unduly  affected  by  fluc- 
tuations, caused  by  events  in  which  we  have  no  ])art.  It  is  believed  a 
loan  can  now  be  made,  sutfieient  to  redeem  all  the  five-twenty  bonds 
held  in  Europe,  at  a  rate  of  interest  not  exceeding  five  per  cent.,  and 
registered  in  London  or  Frankfort,  so  that  it  can  not  be  thrown  upon 
our  market  at  periods  of  alarm  and  stringency.  The  exchange  is  fixed 
at  a  rate  which  will  more  than  cover  all  expense  of  transferring  funds, 
and  in  harmony  with  the  great  system  now  proposed  by  the  continental 
nations,  by  which  the  gold  coin  of  ecpial  value  of  all  Christian  nations 
will  be  convertible  and  exchangeable  without  loss  or  discount. 

Your  Committee  regard  the  provisions  of  the  bill  designed  to  give 
increased  value  to  the  United  States  note  as  of  the  greatest  importance. 
When  the  United  States  failed  to  meet  its  engagements  in  coin,  it  suli- 
stituted  its  notes  and  gave  to  them  every  value  possible.  When  the 
legal-tender  act  of  February  25,  1862,  took  effect,  gold  was  at  a  pre- 
mium of  three  per  cent.  That  act  not  only  made  "the  United  States 
notes  legal  tender  for  public  and  private  debts,  but  made  them  con- 
vertible, at  the  pleasure  of  the  holder,  into  bonds  of  the  United  States. 
This  provision  was  regarded  as  of  the  highest  importance,  without 
which  your  Committee  are  satisfied  the  legal-tender  clause  could  not  at 
that  time  have  passed  Congress.  It  was  founded  upon  the  manifest 
principle  that,  when  we  could  only  pay  in  our  notes  and  compelled  all 
our  citizens  to  receive  them,  we  ought  to  receive  them  for  our  bonds. 


THE   PUBLIC  DEBT.  I53 

Tlie  note  is  a  contract  no  less  sacred  than  the  bond.  By  any  equitable 
rule  it  phould  bear  interest.  All  former  notes  is^^ned  by  the  Tnited 
States  bore  interest — those  durini^  tlie  war  of  1812  at  the  rate  of  5-| 
per  cent.,  those  durin^^  the  Mexican  war  not  exceeding  six  per  cent. 
So  the  exchequer  bills  of  England  forming  a  national  currency  bear 
interest.  This  incident  to  a  United  States  note  past  due  was  only 
waived  i)y  making  them  eonvei'tiblu  into  an  interest-bearing  security. 
Tliis  right  was  plainly  printed  on  the  face  of  the  note;  but  it  was 
found  to  embarrass  the  Treasury  in  negotiating  its  loan  when  under 
the  pressure  of  war,  and  therefore,  by  the  act  of  March  3,  1801,  it  was 
])rovided  ''  that  the  holders  of  United  States  notes,  issued  under  and 
by  virtue  of  said  act,  shall  present  the  same  for  the  purpose  of  exchang- 
ing the  same  for  bonds,  as  therein  ])rovided,  on  or  before  the  first  day 
of  July,  lsr»,'^,  and  thereafter  the  right  so  to  exchange  the  same  shall 
cease  and  determine.''  This  device  to  suspend  the  right  of  converti- 
bility attached  to  tlie  note  was  suggested  by  our  late  distinguished 
colleague.  Judge  CoUamer,  and  was  only  justitied  by  the  necessity 
then  resting  uj)on  us  of  forcing  upon  the  market  all  forms  of  puD- 
lic  securities.  The  necessity  no  longer  exists,  and  your  Committee 
think  the  right  ought  to  be  rest<»red.  *  If  we  cannot  pay  our  note  in 
coin,  let  us  pay  it  in  the  next  best  commodity,  a  b<tnd  of  the  United 
States.  The  value  of  the  note  now  rests  sok-ly  upon  the  compulsory 
value  given  it  by  the  legal-tender  clause  ;  then  it  will  be  anchored  on 
the  solid  basis  of  an  annuity  payable  in  coin.  This  measure  alone  will 
<£ive  the  •"  greenback  "  the  market  value  of  a  l)ond,  while  heretofore, 
tliough  made  the  legal  standard  of  value,  it  has  been  and  now  is  the 
least  valuable  form  of  Govt-rmnent  security. 

Another  highly  important  effect  of  this  provision  is  to  take  from  the 
Secretary  of  the  Treasury  his  power  to  control  the  currency. 

Under  existing  law  he  is  authorized,  at  his  discretion,  to  contract 
the  currency  at  the  rate  of  four  millions  of  dollars  per  month,  and 
there  is  no  provision  to  adapt  the  volume  of  currency  to  the  ever- 
clianging  demands  of  trade  and  commerce.  This  power,  tliough  no 
doubt  exercised  by  the  Secretary  witli  the  sole  view  of  promoting  the 
public  interests,  is  one  not  properly  invested  in  any  officer  constantly 
engaged  in  official  duties,  and  it  is  the  cause  of  widespread  complaint. 
Xo  one  engaged  in  business  can  base  his  calculations  upon  a  currency 
depending  not  on  supply  and  demand,  but  upon  the  discretion  of  a 
single  officer.  If  currency  is  scarce,  the  Secretary  is  blamed  ;  if  it  is 
redundant,  he  is  charged  with  inllating  prices.  The  Government 
should  have  no  power  over  the  currency  except  to  stamp  it  with  the 
highest  credit,  and  by  general  rules,  known  to  all  men,  to  limit  its 
amount.  All  fluctuations  of  the  currency,  affecting,  as  they  do,  the 
prices  of  all  commodities,  should  be  left  solely  to  the  laws  of  demand 
and  supply,  l^pon  .these  l)usiness  men  base  their  trar.sactions,  and 
should  have  the  benefit  of  their  sagacity  without  being  affected  by  the 
arbitrary  discretion  of  the  Government. 

The  plan  proposed  establishes  the  maximum  of  currency  at  the 
amount  fixed  by  law,  and  it  may  be  diminished  by  payment  for  taxes 
and  its  conversion  into  bonds.     These  processes  would,  it  is  believed. 


154  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

rapidly  restore  onr  currency  to  tlie  standard  of  gold  without  the  severe 
disturbance  and  uncertainty  caused  by  the  present  system.  When  the 
restored  credit  of  the  Government  advances  the  market  value  of  our 
bonds  to  the  gold  standard,  specie  payments  may  be  resumed  and 
maintained.  This  plan  is  in  accordance  with  the  uniform  practice  of 
our  Government  prior  to  July  1,  18G3,  and  of  Great  Britain  during 
the  long  period  of  the  susj)ension  of  specie  payments,  from  1707  to 
1823.  Tlie  holder  of  ])aper  money  was  allowed  at  any  time  to  convert 
it  into  a  bon<^  or  annuity.  The  note  forced  upon  the  peo})le  during  a 
suspension  of  specie  payments  was  never  allowed  to  be  of  less  value 
than  other  secuiitics  held  by  public  creditors. 

It  may  be  alleged  that  this  plan  would  contract  the  currency  too 
rapidly  ;  that,  when  trade  was  inactive  and  money  plenty,  it  would  be 
converted  into  bonds  ;  and  when  active  business  operations  were  re- 
sumed, as  by  the  movement  of  croj)s  or  similar  tluctuations  of  trade, 
the  currency  would  be  insufficient  aud  money  too  scarce,  causing  gi-eat 
stringency  and  depression  of  prices.  Such  would  undoubtedly  be  the 
effect,  and  it  is  maiidy  to  furnish  this  fluctuating  currency  that  l)ank8 
of  issue  are  established  by  most  commercial  nations.  The  usefulness 
of  the  national  banks  is  now  impaired  by  the  suspension  of  specie  jiay- 
ments.  Their  currency  is  now  not  a  fluctuating  one,  ])ut  a  permanent 
one.  Their  issues  are  not  returned  when  trade  is  idle,  and  therefore 
they  are  unable  to  relieve  a  sudden  stringency  in  the  money  market. 

It  is  to  avoid  this  difficulty  that  during  the  suspension  of  sjiecie 
Ijayments  your  Committee  propose  that  any  holder  oi  the  five-twenty 
bonds,  or  the  consolidated  bonds,  may,  under  suitable  regulations,  aud 
within  the  limit  of  s4(M),(iOO,(»00,  present  them  at  the  Treasury  and 
receive  in  exchange  United  States  notes. 

This  would  make  a  currency  convertible  into  bonds,  and  within 
proper  limits  a  debt  convertilde  into  currency,  and  its  fluctuations 
M'ould  depend  entirely  upon  the  wants  of  trade  and  commerce,  and  not 
in  any  respect  upon  the  discretion  of  the  Secretary.  The  money  paid 
into  the  Treasury  for  taxes  or  bonds  would  be  a  bank,  or  reserve,  sufl&- 
cient  for  the  negotiation  of  the  new  loan,  for  the  redemption  of  the 
five-twenty  bonds,  and  for  exchange  for  bonds. 

It  may  be  objected  that  this  would  continue  indefinitely  the  suspen- 
sion of  specie  payments.  Your  Committee,  being  sincerely  desirous 
of  avoiding  this  result,  have  given  this  objection  the  most  careful  con- 
sideration, and  are  of  the  opinion  that  experience,  the  only  test  of  such 
a  proposition,  will  show  a  coutraiy  eifect. 

The  holder  of  an  annuity  yielding  five  per  cent,  in  gold,  free  from 
all  taxes,  will  not  surrender  it  for  a  note  only  valuable  as  a  currency, 
unless  the  demand  for  currency  is  m*gent  and  stringent,  and  then  it 
ought  to  be  relieved.  It  will  happen  that  in  one  part  of  the  country 
bonds  will  be  exchanged  for  notes,  and  in  another  part  notes  for  bonds ; 
at  one  season  money,  being  idle,  will  be  converted  into  bonds,  to  be 
returnable  again  for  money  when  it  is  needed.  This  process  will  give 
increased  value  both  to  the  notes  and  bonds,  and  enable  the  Govern- 
ment eventually  to  restore  both  to  the  standard  of  gold,  when  the  vast 
productions  of  our  mines  and  the  accumulated  gold  now  lioai'ded  by 


THE  PUBLIC  DEBT.  155 

our  people  will  take  its  place  as  the  best  and  the  only  true  cun-ency. 
Then  the  banks,  restrained  by  the  necessity  of  redeeming  their  notes 
in  coin,  will  perform  their  appropriate  function  of  furnishing-  a  valuable 
currency  convertible  into  coin. 

If  in  ]M-actice  it  is  found  that  the  conversion  of  boods  into  money 
needs  further  limitation,  either  by  reducing  the  maximum  limit  or  by 
charging  a  percentage,  it  may  be  provided  for  by  Congress.  The  con- 
version is  not  a  right  secured  to  the  bond-holder  as  ar  part  of,  his  con- 
tract, l)ut  is  simply  a  })rivilege  designed  to  regulate  the  currency,  and 
may  be  modified  or  withdrawn  according  to  the  judgment  of  Con- 

1  our  Committee  are  of  the  opinion  that  the  time  is  not  distant 
when  it  will  become  the  duty  of  Congress  to  repeal  so  much  of  existing 
laws  as  makes  the  United  States  notes  a  legal  tender  in  payment  of 
del)ts,  cither  public  or  private.  This  provision  was  adopted  with  ex- 
treme reluctance  and  under  the  pressure  of  overwhelming  necessity. 
The  debates  in  Congress  at  the  time  this  measure  was  adopted  show 
conclusively  that  it  was  universally  regarded  as  a  temporary  expedient. 
It  is  inconsistent  with  sound  financial  principles,  and  was  never  re- 
sorted to  since  the  commencement  of  the  present  Government  until 
February  25,  1802.  The  evils  ]iroduced  by  continental  money  were  so 
fresh  in  the  minds  of  the  founders  of  the  Government  that  during  the 
financial  difficulties  that  followed  the  adoption  of  the  Constituti(»n  no 
one  proposed  such  an  exjiedient.  During  the  war  of  1812,  when  finan- 
cial embarrassments  had  impaired  the  revenue  and  destroyed  the  i^ublic 
credit,  a  limited-tender  Treasury  note  was  proposed,  but  was  jDromptly 
rejected.  Mr.  Dallas,  in  a  communication  to  the  Committee  of  Ways 
and  Means,  declared  "that  the  extremity  of  that  day  can  not  be  anti- 
cipated when  any  hcjncst  and  enlightened  statesman  will  again  venture 
upon  the  des])erate  expedient  of  a  tender  law."  AVe  were  driven  to 
that  extremity,  but  shcndd  hasten  to  abandon  so  desperate  a  remedy  at 
the  earliest  day  practicable.  The  moment  at  which  we  can  restore  our 
notes  to  a  specie  standard  should  be  signalized  by  a  return  to  correct 
principles,  and  our  United  States  notes  should  stand  like  all  other  paper 
money,  receivable  only  at  the  pleasure  of  tlie  creditor. 

Your  Committee,  having  thus  stated  their  views  upon  the  different 
propositions  of  this  bill,  beg  leave  to  add  that  they  do  not  consider  this 
measure  as  embracing  all  the  financial  measures  demanded  by  the  pub- 
lic interest ;  but  they  present  it  in  the  hope  that  it  may  not  be  embar- 
rassed by  other  financial  problems  now  exciting  general  discussion. 

Various  propositions  relating  to  the  national  banking  system  are 
under  consideration  by  your  Committee,  and  will  be  carefully  examined. 
Whatever  view  may  betaken  by  Congress  as  to  the  continued  existence 
of  this  system,  it  is  manifest,  from  the  report  of  the  Com])troller  of  the 
Currency,  that  a  more  equitable  distribution  of  the  banks  among  the 
States,  and  new  provisions  for  reports  and  for  the  redemption  of  their 
notes,  must  be  made.  It  is  equally  manifest  that  further  provision 
must  be  made  for  the  collection  of  certain  internal  taxes,  and  the  re- 
mission of  others.  It  is  only  l>y  relieving  our  industry,  and  ap])lying 
our  taxes  as  far  as  practicable  to  articles  the  consumption  of  which  may 


156  SPEECHES   AND   RErORTS   OF  JOHN   SHERMAN. 

be  dispensed  with,  that  we  can  liopc  to  establish  onr  system  on  a  satis- 
factory basis.  We  may  justly  boast  of  the  manner  our  constituents 
have  heretofore  borne  the  vast  aggregate  of  accumulated  taxes  caused 
by  the  war.  They  have  cheerfully  paid  a  greater  amount  in  the  aggre- 
gate, or  per  capita,  than  any  otlier  nation  before  ;  and,  if  necessary  to 
preserve  the  public  engagement,  they  would  continne  to  do  so,  but  the 
necessity  no  longer  exists.  It  is  ha})j)ily  our  duty  to  select  from  among 
the  great  number  of  articles  now  taxed  such  as  may  now  be  relieved, 
and  "to  simplify  the  mode  of  collecting  the  tax  on  the  residue.  This 
your  Committee,  in  connection  with  that  of  the  House  of  Representa- 
tives, are  prepared  to  do;  but,  as  preliminary  to  all  these  important 
subjects,  it  is  necessary  to  relieve  the  public  mind  from  anxiety  as  to 
the  action  of  Congress  on  the  subjects  embraced  in  this  bill. 


THE  FUNDING  BILL. 

IX  THE  SENATE,  FEBRUARY  27,  1868. 

The  Senate  having  under  consideration  the  bill  for  funding  the  national  debt 
and  for  the  conversion  of  the  notes  of  the  United  States,  Mr.  Sherman  said : 

Mr.  PREsroENT :  The  attention  of  the  Senate  has  been  so  long  occu- 
pied with  grave  political  cpiestions  deeply  exciting  the  public  mind,  that 
I  have  no  doubt  it  will  appear  a  dull  change  in  our  debate  to  turn  to  ques- 
tions purely  of  a  iinancial  and  economic  character :  yet,  as  our  constitu- 
ents are  laboring  under  the  burdens  of  taxation  and  the  acknowledged 
evils  of  a  depreciated  currency,  and  demand  relief  from  us,  it  Ijccomes 
the  imperative  duty  of  Congress  to  give  attention  to  this  subject.  The 
House  of  Representatives  is  now  engaged  in  the  perfonnance  of  its 
constitutional  duty  of  diminishing  taxes ;  and  your  Committee  on  Fi- 
nance deem  it  their  duty  to  lessen,  if  possible,  the  burdens  of  the  public 
debt,  and  to  give  increased  value  to  the  United  States  notes,  now  made 
the  compulsory  basis  of  our  circulation.  We  have,  therefore,  reported 
this  bill  after  careful  consideration.  In  advocating  it,  I  do  not  appeal 
to  any  political  bias ;  I  do  not  appeal  to  any  sectional  interest ;  nor 
have  I  any  pride  of  opinion ;  and  I  shall  only  appeal  to  those  consider- 
ations which  actuate  us  all  alike,  the  desire  to  relieve  our  people  from 
all  the  burdens  of  taxation  consistent  with  the  public  faith. 

The  Committee  on  Finance  acknowledge  that  it  is  the  first  and 
highest  duty  of  a  Government  to  maintain  inviolate  the  public  credit. 
A  strict  compliance  with  public  engagements  is  the  first  duty  of  every 
legislative  body.  Public  credit  is  the  highest  property  of  a  nation,  its 
sure  reliance  in  time  of  danger  and  war ;  it  is  a  more  valuable  property 
than  any  other,  and  is  not  to  be  tarnished  or  soiled  by  any  consideration 
whatever.  But,  subordinate  to  this  great  principle,  it 'is  our  duty  as 
legislators  to  relieve  our  constituents  from  every  exaction  not  demanded 
by  the  national  safety  or  the  public  interests.    "^We  have  a  right  to  take 


THE  FUNDING  BILL.  157 


from  our  people  tlicir  money  to  tlie  extent  necessary  to  carry  on  the 
ordinary  eipenses  of  the  Government  and  mam  am  the  pnblic  fait  i, 
but  not  one  cent  further.     The  great  mass  of  mankind  have  not  iing  to 
protect  except  the  reward  of  their  daily  labor      This  is  their  only  capi- 
k      In  evei-y  community-and  ours  is  more  favored  than  most  m  tins 
particular-tiie  majority  of  men  depend  only  upgn  their  daily  labor, 
Ld  enioy  nothing  of  the  blessings  of  civil  government  except  in  the 
protection  of  the  result  of  that  labor.     It  is,  therefore,  our  .duty  not  to 
ake  one  cent  from  them  unless  it  is  demanded  by  the  P^^/^e  exigencies. 
It  is  witli  this  view,  and  actuated  by  this  13rinciple,  tha    the  Com- 
mittee on  Finance  have  endeavored  to  make  this  bill  a  bill  ol  reliet, 
r     ucbic.  if     ossible,  consistently  with  the  public  faitli,  the  interest  ot 
he  mibHc  debt,  and  giving  increlsed  value  to  United  States  notes.    We 
havrendeatre^^  in  tins  bill  to  accomplish  three  results  :  first,  to  reduce 
the  rate  of  interest  with  the  voluntary  consent  of  the  holders  of  om 
securities;  secwd,  to  make  a  distinct  provision  for  the  payment  ot    he 
pSc  del3t ;  and  third,  to  give  increased  value  to  I  nited  States  notes 
and  to  provide  for  a  gradual  resumption  of  specie  paynien  s.    Ail  tlicsc 
are  obiects  a<lmitted"to  be  of  the  highest  importance.    /H^e  only  ques- 
tion is  whether  the  measure  proposed  tends  to  accomplisli  them. 

The  body  of  our  public  debt  consists  mainlv  of  securities  conimoiily 

knoim  as  the  five-twintv  bonds,     ^'early  all  of  the  debt  of  the  United 

Stat"  is  either  reduced  already  to  that  form  of  ^^^-fy^^^^^^^^ 

within  a  verv  short  period  of  time.     I  have  prepared  a  sta  ement  ±iom 

the  official  documents  showing  the  amount  and  time  f /^f^;;;-;^^^;^^^^^^^ 

five-twentv  bonds.     There  are  of  the  first  ^f  ^^^  ^^'^f,|^^^™'.  ,^^^'^^^ 

iblo  on  the  30th  of  April,  1807,  now  outstanding  ^ol4-,  <  bO.oOU.     Ut 

i  s    on     islue  theiJwili  be  redeemable  on  the  31st  oiOcioljr^ 

next  year  S129,443,8( .( . ;  there  will  be  redeemable  on  the  30th  o^  June, 

1^-0  ><^01  >^S0  950  and  on  the  31st  of  October,  IbiO,  bl*bl,4^',fOU. 

Th^'e' i'  'of  tfie'LeT^^^^^^^^^  either  been  funded  into 

fi  ^-twenties  or  are  in  process  of  being  funded,  something  over  S480 

SoO,  K^O,  making  an  aggregate  of  what  might  now  be  -gai-ded  as  fi^^^^ 

twenty  bonds  of  Sl.613,442,650,  of  which  a  little  o^f.^^OOOOO  000  is 

yet  i?tlie  form  of  seven-thirties,  and  will  be  fnnced  ^f ^^re  the  1st  day 

of  Julv  next.     In  addition  to  this,  there  are  of  ^^hts  tat  are  now 

matured,  or  which  will  mature  this  summer,  an  aggreg^ite  of  blO  ,042 

949,Ton'sisting  chiefly  of  compound-interest  notes  and  thi.e  per    ent 

certificates,  making  with  the  bonds  "If^V"'''  p^  «o  iM'thiii' fivVyears 
^vhich  are  either  redeemable  now  or  will  become  so  ^^ithin  J^^^e  }eai8 
ivl,ni  this  time;  the  great  body  of  thein,  however,  are  redeemable 
within  the  present  and  the  next  year.  ^  ,^  ^  .  ,  ,,  ^^.  •.  •  -^p 
Tl,c  Hrst  question  that  arise.,  Mr.  President  .s  ^vhethe>  ^t  .s  ™ 
now  to  provide  for  tlie  redemption  of  tliesc  Iwnds.  ^Y?  ^  «  ™  Xical 
to  consider  tl.is  question.  It  is  already  >™d«  ""^^^"''J^^^ft  Xin  ' 
.lisraitps  While  it  is  beina  cons  dered  by  us  in  (congress  ii  is  uemj^ 
SS-edrihe  people,  and  there  is  a  <^fy^^^^^ 
broad  country  as  to^iow  and  when  the.fiye-  went les  ^ 
Especially  in  the  West  this  has  been  made  the  ^i^^^l^ct  ot  poi  t  c^^  con 
U^ntion.     I  might  show  you  by  the  resolutions  of  pohtical  parties,  Doth 


158  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

Kepublican  and  Democratic,  that  we  cannot  avoid  or  evade  tliis  issue. 
We  must  meet  it.  I  have  here  the  rcsokitions  of  both  political  iiarties 
in  the  State  of  Indiana,  both  declaring  that  these  bonds  ought  to  be  paid 
in  greenbacks,  and  differing  only  as  to  the  limit  of  greenljacks.  1  have 
also  resolutions  adopted  in  different  parts  of  the  country.  The  tenden- 
cy of  the  Democratic  party  is  to  drift  into  a  political  declaration  that  these 
bonds  shall  be  paid  in  greenl)acks ;  and  great  masses  of  patriotic  men  all 
over  the  country  of  the  political  faith  to  which  the  majority  of  the  Senate 
belong  Imvc  come  to  the  same  conclusion.  AVe  are,  therefore,  compelled 
to  consider  the  (piestion.  It  will  be  made  the  basis  of  every  election 
next  fall  in  nearly  all  the  northwestern  States.  Xo  man  can  be  elected 
to  Congress  unless  he  commits  himself  for  or  against  this  proposition. 

Sir,  it  was  the  first  topic  that  wa.s  introduced  into  this  session  of 
Congress  in  both  Elouses.  My  honorable  friend  from  Vermont  [Mr. 
Edmunds],  in  a  very  elal)orate  speech,  and  altogether  the  best  one  yet 
presented  on  his  side  of  the  case,  introduced  it  on  the^first  or  second 
day  of  the  session.  The  same  subject  was  ])resented  in  the  House  of 
Kepresentativcs  by  a  distinguished  Representative  from  the  same  por- 
tion of  the  country,  taking  the  opposite  view.  It  is  now  more  dis- 
cussed than  any  other  question  except  the  rpiestion  of  reconstruction. 
It  must  be  met  by  us  here,  and  in  anticipation  of  the  movements  of 
political  parties.  If  other  Senators  have  not,  I  certainly  have  been 
overwhelmed  with  propositions  of  all  kinds  from  every  part  of  the 
country,  proposing  various  schemes  of  finance  atfecting  the  very  ques- 
tion proposed  to  be  dealt  with  by  this  bill. 

My  own  conviction  is  that  the  question  ought  to  have  been  settled 
two  years  ago,  at  which  time  I  addressed  tlie  Senate  on  the  subject. 
Mr.  President,  I  believe  that  most  reHecting  men  will  now  admit  that 
if  then  we  had  adopted  some  provision,  comprehensive  in  its  charac- 
ter, to  fund  the  public  debt  and  to  provide  for  the  redemption  of  tlie 
five-twenty  bonds  when  they  became  redeemable,  it  would  have  been 
wiser.  At  that  time  no  portion  of  them  was  redeemable.  The  first 
ones  became  redeemable  about  one  year  ago  ;  but  the  country  was  then 
filled  with  the  idea  of  Mr.  McCulloch,  that  the  only  safety  was  in  con- 
traction, to  get  back  to  specie  payments  before  anything  was  done  with 
the  public  debt ;  and  the  policy  was  adopted  of  autho'rizing  a  contrac- 
tion of  the  currency  without  any  regard  to  funding  whatever,  by  the 
act  of  April  12,  1866,  passed  against  my  earnest  protest,  in  which  we 
gave  to  the  Secretary  of  the  Treasury  ahnost  unlimited  power  over  the 
currency  and  over  the  public  debt.  ^Ve  authorized  him  to  convert 
every  form  of  indebtedness  into  any  form  of  indebtedness  provided  for 
by  previous  acts.  There  was  no  limitation  upon  his  powers  except  that 
he  could  reduce  the  greenback  currency  only  at  the  rate  of  S-i,'  •<  >0.(  k  lO 
per  month.  I  have  no  doubt  that  he  exercised  his  power  conscien- 
tiously ;  but  what  has  been  the  result  ?  Within  two  years  he  contracted 
the  legal-tender  currency  8160,000,000,  and  the  plain  United  States 
notes^  over  $4:0,000,000.  He  also  converted  all  the  floating-currency 
debt  into  gold-interest  bonds.  At  the  time  this  law  was  passed,  April 
12,  1866,  the  total  amount  of  five-twenty  bonds  was  $666,00(),0i>0.  and 
the  great  mass  of  the  debt  was  in  what  are  called  currency  obligations, 


THE  FUXDiyG  BILL.  159 

the  principal  of  which,  undoubtedly,  could  have  been  paid  in  cui'rency. 
But,  conscientiously  believing:,  as  he  did,  tliat  the  best  way  to  the  re- 
sumption of  specie  pa}anents  was  by  a  rapid  and  steady  contraction  of 
the  currency,  he  entered  upon  the  policy  I  have  stated. 

In  April,  1866,  the  pnce  of  gold  was  125.  It  had  steadily  declined 
from  the  close  of  the  war  until  it  reached  its  lowest  point,  I  believe,  in 
April,  1S6(>,  the  very  time  of  the  passage  of  this  law.  From  that  time 
to  this  gold  has  advanced,  varying  between  130  and  140  ;  and  are  we 
any  nearer  specie  payments  now  than  we  were  then  ?  Not  at  all.  We 
have  converted  our"^  debt  into  a  more  oppressive  form  of  obligation. 
The  interest  of  the  great  mass  of  it  is  now  payable  in.  gold  at  the  high 
rate  of  six  per  cent.,  and  the  bonds  are  less  valuable  in  gold  than  then. 
I  still  think  that,  if  we  had  looked  rather  to  the  funding  of  the  debt 
with  the  currency  then  afloat,  we  could  have  passed  the  whole  of  it  into 
five  per  cent,  ten'^-forty  bonds  at  par,  instead  of  into  a  six  per  cent.  loan. 
The  state  of  the  money  market  since  then  justifies  this  opinion.  If  the 
bill  I  refer  to  liad  passed  two  years  ago,  a  great  part  of  our  debt  would 
have  gone  into  the  five  per  cent,  loan  provided  for  by  it,  and  the  coun- 
try would  liave  been  saved  many  millions  of  g<jld  per  annum,  and  would 
have  escaped  the  dangerous  question  now  presented  to  us. 

Let  us  now  consider  the  legal  meaning  of  the  contract  between  the 
Tnited  States  and  the  holdei*s  of  the  five-twenty  bonds. 

Mr.  President,  this  form  of  del)t  contains  on"e  feature  that  was  con- 
sidered its  chief  virtue,  and  that  is  the  right  of  redemption  after  five 
years.  AVe  all  remember  the  time  when  this  first  five-twenty  loan  was 
introduced.  Up  to  that  moment  the  bonds  that  had  been  sold  were 
l(»ng  bonds,  paval)le  twenty  years  after  their  date,  now  called  the  bonds 
of  '81 ;  but  in  February,  ls< '.2,  Congress  for  the  first  time,  upon  the 
recommendation  of  the  then  Secretary  of  the  Treasury,  introduced  the 
idea  of  retaining  the  right  to  redeem  the  bonds  after  five  years.  This 
right  was  considered  the  most  favorable  feature  of  that  loan.  The 
Seeretarv^  of  the  Treasury,  in  his  report  to  Congress,  said  it  was  im- 
portant to  retain  the  right  to  redeem  the  principal  of  the  debt  with  a 
view  at  any  time  to  take  advantage  of  the  money  market  and  reduce 
the  rate  of  interest ;  and  he  proposed,  and  upon  his  recommendation 
Conirress  concurred  in  the  idea,  that  in  future  loans  a  short  time  should 
lie  fixed  after  which  the  debt  might  be  redeemed,  while  a  longer  time 
was  fixed  within  which  the  debt  must  be  paid.  This  was  a  valuable 
privilege  reserved  by  the  United  States  for  a  valuable  purpose.  We 
were  then  eniraged  in  war,  and  by  the  experience  of  nations  it  was 
known  that  during  war  we  must  submit  to  hard  and  exacting  terras  in 
order  to  borrow  money ;  but  the  right  to  get  better  terms  at  the  end  of 
five  years  was  reserved. 

Xow,  the  question  arises,  how  may  these  five-twenty  bonds  be  re- 
deemed ?  Four  different  modes  have  been  suggested,  in  regard  to 
each  of  which  I  intend  to  make  a  few  observations ;  these  plans  are : 

First.  That  these  bonds  may  be  paid,  the  principal  in  gold,  at  any 
time  after  five  years. 

Second.  That  these  bonds  may  be  paid  by  a  new  issue  of  legal  ten- 
ders similar  in  character  to  the  kind  issued  when  they  were  sold. 


IGO  SPEECHES    AND   REPORTS   OF  JOHN   SHERMAN. 

Third.  That  either  l)j  selliui^  a  new  Ixtnd  or  hy  levvinij^  taxes  we 
may  draw  into  the  Treasury  existin<^  United  States  notes,  and  with 
those  pay  otl'  or  redeem  the  tive-twenties. 

Fourth.  The  2)lan  suggested  by  the  Committee  of  giving  to  the 
holder  of  the  bond  at  his  option  the  right  to  take  another  Ijond  bearing 
a  less  rate  of  interest. 

Mr.  President,  let  me  briefly  jiresent  tlie  view  taken  of  these  dif- 
ferent propositions.  Is  the  United  States  l^ound  in  law  or  e»piity  to 
])ost])one  the  redemption  of  the  tive-twenties  until  they  rise  to  par  in 
gold  {  My  friend  trom  Vermont  discussed  this  question  with  great 
ability,  and  he  affirmed  that  we  were  so  bound ;  that  we  had  no  right 
t(j  redeem  these  bonds  until  the  bonds  rose  to  par  in  gold.  That  is  his 
position,  and  he  maintained  it  witli  great  force. 

Now,  I  confess  that  this  would  undoubtedly  be  tlie  rule  as  to  tlie 
Ijonds  issued  before  the  act  of  February  i?5,  1S»12;  and  the  Secretary 
of  the  Treasury  has  always  properly  decided  that  bonds  issued  before 
the  legal-tender  act  took  effect  must  be  so  paid  in  gold ;  and  why  ? 
Tlie  bonds  issued  in  18(U  were  issued  when  no  one  contem])lated  any 
other  mode  of  ])ayment,  when  there  was  no  money  in  which  to  pay 
3xcept  gold  and  silver  coin.  This  question  was  lirst  presented  to  Sec- 
retary Chase  and  decided  by  him  when  a  jjortion  of  the  Texas  loan 
matured  in  the  fall  of  1862.  A  small  portion  of  that  debt  matured, 
and  he  paid  it  in  gold.  Ilis  decision,  to  which  I  shall  have  occasion 
to  refer  in  discussing  another  point  of  this  subject,  was  not  based  at 
all  upon  the  question  of  legal  tender;  it  did  not  raise  the  question; 
but  it  was  decided  upon  the  ground  that  as  gold  was  paid  for  those 
bonds,  gold  must  be  returned  to  the  bond-holder. 

A  Government  may,  as  a  matter  of  paramount  authority,  compel 
its  citizens  as  between  each  other  to  receive  and  pay  out  its  notes  as 
money  on  preexisting  contracts ;  but  it  has  no  right  to  debase  its  money 
to  make  the  payment  of  its  own  debts  easier.  We  may,  if  there  is  no 
stipulation  to  tlie  contrary,  jxiy  in  that  kind  of  coin  or  money  which 
existed  when  the  debt  was  created ;  but,  after  we  have  created  a  debt 
and  have  received  gold  or  good  money,  we  cannot  then  debase  the  coin 
and  pay  the  debt  in  inferior  coin.  Although  we  may  change  contracts 
between  individuals,  vre  have  no  right  to  do  it  as  between  ourselves 
and  j^ublic  creditors.  A  nation  in  dealing  with  a  public  creditor  stands 
on  a  different  footing  from  what  it  does  in  regard  to  transactions  be- 
tween individuals  of  that  nation.  The  only  rule  is  the  contract,  and 
we  can  not  change  that  without  being  guilty  of  repudiation.  I  there- 
fore assume  that  all  the  old  bonds  issued  before  the  legal-tender  act  are 
payable  in  coin. 

But  the  c[uestion  is,  whether  the  bonds  issued  since  the  legal-tender 
act  took  effect  may  be  paid  in  legal  tenders.  Upon  this  question,  I 
may  as  well  state  now,  the  Committee  or  Finance  do  not  pass  ony 
opinion  ;  and  in  the  observations  I  make  on  this  point  I  speak  for  my- 
self, not  for  them.  They  deem  the  occasion  a  proper  one  to  offer  an 
exchange  to  the  public  creditor,  leaving  for  the  future  to  settle  the  re- 
sult of  a  refusal.  The  act  which  provided  for  the  legal  tenders  also 
provided  for  the  five-twentv  bonds.     However,  the  notes  were  issued 


TOE   FUNDING  BILL.  161 

before  tlie  bonds ;  the  notes  were  all  outstanding  before  a  single  bond 
was  issued.     Now,  the  legal-tender  clause  provides  that :" 

Such  notes  herein  authorized  shall  be  receivable  in  payment  of  all  taxes,  inter- 
nal duties,  excises,  debts,  and  demands  of  every  kind  due  to  the  United  States, 
except  duties  on  imports,  and  of  all  claims  and  demands  against  the  United  States 
of  every  kind  whatsoever,  except  for  interest  upon  bonds  and  notes,  which  shall  be 
paid  in  coin,  and  shall  also  be  lawful  money  and  a  legal  tender  in  payment  of  all 
debts,  j)ublic  and  private,  within  the  United  States,  except  duties  on  imports  and 
interest  as  tiforesaid. 

Does  not  this  act,  in  so  many  words,  declare  tliat  while  coin  shall 
be  paid  for  the  interest  of  the  ])ublic  debt,  yet  the  notes  provided  by 
tliis  act  shall  be  a  lawful  tender  in  puyuient  of  all  public  debts  i 

It  is  admitted  that  if  the  matter  stood  on  the  legal-tender  clause 
tliere  would  be  no  doubt,  there  could  be  no  resisting  the  conclusion, 
that  the  legal  contract  between  the  Government  and  bond-holder  was 
that  the  interest  should  l>e  paid  in  coin,  and  tlie  principal  should  be 
paid  in  tlie  kind  uf  legal  tenders  s])ecitied  by  tliis  act.  The  act  further 
provides  that  the  amount  of  legal  tenders  shall  Ijc  limited  to  fS150,000,- 
OUO.  It  also  provides  that  the  holder  of  these  legal  tendei-s  may  at 
any  time  convert  them  into  five-twenty  bonds ;  and  the  second  section 
provides  for  the  issue  of  those  bonds.  If  the  bonds  had  been  issued 
and  negotiated  solely  under  the  act  of  February  25,  1862,  it  would 
liave  been  irresistible  logic  tliat  it  was  not  contemplated  that  the  ?>r»00,- 
O00,(M)(J  authorized  by  tlie  act  should  be  paid  with  $15(»,000,00()  legal 
tenders,  themselves  convei-tible  into  bonds.  But  no  bonds  were  issued 
under  that  act.  Every  one  of  the  restrictions  as  to  the  amount  of  legal 
tendei-s  was  repealed  before  the  bonds  were  negotiated.  In  July  fol- 
lowing, before  a  single  bond  was  sold,  the  limitation  as  to  the  amount 
of  legal  tendei-s  was  increased  to  s30(l,000,0f»0.  In  December  follow- 
ing the  Secretary  had  failed  to  negotiate  the  five-twenty  loan  ;  and  in 
his  report,  to  which  I  will  now  refer,  he  says  that  it  is  impossible  for 
him,  under  the  restrictions  contained  in  these  acts,  to  sell  the  bonds  ; 
that  after  all  his  efforts  he  has  sold  only  a  few  millions ;  that  the  loan 
has  been  a  failure,  and  he  asks  for  additional  legislation.  I  now  ask 
attention  to  that  report.  lie  states  the  failure  to  negotiate  the  five- 
twenty  loan,  and  tlien  says : 

The  act  of  last  session  [the  one  to  which  I  have  already  referred]  authorized  the 
Secretary  to  issue  bonds  of  the  United  States,  already  often  mentioned  as  five- 
twenties,  to  the  amount  of  $.")00,000,000,  and  to  dispose  of  them  for  coin  or  United 
States  notes  at  the  market  value  thereof.  In  the  same  act  authority  \vas  given  to 
issue  $150,000,000  in  United  States  notes,  which  authority  .was  afterward  enlarged 
to  $250,000,000  ;  and  it  was  provided  that  any  holder  of  such  notes  to  the  amount 
of  fifty  dollars,  or  any  multiple  of  fifty,  might  exchange  them  for  five-twenty  bonds 
at  par. 

Tlie  effect  of  these  provisions  was  to  make  negotiations  of  considerable  amounts 
impossible ;  for  considerable  amounts  are  seldom  taken,  except  with  a  view  to  re- 
sales at  a  profit,  and  resales  at  any  profit  are  impossible  under  the  law. 

Then  he  goes  on  to  say : 

The  Secretarv  respectfully  recommends  the  repeal  of  both  these  provisions.    The 
first  imposes,  it  i's  believed,  a  restriction  which  Congress  did  not  mtend;  and  the 
second  has  been  followed  by  the  inconveniences  which  were  feared  rather  than  by 
the  benefits  which  were  expected. 
11 


162  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

Then  lie  goes  on  to  say : 

Should  Congress,  liow^ever,  be  of  opinion  that  these  clauses  should  be  retained, 
it  will  be  necessary  to  provide  for  other  hnvs,  at  rates  more  favorable  to  the  takers 
than  convertibility  into  five-twenties.  This  can  be  done  either  by  autliorizing  bonds 
at  longer  time  or  by  increasing  the  rates  of  interest  oftered.  The  Secretary  can  not 
recommend  either  course  except  as  an  alternative  to  no  provision  at  all. 

When  we  were  called  njDon  to  consider  this  question  we  had  to 
choose  between  three  alternatives  :  the  repeal  of  the  restrictions  which 
prevented  the  sale  of  five-twenty  bonds,  or  the  sale  of  the  bonds  at  a 
higher  rate  of  interest,  or  their  sale  below  par.  After  long  considera- 
tion— for  the  subject  was  debated  over  and  over  again — the  Committee 
on  Finance  agreed  upon  the  act  of  March  3,  1863.  That  act  repealed 
the  limit  as  to  the  amount  of  circulation  and  raised  it  to  $150,000,000 ; 
it  also  took  away  the  right  to  convert,  which  the  Secretary  said  was  the 
other  restriction  that  prevented  the  sale  of  the  bonds,  and  limited  the 
right  of  the  holders  to  convert  the  outstanding  greenbacks  to  the  1st  of 
July  then  next.  By  this  legislation  the  limitations  which  prevented 
the  sale  of  the  first  nvc-twenty  bonds  were  repealed,  and  then,  for  the 
first  time,  this  loan  was  taken.  Then  it  was  that  an  agency  was  organ- 
ized and  means  were  taken  to  spread  the  bonds  over  the  country,  and 
they  were  sold ;  but  they  were  not  sold  until  these  restrictions  were 
removed,  and  they  were  sold  upon  a  basis  of  $150,000,000,  without  the 
right  of  redemption,  with  no  privilege  whatever  except  that  of  being 
receivable  in  payment  of  taxes.  That  was  the  state  of  the  law  upon 
which  the  legal  right  of  tlie  hoklers  of  the  five-twenties  rests.  People 
refused  to  buy  these  bonds  upon  the  terms  of  the  act  of  February  25, 
18C)2.  They  did  buy  them  under  the  act  of  March  3,  1863 ;  and  it  is 
idle  to  rest  their  claims  upon  restrictions  repealed  before  the  bonds 
were  issued. 

I  wish  to  read  a  little  further,  to  show  that  the  Secretary  of  the 
Treasury,  Mr.  Chase,  a  year  afterward,  in  December,  1863,  in  his  report, 
again  stated  that  Congress,  having  relieved  him  from  the  restrictions  of 
the  act  of  1862,  enabled  him  to  sell  the  five-twenty  bonds.     He  says : 

On  that  day,  Marcb  3,  1863,  the  act  to  provide  ways  and  means  for  the  support 
of  the  Government  received  the  approval  of  the  President  and  became  law.  In  ad- 
dition to  various  provisions  for  loans,  it  contained  clauses  repealing  the  restrictions 
affecting  the  negotiation  of  the  five-twenties,  and  thus  disengaged  that  important 
loan  from  the  embarrassments  which  had  previously  rendered  it  almost  unavailable. 

Then  he  goes  on  and  says  that  every  dollar  of  the  loan  was  sold  in 
a  short  time,  presenting  a  remarkable  case  of  success ;  but  it  was  not 
sold  under  the  act  of  February  25,  1862.  On  the  contrary,  there  was 
an  utter  failure  to  sell  the  loan  under  that  act.  It  was  sold  under  the 
subsequent  law  which  repealed  the  restrictions  of  the  act  of  1862,  and 
it  was  sold  upon  a  basis  of  currency  amounting  to  $450,000,000,  and 
when  the  notes  had  been  so  depreciated  by  our  legislation,  intentionally, 
for  wise  purposes,  when  the  right  to  fund  was  taken  away,  and  no  right 
was  given  to  the  notes  except  to  be  paid  to  the  Government  in  the  way 
of  taxes. 

It  is  true  that  the  various  agents  of  the  Government  stated  that 
these  bonds  would  be  paid  in  coin,  and  that  creates  the  embarrassment 


THE  FUISTDIXG  BILL.  163 

in  regard  to  this  matter  that  has  always  affected  my  mind  more  than  any 
legal  difficulty  in  the  way  ;  because  I  think  the  nation  is  not  only  bound 
to  obsei-^'e  the  law,  but  it  is  bound  to  pay  a  reasonable  degi-ee  of  re- 
spect to  the  representations  made  at  the  time  these  bonds  were  sold. 
It  is  tnie,  as  matter  of  law,  that  no  agent  could  vary  the  contract ;  that 
every  man  who  bouglit  these  bonds  bought  them  upon  the  face  of  the 
law,  and  not  upon  the  mere  advertisements  of  agents.  Still  every  wise 
legislator  would  consider  the  extent  of  those  rej^resentations,  and  how 
far  they  affected  the  public  mind. 

It  has  been  sometimes  said  that  Congress  silently  acquiesced  in  them, 
but  that  is  not  tme.  Congress  was  not  in  session  when  any  portion  of 
this  loan  was  sold.  "We  adjourned  on  the  4th  of  March,  1863,  and  did 
not  convene  until  the  December  following,  and  within  that  time  all  the 
bonds  were  sold.  The  silence  of  the  subsequent  Congress  could  not 
change  the  contract  which  was  made  in  March,  1863,  and  had  no  effect 
upon  the  case. 

It  has  been  suggested  that  the  Treasury  Department  has  decided 
that  the  bonds  were  payable  in  gold,  reference  being  made  to  the  deci- 
sion of  Secretary  Chase  on  the  payment  of  the  Texas  bonds  in  Decem- 
ber, 1862.  It  is  claimed  that  the  Secretary  of  the  Treasury  then  decided 
that  the-  legal-tender  clause  did  not  apply  to  Government  securities. 
IS^ow,  I  will  read  the  decision  of  the  Secretaiy.  I  read  from  his  letter 
of  January  5,  1863,  in  reply  to  a  resolution  of  the  House  of  Represen- 
tatives, tie  states  that  he  concluded  to  pay  this  loan  in  coin  for  these 
reasons : 

My  judgment  was  determined  in  favor  of  payment  in  coin,  not  merely  by  the 
weicrhty  considerations  growing  out  of  its  beneficial  influences  on  public  credit,  but 
by  the  circumstance  that  I  found  myself  able  to  obtain  the  needed  specie  at  a  cost 
so  small  that  payment  in  coin  was,  in  fact,  a  less  inconvenience  to  the  Treasury  and 
a  less  interference  with  payments  to  and  for  the  army  and  navy  than  payment  in 
notes  would  have  been. 

A  letter  signed  by  Georo-e  Harrington,  Assistant  Secretary,  dated 
May  26,  1863,  and  a  letter  of  Mr.  Field,  also  Assistant  Secretary,  have 
also  been  referred  to.     Mr.  Harrington  said  in  his  letter  : 

The  five-twenty  sixes,  payable  twenty  years  from  date,  though  redeemable  after 
five  years,  are  considered  as  belonging  to  the  funded  or  permanent  debt ;  and  so 
also  are  the  twenty-year  sixes,  into  which  the  three-year  seven-thirty  notes  are 
convertible.  These  bonds,  therefore,  according  to  the  usage  of  the  Government, 
are  payable  in  coin. 

The  letter  of  Mr.  Field,  when  he  was  Assistant  Secretary,  simply 
stated  as  a  fact  that  the  bonds  would  be  paid  in  gold.  There  was  no 
reference  to  the  law,  no  decision  upon  the  terms  of  the  law,  but  a 
mere  reference  to  the  custom  of  the  Department  as  to  old  bonds  issued 
before  the  legal-tender  act ;  and  no  doubt  it  was  made  upon  the  com- 
mon expectation  that  long  before  the  five  years  expired  specie  pay- 
ments would  be  resumed,  and  no  doubt  they  would  have  been  if  our 
arms  had  been  victorious  during  that  summer ;  but  certainly  none  of 
these  letters  can  be  regarded  as  a  formal  construction  of  the  legal-ten- 
der act,  which  is  not  even  referred  to. 

Mr.  President,  I  will  not  follow  this  matter  further,  because  it  is 


164  SPEECHES  AND  REPORTS   OF  JOIIX  SHERMAN. 

not  necessary  for  my  ai'gunient  that  I  slioiild  do  so ;  but  I  submit  to 
Senators  whether  the  presentation  of  the  law  and  the  facts  in  regard 
to  the  five-twenty  loan  does  not  at  least  raise  a  reasonable  doubt  upon 
which  honest  men  may  disagree.  All  that  is  necessary  for  my  argu- 
ment is  to  show  that  there  is  such  a  doubt  as  to  the  manner  of  paying 
these  bonds.  If  such  a  doubt  exists  it  ought  to  be  removed,  or  some 
other  bond  substituted,  in  order  that  this  unsettled  question  may  not 
poison  the  public  credit. 

The  second  mode  of  paying  o2  the  live-twenty  bonds  is  proposed 
by  partisans,  and  consists  in  a  new  issue  of  greenbacks.  This  is  a 
plausible  and  a  dangerous  device.  No  man  can  justify  it.  AVhy  ? 
Because  the  very  acts  under  wliicli  these  bonds  were  issued  contain 
limitations  wdiich  we  can  not  and  dare  not  exceed.  These  Ihnitations 
were  put  in  every  loan  act,  and  finally  embodied  in  the  form  of  a  guar- 
antee in  the  act  of  June  30,  18G4,  to  which  I  will  now  refer.  The 
limitation  contained  in  the  last  preceding  act,  that  of  March  3, 1863,  in 
force  when  the  five-twenties  were  negotiated,  was  $450,000,000.  The 
act  of  June  30,  1864,  modified  and  repeated  this  limitation,  as  follows : 

Nor  shall  tlie  total  amonnt  of  United  States  notes  issued  or  to  be  issued  ever  ex- 
ceed $400,000,000,  and  such  additional  sum,  not  exceeding  $50,000,000,  as  may  be 
temporarily  required  for  the  redemption  of  temporary  loan. 

This  limitation  upon  the  amount  of  greenbacks  was  always  a  part 
of  the  loan  laws,  and  M'hy  ?  Because  the  amount  of  those  notes  issued 
would  regulate  and  fix  the  value  of  the  bonds  themselves.  In  all  the 
loan  acts,  therefore,  the  amount  of  greenbacks  issued  from  time  to  time 
was  limited  by  law,  and  tliat  limitation  was  a  part  of  the  contract  under 
which  the  bonds  were  issued  ;  and  hence  any  proposition  which  looks 
to  an  increase  of  the  legal  tenders  with  a  view  by  this  increase  to  pay 
ofi"  the  five-twenties  would  be  a  plain,  palpable  violation  of  a  public 
engagement,  just  as  much  as  would  be  a  clipping  of  the  coin,  or,  to 
follow  the  example  of  the  middle  ages,  a  debasement  of  the  coin. 
Every  additional  greenback  issued  tends  to  depreciate  the  value  of  the 
security  ;  and  therefore,  as  the  law  itself  limits  the  amount,  it  must  be 
complied  with,  whatever  is  the  consequence. 

I  take  it,  then,  that  no  proposition  will  ever  receive  the  sanction  of 
Congress  in  the  face  of  this  law,  providing  that  the  five-twenties  shall 
be  redeemed  with  any  other  notes  than  those  in  existence  at  the  time 
they  were  sold  ;  that  any  proposition  of  that  kind  would  be  dishonor- 
able to  the  country  and  dishonorable  to  any  one  who  seriously  proposed 
and  advocated  it.  It  would  be  to  create  a  depreciated  currency  in 
order  to  evade  the  payment  of  an  honest  debt. 

But,  sir,  aside  from  that,  as  an  act  of  public  policy,  it  would  be  in- 
jurious. It  would  impair  all  values ;  it  would  affect  all  prices.  ISTone 
would  suffer  from  such  a  debasement  of  the  currency  so  much  as  the 
laboring  man.  Labor  is  the  last  thing  except  real  estate  to  feel  the 
effect  of  a  change  in  the  currency,  because  labor  is  more  abundant 
than  any  other  commodity.  Labor  feels  last  the  advance  caused  by 
the  inflation  of  paper  money.  I  trust  this  proposition  when  discussed 
by  the  people  will  be  generally  repudiated,  and  I  believe  it  will  be.  I 
regard  this  limit  upon  the  amount  of  greenback  currency  as  a  sheet 


THE  FUNDING  BILL.  105 

anchor  of  public  safety ;  that  in  no  event  whatever  is  it  to  be  vio- 
lated. 

It  is  sometimes  said,  why  will  not  the  proposed  increase  of  banking 
circulation  have  the  same  effect  as  the  increase  of  greenbacks  ?  This 
question  is  put  in  regard  to  the  bill  reported  by  my  friend  from  Mis- 
souri [Mr.  Henderson]  to  repeal  the  limitation  upon  the  amount  of 
banking  circulation.  I  answer  that  the  effect  is  very  different.  The 
amount  of  bank  notes  may  be  left  free  without  any  legal  limit,  if  only 
the  right  to  present  the  note  for  redemption  is  always  enforced.  Ee- 
demption  must  be  at  present  in  legal  tenders,  but  we  all  look  to  an 
early  resumption  of  specie  payments.  There  is  no  check  on  banking, 
there  is  no  use  in  banks,  unless  you  have  specie  payments.  Bank  notes, 
unless  they  are  based  on  the  payment  of  specie  or  something  that  is  or 
will  soon  be  equivalent  to  specie,  are  injurious,  and  therefore  I  am  not 
in  favor  of  any  increase  of  the  bank-note  circulation  unless  it  is  in  view 
of  the  speedy  resumption  of  specie  payments.  But,  sir,  if  bank  notes 
are  based  on  coin,  or  if  they  are  redeemable  in  coin,  their  amount  may 
be  left  to  the  demands  of  trade,  to  the  wants  of  the  community.  The 
power  to  present  them  for  payment  at  any  time  is  a  sufficient  check  on 
the  amount.  That  is  sliown  by  the  experience  of  many  countries.  In 
England  the  limit  is  very  rarely  reached.  In  Kew  ^ork  they  had  a 
very  good  State  system,  which,  if  it  had  been  extended  all  over  the 
United  States,  under  the  control  of  the  General  Government,  would 
have  been  a  wise  one.  That  was  a  system  of  free  banking  under  which 
any  man  might  bank  who  would  keep  up  the  specie  standard,  and  give 
the  requisite  security  to  the  public  and  redeem  his  notes  in  specie. 

I  come  now  to  the  thii-d  mode  that  has  been  suggested,  and  that  I 
have  necessarily  discussed  as  I  have  proceeded.  I  here  again  desire  to 
repeat  that,  in  what  I  have  to  say  in  regard  to  the  manner  of  paying  or 
redeeming  the  bonds,  I  do  not  speak  for  the  Committee  on  Finance, 
because,  in  the  view  wliich  they  took  of  it  in  the  bill  which  they  re- 
ported, they  did  not  decide  that  question.  I  merely  present  the  argu- 
ment. 

Equity  and  justice  are  amply  satisfied  if  we  redeem  these  bonds  at 
the  end  of  the  five  years  in  money  of  the  same  kind  and  of  the  same 
intrinsic  value  existing  at  the  time  they  were  issued.  Senators  are 
sometimes  in  the  habit,  in  order  to  defeat  the  argument  of  an  antago- 
nist, of  saying  that  this  is  repudiation.  Why,  sir,  every  citizen  of  the 
United  States  has  conformed  his  business  to  the  legal-tender  clause. 
He  has  collected  and  paid  his  debts  accordingly.  Every  State  in  this 
Union,  without  exception,  has  made  its  contracts,  since  the  legal-tender 
clause  became  law,  in  currency,  and  paid  them  in  currency.  Indeed, 
every  State  in  this  Union  except  Massachusetts  and  California,  has 
gone  further,  and,  as  I  think,  improperly,  and  has  paid  in  legal  tenders 
either  principal  or  interest  of  preexisting  debts  contracted  on  the  basis 
of  gold.  Connecticut  pays  her  interest  in  paper  on  debts  contracted 
since  the  passage  of  the  legal-tender  act.  There  is  a  wide  distinction 
as  to  preexisting  debts  between  the  right  of  a  citizen  to  pay  a  debt 
under  the  legal-tender  act  and  the  right  of  a  State  or  a  Government  to 
do  it ;  but  as  to  debts  contracted  since  the  legal-tender  law  took  effect, 


166  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

they  were  contracted  in  currency,  and  npon  the  express  stipulation  in 
the  Law  that  their  principal  should  be  paid  in  legal  tenders  and  the 
interest  in  coin.  If  that  stipulation  was  not  in  the  law,  the  right  to 
redeem  would  only  rest  upon  the  general  principle  that  a  debt  may  be 
paid  in  the  kind  of  money  in  which  it  was  contracted. 

But  pubHc  as  well  as  private  debts  contracted  since  the  legal-tender 
act  do  not  rest  upon  inference,  but  upon  the  express  stipidation  in  the 
■  law ;  and  it  is  equitable  and  right  that  the  United  States  should  avail 
itself  of  this  part  of  the  contract. 

Sometimes  this  bill  has  been  regarded  as  a  threat.  We  do  not 
so  intend  it.  We  say  to  the  holders  of  our  public  securities,  except 
the  existing  ten-forties,  "  We  will  give  each  of  you,  at  your  oj^tion, 
this  form  of  security  in  exchange  for  that  which  you  now  have ; 
if  you  accept  this  offer  by  the  1st  of  l^ovember  next,  we  will  give 
you  certain  exemptions ;  if  not,  you  stand  upon  your  existing  right, 
and  all  questions  affecting  it  shall  be  posti3oned  until  the  next  session 
of  Congress."  It  is  said  that  this  is  a  threat.  I  do  not  so  regard  it. 
The  committee  has  provided  no  alternative  in  case  the  bond-holders  do 
not  accept.  Their  bonds  still  stand,  and  no  one  proposes  the  alterna- 
tive adopted  by  the  English  Government,  which  I  intend  to  refer  to  in 
a  moment,  of  stopping  the  interest,  or  the  alternative  adopted  by  our 
own  Government  under  Hamilton's  plan  of  reducing  the  interest.  We 
leave  the  bond-holders  to  stand  precisely  as  they  are,  and  they  will  be 
paid  their  six  per  cent,  interest  in  gold  until  their  bonds  are  redeemed, 
and  they  can  not  be  redeemed  under  existing  laws  without  further  leg- 
islation. All  that  the  Committee  on  Finance  do  in  this  bill — and, 
perhaps,  in  discussing  the  other  points  I  have  gone  beyond  the  neces- 
sity of  the  case — is  to  offer  to  all  the  public  creditors  these  new  bonds 
for  the  old,  the  exchange  to  be  made  without  expense  to  the  Govern- 
ment, without  sacrifice  by  any  one,  leaving  every  man  to  judge  for 
himself  whether  his  interest  and  substantial  equity  will  not  be  jDro- 
moted  by  it.  If  he  does  not  accept  he  stands  by  liis  bond,  and  Con- 
gress must  decide  whether  the  redemption  of  these  bonds  shall  be 
postponed  to  some  indefinite  future  when  we  may  be  able  to  pay  gold 
for  what  we  received  in  depreciated  paper.  We  do  not  decide  it,  and 
do  not  undertake  to,  but  we  simply  submit  the  option. 

Even  if  Senators  do  not  agree  in  the  view  that  I  take  of  this  mat- 
ter, it  is  necessary  to  provide  this  new  loan  for  this  reason :  we  must 
jDrovide  for  the  funding  of  some  one  hundred  and  odd  millions  of  loan 
that  is  maturing ;  we  must  provide  for  the  redemption  of  the  com- 
pound-interest notes  ;  we  must  provide  for  the  conversion  of  the  green- 
backs, which  we  do  in  anotlier  section ;  we  must  provide  some  bond 
into  which  even  the  floating  debt  may  go  ;  and  it  is  advisable  in  mak- 
ing that  bond  to  select,  if  possible,  a  bond  into  which  the  whole  mass 
of  the  public  del)t  may  from  time  to  time  be  converted  according  to 
our  future  laws. 

These  obligations  are  convertible  into  five-twenties  as  the  law  now 
stands,  but  would  any  Secretary  now  convert  any  more  of  our  currency 
debt  into  five-twenty  bonds  bearing  six  per  cent,  interest  in  gold  ?  As. 
I  shall  show  hereafter,  there  is  no  such  burdensome  loan  negotiated  by 


THE  FUNDING  BILL.  167 

any  civilized  nation  in  the  world  as  our  five-twenty  loan,  if  it  is  to  be 
paid  in  gold.  Therefore,  I  wonld  say,  as  I  said  two  years  ago,  that  I 
never  would  issne  another  five-twenty  bond,  because  it  is  the  most  ex- 
pensive form  of  loan.  Just  consider  it :  seventy-six  dollars  of  gold 
vrill  buy  a  five-twenty  bond  bearing  six  per  cent,  interest  in  gold,  and 
that  bond  cannot  be  redeemed,  according  to  one  construction,  until  the 
United  States  are  ready  not  only  to  pay  six  per  cent,  on  one  hundred 
dollars  for  the  use  of  seventy-six  dollars,  but  also  to  pay  one  hundred 
dollars  in  gold  for  what  now  costs  seventy-six  dollars.  That  is  the 
proposition,  and  I  say  I  never  would  issue  another  five-twenty  bond. 
I  think  our  great  mistake  has  been  that  we  have  funded  a  great  mass 
of  our  floating  debt  already  into  five-twenties,  and  given  to  the  public 
creditors  the  right  to  demaiid  this  large  rate  of  interest  for  so  long  a 
time. 

Now,  I  wish  to  show,  as  we  are  governed  in  a  great  measure  by 
example,  that  the  proposition  made  by  the  Committee  on  Finance  is  in 
exact  accordance  with  the  course  that  has  been  pursued  in  England  six 
or  seven  times,  and  once  in  our  own  country.  In  England,  prior  to 
1715,  the  rate  of  interest  was  six  per  cent.,  which  was  reduced  by  an 
act  of  Parliament  to  five  per  cent.,  and  without  negotiation.  In  1725, 
after  the  explosion  of  the  South  Sea  bubble,  the  rate  of  interest  on  the 
mass  of  the  public  debt  was  reduced  from  five  per  cent,  to  four  per 
cent.  This  was  done  mainly  by  negotiation  through  the  great  corpora- 
tions of  London,  the  Bank  of  England,  the  South  Sea  Comj^any,  and 
one  of  the  India  companies.  They  reduced  the  interest  by  issuing  four 
per  cent,  annuities  in  payment  of  five  per  cents,  paying  off  what  were 
called  the  dissentients. 

In  the  middle  of  the  eighteenth  century  the  rate  of  interest  all  over 
Europe  became  lower  than  ever  was  known  l)efore.  It  fell  to  three 
per  cent.  In  1737  it  was  proposed  in  England  to  reduce  the  interest 
on  the  ptiblic  debt  from  four  to  tlu-ee  per  cent.  This  passed  the 
House  of  Commons  two  readings,  and  was  lost  on  the  third.  In  1742 
a  similar  attempt  was  made  to  reduce  the  rate  of  interest,  and  in  1749, 
under  the  administration  of  Mr.  Pelham,  it  was  carried  into  execution ; 
and  we  have  in  Hansard's  Debates,  and  also  in  the  biograi3hy  of  Mr. 
Pelham,  an  exact  account  of  this  transaction.  Mr.  Pelham  was  warned 
before  he  made  this  proposition  of  the  effect  upon  himself ;  but  he 
persisted  in  it,  and  finally  carried  it  through,  after  quite  an  extended 
argument.  His  proposition,  in  short,  was  that  any  holder  of  any  se- 
curity bearing  four  per  cent,  interest  might,  within  a  given  time,  pre- 
sent it,  not  for  redemption,  but  to  receive  in  exchange  a  security  bear- 
ing three  and  a  half  per  cent,  interest  for  four  or  five  years,  and  after 
that  bearing  three  per  cent,  interest.  ISTothing  was  said  about  redemp- 
tion ;  but  it  was  understood,  no  doubt,  that  in  case  holders  did  not 
accept  it  their  securities  would  be  redeemed.  The  result  was  an  angry 
debate,  in  which  it  was  alleged  that  this  was  a  violation  of  the  public 
faith.  I  read  a  note  in  Hansard's  Debates,  taken  from  Tindal.  Tin- 
dal  says : 

Tliis  \A-as  generally  looked  upon  to  be  a  very  bold  measure  in  the  minister,  and 
some  of  his  best  friends,  even  the  day  before  the  vote  passed  in  the  House  of  Com- 


168  SPEECHES  AND  KEPORTS  OF  J0H:N'  SHERMAN. 

mons,  endeavored  to  persuade  him  against  it.  But  lie  appeared  determined,  and  in 
a  few  weeks  they  approved  of  his  steadiness  as  much  as  before  tliey  blamed  his 
obstinacy. 

I  read  from  Mr.  Pelliam's  biograpliy  what  is  there  said  ou  the  sub- 
ject: 

Duly  impressed  with  the  importance  of  his  financial  plan,  Mr.  Pelham  suffered 
no  avoidable  delay  to  intervene  before  he  submitted  it  to  the  House.  By  this 
promptitude  he  manifested  the  decision  of  a  great  minister,  for  the  proposal  was  at 
first  so  unpopular  or  so  little  understood  that  even  on  the  very  day  before  the 
resolutions  were  In-ought  forward  some  of  his  friends  endeavored  to  dissuade  him 
from  his  purpose  ;  but  their  remonstrances  were  ineffectual.  He  persevered  in  his 
determination,  and  the  event  fully  justified  his  expectations.  On  the  28tli  of  No- 
vember a  motion  was  made  for  a  committee  of  the  whole  House,  to  take  that  part 
of  his  Majesty's  speech  into  consideration  v,'hich  related  to  the  national  debt.  The 
expediency  of  reducing  the  interest  had  been  so  clearly  demonstrated  by  Mr.  Pel- 
ham  that  his  plan  was  unanimously  approved. 

The  great  cor]3orations  which  had  aided  in  the  former  reduction  in 
the  interest  of  the  pubhc  debt  combined  against  it,  and  for  two  years 
defeated  it.  The  House  of  Commons  was  lirm,  and  threatened  to  re- 
peal some  of  their  privileges,  and  finally  compelled  them  to  acquiesce. 

There  is  a  still  more  interesting  case,  and  one  more  applicable  to 
our  present  condition,  which  occurred  in  England  in  1822.  During 
the  wars  which  probably  tested  the  power  of  England  more  than  any 
other  event  in  her  history — her  wars  with  Napoleon — she  was  com- 
pelled to  resort  to  great  sacrifices.  She  issued  all  manner  of  securities  ; 
she  sold  her  bonds  at  one  time  at  fifty  or  sixty  cents  on  the  dollar  ;  she 
issued  five  per  cents,  four  per  cents,  and  three  per  cents,  and  all  other 
forms  of  security.  After  the  war  was  over,  before  the  resumption  of 
specie  payments,  Mr.  Vansittart,  then  Chancellor  of  the  Exchequer, 
proposed  to  fund  the  public  debt  by  a  proposition  very  similar  in  lan- 
guage to  the  one  submitted  now  by  the  Committee  on  Finance.  The 
great  mass  of  their  floating  debt  consisted  of  five  per  cent,  exchequer 
bills — navy  bills,  as  they  were  commonly  called — which  were  very 
much  such  bills  as  our  five-twenty  bonds.  They  bore  five  per  cent, 
interest.  Mr.  Vansittart  introduced  his  bill  on  the  25th  of  February, 
1822  ;  and  we  have  the  whole  debate  in  Hansard.  His  proposition  is 
in  substance  like  our  own.  It  simply  declared  tliat  the  holders  of  those 
five  per  cent.  Inlls  might  present  them  at  such  a  time  for  exchange  for 
a  four  per  cent,  annuity.  If  they  did  not  present  their  securities,  their 
assent  was  implied.  There  was  some  opposition  to  the  measure.  It 
was  alleged  to  be  a  violation  of  the  public  faith  ;  it  was  before  specie 
payments  were  resumed  in  England,  when  all  payments  were  made  in 
Bank  of  England  notes.  It  was  finally  carried,  after  debate,  and  ac- 
quiesced in. 

There  is  also  one  case  in  our  own  history,  and  tliat  is  the  funding 
system  adopted  by  Alexander  Hamilton.  The  Constitution  of  the 
United  States  declared  that  the  public  debt  of  the  United  States  should 
be  inviolate,  and  the  new  Government  assumed  the  debt  of  the  old 
Confederacy  ;  but,  as  a  matter  of  course,  it  was  in  a  condition  of  great 
uncertainty  ;  the  interest  had  been  unpaid  for  a  long  time,  and  there 
were  disputes  as  to  tlie  amount.     Alexander  Hamilton,  as  first  Secre- 


THE   FUNDING  BILL.  169 

tarj  of  the  Treasury,  proposed  a  plan  of  funding  and  grouping  together 
all  this  mass  of  indebtedness.  His  report  on  the  public  credit  was  re- 
garded by  his  friends,  and  has  been  regarded  by  the  whole  world,  as  a 
remarkable  production  ;  and  yet  what  was  Alexander  Hamilton's  fund- 
ing plan  ?  He  proposed,  lirst,  to  ascertain  the  amount  of  the  national 
debt,  which  was  finally  computed  to  be  and  was  settled  at  $54,000,000, 
foreign  and  domestic.  Did  he  j)ropose  to  pay  that  off  in  precise  con- 
formity with  the  terms  on  which  the  debt  was  contracted  ?  ISTot  at  all. 
He  also  ascertained  the  amount  of  the  State  debts  ;  nearly  all  the  States 
were  overwhelmed  with  debts  that  grew  out  of  the  revolutionary  war, 
and  they  were  ascertained  and  apportioned ;  the  general  aggregate  of 
all  was  $75,000,000.  How  was  this  funded  ?  By  offering  the  fund- 
holders  six  per  cent,  bonds  for  two  thirds  of  their  debt,  and  the  other 
third  was  paid,  some  of  it,  by  three  per  cent,  bonds,  some  by  four 
per  cent,  bonds,  some  by  public  lands,  and  some  by  annuities.  The 
plan  of  Alexander  Hamilton  embraced  various  forms  of  loan,  and  all 
was  submitted  to  the  voluntary  will  of  the  fund-holders.  Some  of 
them  refused  to  agree.  What  did  he  do  then  ?  He  only  j)aid  them 
in  accordance  with  the  stipulations  made  as  to  the  rest  of  the  loans.  I 
will  read  a  short  paragraph  or  two  from  this  document  of  Mr.  Ham- 
ilton to  show  how  he  regarded  the  public  debt : 

The  interesting  pi-oblem  now  occurs:  Is  it  in  the  power  of  the  Fnited  States, 
consistently  with  those  prudential  considerations  which  ought  not  to  be  overlooked, 
to  make  a  provision  equal  to  the  purpose  of  funding  the  whole  debt,  at  the  rates  of 
interest  which  it  now  bears,  in  addition  to  the  sum  which  will  be  necessary  for  the 
current  service  of  the  Government  ? 

The  Secretary  will  not  say  that  such  a  provision  would  exceed  the  abilities  of 
the  country  •,  but  he  is  clearly  of  opinion  that  to  make  it  would  require  the  exten- 
sion of  taxation  to  a  degree  and  to  objects  which  the  true  interests  of  the  public 
creditors  forbid.  It  is  therefore  to  be  hoped,  and  *ven  to  be  expected,  that  they 
will  cheerfully  concur  in  such  modifications  of  their  claims,  on  fair  and  equitable 
principles,  as  -will  facilitate  to  the  Government  an  arrangement  substantial,  durable, 
and  satisfactory  to  the  community.  The  importance  of  the  last  characteristic  will 
strike  every  discerning  mind.  Xo  plan,  however  flattering  in  appearance,  to  which 
it  did  not  belong,  could  be  truly  entitled  to  confidence. 

He  provided  for  four  per  cent,  interest  to  be  paid  to  those  who  did 
not  agree  to  the  offer,  two  per  cent,  less  than  they  were  entitled  to 
under  the  law  creating  the  debt.  After  sjDcaking  of  those  who  might 
refuse  the  offer,  he  proceeds  to  say  : 

Hence,  whatever  surplus  of  revenue  might  remain,  after  satisfying  the  interest 
of  the  new  loans  and  the  demand  for  the  current  service,  ought  to  be  divided  among 
those  creditors  (if  any)  who  may  not  think  fit  to  subscribe  to  them.  But,  for  this 
purpose,  under  the  circumstance  of  dependiug  propositions,  a  temporary  appro- 
priation will  be  most  advisable,  and  the  sura  must  be  limited  to  four  per  cent.,  as 
the  revenues  will  only  be  calculated  to  produce  in  that  ])roportion  to  the  entire 
debt. 

The  Secretary  confides  for  the  success  of  the  propositions  to  be  made  on  the 
goodness  of  the  reason  upon  which  they  rest;  on  the  fairness  of  the  equivalent  to 
be  offered  in  each  case;  on  the  discernment  of  the  creditors  of  their  true  interest ; 
and  on  their  disposition  to  facilitate  the  arrangements  of  tlie  Government,  and  to 
render  them  satisfactory  to  the  community. 

I  say  the  plan  now  proposed  by  the  Committee  on  Finance  is  in 
accordance  with  precedent,  holds  out  no  thi-eats,  and  deals  with  all 


170  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAK 

alike,  holders  of  five-twenty  bonds,  greenbacks,  and  all.  It  gives  them 
a  proposition  to  fund  their  debt  at  their  own  option  by  the  1st  of  No- 
vember next ;  or  if  they  do  not  choose  to  do  it,  then,  as  a  matter  of 
course,  the  question  is  to  be  decided  at  the  next  session  of  Congress 
whether  or  not  Congress  will  redeem  the  five-twenty  bonds  in  the  cur- 
rency in  which  they  were  contracted  or  postpone  their  redemption, 
paying  the  interest  at  six  per  cent,  in  gold,  until  we  can  redeem  the 
principal  in  gold.  Whatever  view  Senators  may  take  of  this,  they  can 
not  avoid  making  some  provision  by  some  loan  less  onerous  than  five- 
twenties  for  fundino;  the  greenbacks  and  the  floatino-  debt  of  tlie  United 
States ;  and  into  that  loan,  w^hatever  it  may  be,  the  whole  debt  may 
eventually  be  funded. 

ISTow,  Mr.  President,  tlie  question  is  whether  the  terms  of  the  pro- 
posed loan  are  reasonable  and  fair,  such  as  we  ought  to  propose  to  our 
own  citizens,  and  such  as  our  constituents  may  reasonably  hope  to 
fulfill. 

The  first  question  that  arises  is  the  exemption  from  State  taxation. 
ISTo  Government  that  I  have  been  able  to  find  ever  allowed  its  bonds  or 
securities  to  be  taxed.  The  United  States  never  did.  In  the  absence 
of  stijjulations  to  the  contrary,  the  courts  have  always  held  that  no 
State  or  subordinate  authority  could  tax  the  national  securities.  It 
inay,  it  is  true,  be  made  a  part  of  the  loan  that  the  States  shall  have  a 
power  to  tax  them,  but  who  would  buy  su3h  bonds  ?  I  never  would 
vote  for  such  a  provision.  I  never  would  allow  a  subordinate  authority 
to  thus  control  the  public  credit  of  the  United  States,  or  have  a  voice 
in  the  matter.  The  eftect  in  time  of  war  would  be  disastrous.  Such 
a  power  would  prevent  the  citizens  of  a  State  where  the  power  was 
exercised  from  loaning  money  upon  Government  securities.  I  take  it 
therefore  as  an  axiom,  that  in  no  event  shall  we  allow  subordinate  au- 
thorities to  tax  the  national  securities.  I  need  not  refer  to  the  authori- 
ties on  this  subject.     I  have  done  that  before. 

The  next  provision  is  the  exemption  from  any  discriminating  prop- 
erty tax.  Men  who  do  not  understand  the  question  have  proposed  to 
tax  Government  securities  sj)ecially,  like  a  special  tax  on  manufactures ; 
and  the  proposition  has  been,  perhaps,  broached  in  Congress  to  tax 
Government  securities  one  or  two  per  cent,  in  lieu  of  all  other  taxes. 
Such  a  provision  w^ould  be  a  clear  and  palpable  violation  of  the  Consti- 
tution and  of  the  law.  It  would  be  worse  than  repudiation ;  it  would 
be  the  meanest  kind  of  repudiation.  "Why  ?  Because  it  would  be  a 
special  discriminating  tax  on  property.  A  tax  on  manufactures  is  a  tax 
on  consumption.  The  manufacturer  may  add  that  tax  to  the  cost  of 
the  article,  and  t]ie  consumer  wlio  finally  uses  the  article  pays  the  tax. 
That  is  the  principle  upon  which  it  rests.  A  special  tax  on  property  is 
a  diminution  of  tlie  property.  It  cannot  be  collected  from  any  one 
else,  or  shared  witli  any  one.  It  is  a  direct  tax — as  much  so  as  if  levied 
on  farms  ;  and,  being  a  direct  tax,  it  is  unconstitutional,  unless  appor- 
tioned among  the  States  according  to  population. 

One  of  the  earliest  cases  which  came  before  the  Supreme  Court  was 
the  well-known  case  involving  a  tax  on  carriages.  There  the  Court 
held  that  it  was  the  use  of  the  carriage  which  was  taxed,  and  that  was 


THE  FUNDING  BILL.  171 

a  proper  tax,  because  it  was  a  tax  on  the  use  of  a  luxury.  It  was  the 
enjoyment  or  use  of  the  carriage  that  was  taxed,  not  the  property  in 
the  carriage.  No  special  tax  can  be  levied,  on. property.  If  this  princi- 
ple once  prevailed,  that  we  might  select  any  kind  of  property  and  levy 
a  discriminating  tax  on  it,  the  time  might  come  when  shijjping  might 
be  selected  as  the  subject  of  a  special  tax ;  when  property  in  lands, 
plainly  against  the  intention  of  the  Constitution,  might  be  selected  for 
the  levying  of  a  discriminating  tax.  We  purpose,  therefore,  in  order 
to  avoid  all  controversy,  to  put  a  stipulation  in  the  new  Joan  law  ex- 
empting these  bonds  from  all  discriminating  taxation  by  Congress,  but 
leaving  them  subject  to  the  same  income  tax  that  other  income  is  sub- 
ject to. 

There  is  some  difference  of  opinion  as  to  the  rate  of  interest  of  the 
new  bonds.  The  Committee  on  Finance  took  great  care  in  deciding 
this  question.  We  believed  that  we  could  not  hope  to  negotiate  a  loan 
at  a  rate  lower  than  five  per  cent.  It  is  the  lowest  rate  of  interest  ever 
provided  for  in  any  loan  act  of  the  United  States,  excejjt  in  the  fund- 
ing scheme  of  Alexander  Hamilton,  already  referred  to,  where  a  certain 
portion  of  the  debt  was  funded  at  three  per  cent.  I  have  looked  with 
care  into  recent  foreign  loans,  and  I  find  that  no  Government  in  Europe 
has  recently  sold  its  bonds  at  a  less  rate  of  interest  than  five  per  cent. 
When  the  nominal  rate  was  lower,  they  were  sold  at  a  discount.  The 
English  loans  during  the  Napoleonic  war  yielded  the  lender  a  rate  of 
interest  averaging  over  five  per  cent.  I  have  on  that  subject  a  number 
of  authorities,  and  I  will  refer  to  one  or  two  of  them. 

In  the  compendium  of  finance  which  I  have  before  me  there  is  a 
statement  of  the  amount  of  the  various  loans  negotiated  by  the  English 
Government  during  the  second  French  revolutionary  war.  The  whole 
amount  of  loans  negotiated  was  £420,905,400  sterling,  or  over  two 
thousand  million  dollars.  The  amount  actually  received  from  those 
loans  by  the  Government  was  £266,800,000  sterling,  or  at  the  rate  of 
about  sixty  j^er  cent.  The  securities  were  mainly  three  per  cents, 
though  large  sums  bore  four  and  five  per  cent.,  so  that  the  rate  of  in- 
terest actually  paid  was  over  five  per  cent.  In  1815,  after  Bonaparte 
had  left  the  island  of  Elba,  when  it  became  necessary  for  the  English 
Government  to  negotiate  a  large  loan,  they  sold  £66,000,000  of  three 
and  four  per  cent,  consols  for  £36,000,000  sterling,  or  about  fifty-six 
cents  on  the  dollar. 

So  it  is  in  France.  We  have  all  heard  about  the  popular  loan  in 
France  during  the  Crimean  war,  and  it  was  regarded  as  a  remarkable 
success  in  its  time.  It  was  undoubtedly  very  popular  in  France.  The 
first  loan,  on  the  14th  of  March,  1854,  was  for  250,000,000  francs.^  It 
was  sold  at  the  rate  of  one  hundred  francs  of  three  per  cents  for  sixty- 
five  francs  and  twenty-five  centimes,  and  at  the  rate  of  one  hundred 
francs  at  four  and  a  half  per  cent,  for  ninety-two  francs  and  fifty  cen- 
times, making  really  a  little  over  five  per  cent. 

The  ordinary  legal  rate  of  interest  in  most  of  the  States  is  seven 
per  cent.,  and  the  actual  rate  among  merchants  often  amounts  to  ten. 
We  have  by  the  discrimination  made  in  favor  of  these  bonds  reduced 
the  rate  to  five  per  cent.,  and  it  seems  to  me  that  that  is  as  low  as  it  is 


172  SPEECHES   AND  REPORTS  OF  JOIIX  SIIERMAX. 

possible  to  negotiate  this  loan.  As  a  matter  of  course,  if  I  believed  it 
was  in  the  i)Ower  of  the  Government  Avithout  adopting  measures  injuri- 
ous to  the  pu1)lic  interest  to  negotiate  a  bond  at  a  less  rate  of  interest, 
1  would  gladly  have  it  done;  but  after  full  examination  of  this  <juc's- 
tion  the  Coniuiittee  on  Finance  came  to  the  conclusion  tliat  the  loan 
could  not  be  negotiated  at  a  lower  rate. 

There  are  various  reasons  wliy  the  rate  of  interest  all  over  tlie  world 
is  now  higher  than  it  was  one  lumdred  years  ago.  The  artiticial  wants 
of  society  have  been  very  much  incrotised.  'NVe  liave  railroads,  steam- 
boats, and  telegraphs,  vast  avenues,  sources,  and  demands  for  wealth 
and  capital,  that  one  hundred  yeare  ago  i^enjamin  Franklin  and  Dr. 
Johnson  never  thought  of.  The  railroads  in  this  country  at  this  time 
are  worth  more  than  all  the  country  was  worth  at  the  time  of  the  revo- 
lutionary war.  All  tliese  new  elements  of  social  progress  make  de- 
mands for  money,  and  therefore  raise  the  rate 'of  interest.  There  is 
another  remarkable  fact  which  causes  a  general  advance  of  the  rate  c>f 
interest  all  over  the  world  in  this  as  compared  with  tbe  last  century, 
and  that  is  the  vast  addition  made  to  the  coinage  of  the  world.  The 
discovery  of  gold  and  silver  has  caused  an  advance  in  the  rate  of  inter- 
est. Why  ?  Because  every  man  who  loans  money  now,  especially  on 
long  time,  knows  that  he  will  be  paid  oif  at  the  end  of  the  period  in  a 
connnodity  with  less  productive,  purchasing  power  than  that  he  loans. 
The  actual  depreciation  in  gold  and  silver  coin  for  a  mnnber  of  yeai*slias 
been  a  little  over  one  per  cent,  per  annum,  so  that  if  a  man  now  lends 
$1,000,  payable  in  gold  twenty  years  hence,  he  will  get  back  his  $1,000 
at  the  end  of  twenty  years  with  one  fifth  of  its  purchasing  power  shorn 
off  by  the  additions  in  the  mean  time  to  the  value  of  the  gold  and  sil- 
ver of  the  world.  The  truth  is  now  that  while  real  estate  is  advancing 
money  is  depreciating.  All  productions  are  advancing,  while  the  rela- 
tive value  of  gold  and  silver  coin  to  other  commodities  is  diminishing, 
A  productive  four  per  cent,  investment  in  real  estate  is  a  more  profita- 
ble investment  than  six  per  cent,  in  the  best  bonds  in  the  world. 
Why  ?  Because  those  bonds  in  the  future  will  be  paid  otf  in  gold  and 
silver  coin  when  it  has  less  purchasing  power  than  it  has  now,  while  the 
lands,  by  tlie  gradual  increase  of  the  country,  are  increasing  in  value. 
The  one  diminishes  at  the  rate  of  one  per  cent,  per  annum,  according 
to  the  best  statisticians,  and  the  other  increases  in  this  country  at  the 
rate  of  one  and  a  half  per  cent,  per  annum. 

I  say,  Mr,  President,  we  cannot  negotiate  a  bond  bearing  a  less  rate 
of  interest  than  five  per  cent,  except,  first,  by  increasing  and  depreci- 
ating the  greenbacks,  and  that  certainly  we  ought  to  oppose  to  the 
utmost ;  or  second,  by  the  English  plan  of  selling  the  loan  below  par, 
to  which  our  people  are  not  accustomed,  and  to  which  they  would  not 
submit.  That  resort  would  increase  nominally  the  public  debt.  Even 
if  the  rate  of  interest  should  be  more  favorable,  the  popular  judgment 
would  condemn  it,  because  they  look  upon  a  debt  as  a  temporary  thing 
to  be  paid  off  in  full,  and  not,  as  in  England,  a  permanent  thing,  of 
wdiich  the  principal  is  never  to  be  paid,  and  only  the  interest  to  be  pro- 
vided for. 

There  is  this  great  difference  between  our  system  and  the  English 


THE  FUNDING  BILL.  173 

system.  In  England  they  sell  their  credit  below  par.  They  fix  the 
rate  of  interest,  and  they  sell  securities  in  open  market  at  what  they 
will  bring.  In  this  country  we  fix  the  price  of  our  bonds  at  par,  and 
ask  money-lenders  at  what  rate  of  interest  they  will  loan  us  money. 
That  is  the  difference.  Why  is  it  so  ^  Because  in  England  they  do 
not  anticipate  the  payment  of  the  principal.  . 

There  is  another  way  in  which  I  suppose  we  might  negotiate  a  bond 
at  a  low  rate  of-  interest ;  and  that  is,  by  postponing  the  payment  of 
the  principal  to  an  indefiuite  period.  That,  how^'er,  is  against  the  A  iner- 
ican  notions  of  finance.  ,  Our  people  have  always  looked  upon  a  debt 
as  a  burden  to  be  paid  off  as  rapidly  as  possil)le,  and  public  opinion  and 
good  policy  would  not  tolerate  the  making  of  a  very  long  loan  ;  and  I  for 
one  would  not,  under  any  circumstances,  vote  for  one  which  it  would 
not  be  within  the  po^ver  of  tlie  Government  to  redeem  within  twenty 
years. 

A  bond  at  four  per  cent,  or  any  other  less  rate  of  interest  would 
be  looked  upon  as  confiscation  ;  you  could  not  negotiate  it ;  five  per  cent, 
is  now  about  par,  and  we  can  sell  a  five  per  cent,  bond  without  increas- 
ing the  greenl:>acks  a  single  dollar.  I  do  not  desire  to  see  the  gTeenl)acks 
increa.sed  beyond  tlieir  present  amount.  There  is  no  necessity  for  it. 
We  can  reduce  the  rate  of  interest  from  six  to  five  per  cent,  without 
increasing  the  volume  of  greenbacks,  and  we  can  thus  save  to  the  peo- 
ple of  this  country  $17,00(>,000  in  gold  per  annum  without  deranging 
the  currency,  disordering  the  money  market,  or  dej:)reciating  our  credit. 
I  do  not  desire  to  force  upon  tlie  market  a  loan  l)eariiig  a  lower  rate  of 
interest,  which  will  recpiire  mcjre  greenbacks  to  float  it,  or  require  us 
to  sell  it  below  par,  or  tp  postpone  the  time  of  pa}^nent.     We  can  ne- 

fotiate  a  five  per  cent,  loan  now  in  the  present  state  of  tlie  money  mar- 
et,  disordered  as  it  is  by  political  complications,  maintaining,  however, 
the  right  within  a  reasonable  time,  say  ten  years,  to  make  a  further  re- 
duction to  four  per  cent,  if  we  can,  and  after  that  to  three  per  cent,  or 
whatever  public  credit  will  allow ;  but  an  attempt  now  to  reduce  the 
rate  of  interest  to  four  per  cent,  would  be  regarded  in  this  coimtry  and 
abroad  as  a  species  of  confiscation. 

The  section  of  this  bill  in  regard  to  the  payment  of  the  principal  of 
the  debt  only  establishes  the  general  idea  that  the  debt  itself  shall  be 
paid  at  some  time.  The  Committee  on  Finance,  after  much  reflection, 
agreed  to  fix  the  amount  which  should  be  annually  applicable  to  the 
payment  of  the  principal  and  interest  of  the  debt  at  $135,000,000. 
The  amount  of  the  interest  noM-  is  81^9,500,000,  so  that  we  appropriate 
about  five  and  a  half  millions  to  the  payment  of  the  principal ;  but,  as 
a  matter  of  course,  this  sum  being  applied  annually,  while  both  the 
principal  and  the  interest  of  the  debt  are  being  reduced,  partly  by 
funding,  partly  by  payment,  partly  by  the  operation  of  this  law,  the 
interest  Mill  gradually  be  decreased,  and  the  amount  applicable  to  the 
])rincipal  will  thus  annually  increase.  If  all  our  debt  is  funded  into  a 
five  per  cent,  loan  except 'the  long  bonds  of  1881,  and  the  amount 
should  be  $2,200,000,000,  leaving  outstanding  the  present  amount  of 
greenbacks  and  no  more,  the  interest  on  the  debt  would  cease  to  be  a 
burden,  and  the  difference  between  the  amount  appropriated  and  the 


1>74  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

amount  required  to  pay  the  interest  would  gradually  pay  off  tlie  prin- 
cipal of  the  debt.  I  have  a  table,  prepared  at  the  Treasury  Dej^art- 
ment,  showing  the  precise  operation  of  this  plan,  by  which  it  will 
appear  that  it  would  pay  off  the  debt  by  1909. 

Mr.  President,  I  desire  now  to  make  a  few  observations  in  regard 
to  the  sections  of  the  bill  relating  to  the  United  States  notes ;  and 
these  I  consider  as  vitally  important.  We  propose  to  restore  to  the 
holder  of  United  States  notes  the  right  to  fund  them  at  pleasure  into 
the  new  bonds.  There  is  more  just  ground  of  discontent  and  more 
real,  discontent  among  the  peoj^le  of  this  country  because  of  the  dis- 
crimination made  between  the  bond-holder  and  the  holder  of  the  green- 
back than  from  any  other  cause.  You  compel  every  citizen  of  this 
country  to  take  the  greenl)ack  as  money,  willing  or  unwilling  ;  it  is  the 
measure  of  the  value  of  his  labor ;  and  yet  it  has  no  purchasing  power 
except  from  the  hope  that  in  some  future  time  the  United  States  will 
redeem  it.  It  may  be  forced  upon  another  man  in  pajinent  of  a  debt ; 
it  may  be  applied  to  pay  taxes ;  but  it  can  not  be  converted  into  in- 
come except  at  a  discount. 

A  man  can  not  take  United  States  notes  payable  on  demand  to  a 
broker  and  receive  in  exchange  any  security  issued  by  the  United 
States.  In  1863  we  were,  compelled  for  wise  purposes  to  take  away 
the  right  of  the  holder  of  the  greenback  to  fund  it,  because  we  wished 
then  to  force  our  loans  upon  the  market,  and  while  that  right  was  out- 
standing we  could  not  do  it.  Xow  that  the  war  is  over,  and  the  whole 
process  of  funding  is  intended  to  be  at  the  will  of  the  note-holder,  we 
ought  promptly  to  restore  this  right  to  allow  the  note  to  be  converted 
at  any  time  into  some  kind  of  bond  ;  and  we  propose  also  to  allow  the 
bond  to  be  converted  into  notes,  keeping  within  the  limit  of  notes  iixed 
by  law.  Then  there  is  no  discrimination ;  the  bond-holder  and  the 
note-holder  are  both  pubhc  creditors ;  both  depend  upon  the  public 
faith.  The  note-holder  may  go  to  the  Treasury  of  the  United  States 
and  demand  his  bond ;  the  bond-holder  may  go  also  and  demand  his 
note.  They  are  put  on  a  basis  of  equality,  and  will  be  of  equal  value. 
This  destroys  all  speculation  in  Government  securities.  The  note- 
holder may  at  his  option  draw  interest  in  gold  by  converting  his  notes 
into  bonds,  and  the  popular  cry  of  demagogues  that  we  have  provided 
gold  for  the  bond-holder  and  notes  for  the  people  will  be  silenced ; 
and  there  is  no  reason  why  the  note  issued  to  the  laboring  man  should 
now  be  less  valuable  than  any  other  form  of  Government  security. 
An  important  effect  of  this  provision  will  be  to  furnish  money  to  re- 
deem the  bonds  or  any  other  securities  that  offer,  and  without  resorting 
to  a  sale  of  bonds.  I  do  not  propose,  nor  do  the  Committee  contem- 
plate, the  issue  of  any  new  greenbacks.  We  suppose  that  the  process 
of  funding  these  notes  will  furnish  ample  means  to  redeem  all  the  out- 
standing bonds  and  securities  as  they  become  redeemable.  I  have  no 
doubt  the  same  process  will  go  on  here  that  occurred  in  Europe :  a 
small  amount  of  money  will  pay  a  large  amount  of  bonds.  The  mass 
of  bonds  will  be  exchanged  without  money.  The  transactions  j^aid  by 
money  compared  with  the  transactions  paid  by  checks  and  other  forms 
of  paper  are  as  one  to  a  thousand.     The  daily  balances  in  the  exchanges 


THE  FUNDING  BILL.  175 

in  the  ISTew  York  clearing-house  amount  to  many  millions,  and  yet  the 
amount  of  currency  to  pay  these  balances  is  often  less  than  one  per 
cent,  of  their  nominal  amount. 

Other  reasons  may  be  given  for  the  new  feature  of  this  bill  giving 
the  holder  of  bonds  the  right  to  convert  them  into  notes.  It  is  indis- 
pensably necessary  to  guard  against  sudden  contraction  and  panic. 
There  are  times  when  the  notes  Tvill  float  into  bonds  so  rapidly  as  to 
contract  the  currency,  and  thus  derange  business  and  prevent  the  move- 
ment of  crops.  This  privilege  will  give  flexibility  and  movement  to 
the  currency  of  the  country.  Every  exchange  will  be  a  benefit  to  the 
Government.  If  the  holder  of  a  Government  security  bearing  inter- 
est surrenders  it  to  the  Treasury  for  a  note  without  interest,  the  Llnited 
States  saves  the  interest.  If,  on  the  contrary,  the  notes  are  fmided  for 
a  bond,  the  notes  may  be  used  in  the  redemption  of  other  bonds  bear- 
ing a  higher  i^ate  of  interest.  If  tlie  money  market  becomes  stringent, 
if  currency  becomes  scarce,  the  holder  may  be  willing  to  surrender  his 
bond  bearing  five  per  cent,  interest  in  gold,  in  order  to  get  cuiTcncy 
with  which  to  pay  his  debts ;  and  why  not  give  him  that  privilege  ? 
It  is  a  benefit  to  the  United  States,  and  it  is  the  only  mode  l3y  which, 
during  the  suspension  of  specie  jjayments,  we  may  make  a  flexible  cur- 
rency. 

And,  sir,  this  loan  will  be  the  great  savings  fund  of  the  people  of 
the  United  States.  Every  man  having  money  for  a  time  idle  will  float 
it  into  these  ten-forty  bonds ;  and  while  we  have  the  money  we  shall 
pay  off  bonds  bearing  a  higher  rate  of  interest.  When  he  desires  it 
again,  he  can  come  back  and  get  the  l)ond  ;  and  so  this  operation  may 
be  carried  on  with  perfect  safety.  Xow  the  deposits  in  the  savings 
banks  amount  to  over  five  hundred  million  dollars..  "Why  should  not 
this  money  be  deposited  in  the  Treasury  i  AYhy  should  not  these  little 
streams  of  the  savings  of  the  laboring  man  help  to  float  the  public  credit  ? 
The  Government  of  the  United  States  ou^ht  not  to  feel  too  high  to  ac- 
knowledge the  services  of  such  a  fund.  It  will  be  useful.  The  bond 
will  enable  the  depositor  to  get  the  full  value  of  his  money.  ISTow  he 
deposits  in  savings  banks,  where  he  gets  four  or  five  per  cent,  interest 
in  paper  money. 

In  every  view  we  could  take  of  this  proposition,  after  the  most  am- 
ple consideration,  we  thought  it  was  a  wise  provision,  and  would  work 
well.  The  printing  and  exchanging  of  these  bonds  will  be  carried  on 
at  the  Treasury  Department  or  at  the  depositories,  or  other  jDroper 
places  of  exchange,  and  the  only  cost  will  be  that  of  printing.  This 
method  of  exchange  is  adapted  to  the  wants  of  trade,  and  will  tend  to 
give  increased  value  to  the  notes  ;  and  my  firm  conviction  is  that  both 
notes  and  bonds  will  gradually  rise,  until  they  reach  the  standard  of 
gold,  when  the  whole  process  will  cease  according  to  tlie  provisions  of 
the  bill.  I  look  upon  this  provision  as  the  most  rapid  way  to  specie 
payments. 

"^  The  only  section  of  the  bill  to  which  I  have  not  alluded  is  that  which 
legalizes  contracts  in  gold.  That  is  right  in  itself.  I  always  supposed 
tliat  the  legal-tender  act  was  not  intended  to  affect  the  right  of  the  peo- 
ple to  negotiate,  buy,  and  sell  gold,  if  they  chose.     Some  of  the  courts, 


176  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

however,  have  decided  otherwise.  "Whatever  the  law  may  be,  tliere  is 
no  objection  to  unlocking  the  hoards  of  gold,  and  allowing  the  people 
to  deal  in  it  as  thev  choose.  It  makes  another  addition  to  the  currency, 
and  will  gradually  make  our  people  become  accustomed  to  dealings  and 
transactions  in  gold,  tlms  tending  in  the  right  direction.  Where  one 
man  lends  gold  to  another  man,  it  is  equitable  that  he  should  have  gold 
back  in  payment ;  and  it  is  very  inequitable  for  the  debtor  in  such  a 
case  to  refuse  to  pay  it,  and  commit  a  fraud  by  means  of  the  law.  I 
think  it  will  be  beneficial  to  insert  this  provision,  because  dealing  in 
gold  will  have  a  tendency  toward  specie  payments. 

I  have  thus,  Mr.  President,  presented  the  leading  pi-ovisions  of  this 
bill.  I  appreciate  the  difficulties  of  the  subject,  and  the  personal  re- 
sponsibility I  assume  in  advocating  a  measure  that  may  fail  of  its  pur- 
pose. It  is  far  easier  to  sit  quiet,  to  proj)Ose  nothing,  and  criticise  the 
measures  of  others ;  but  such  I  do  not  understand  to  be  the  duty  of 
your  Committee  on  Finance.  We  are  actuated  by  an  earnest  desire  to 
reduce  the  burdens  of  the  people  without  injury  to  the  public  credit  or 
injustice  to  the  public  creditor  ;  by  a  firm  conviction  that  the  offer  here 
made  to  the  bond-holder  is  equitable  and  honorable,  and  that  its  accep- 
tance will  not  only  save  an  annual  expenditure  of  $17,000,000  in  gold, 
but  will  settle  upon  a  proper  basis  the  mode  of  payment  of  the  public 
debt,  and  still  leave  open,  after  a  reasonable  time,  a  further  reduction 
of  interest  if  practicable.  Further  than  this  the  Committee  does  not  go. 
It  does  not  provide  for  a  rejection  of  the  offer ;  but  I  repeat  that,  if  tlie 
offer  is  rejected,  I  will  not  liesitate  to  vote  to  redeem  maturing  bonds  in 
the  currency  in  existence  when  they  were  issued  and  with  Avhich  they 
were  purchased,  carefully  complying,  however,  with  all  the  provisions 
of  law  as  to  the  mode  of  payment  and  as  to  the  amount  of  currency 
outstanding.  This  conclusion  I  have  arrived  at  against  the  earnest  ar- 
guments of  personal  and  political  friends,  and  against  my  own  personal 
and  pecuniary  interests. 

But,  sir,  I  saw  two  years  ago — and  we  all  see  clearly  now — that  the 
existing  relation  between  the  public  creditor  and  the  tax-payer  is  one 
by  which  the  former  enjoys  all  the  blessings  of  a  Government  without 
cost,  receives  without  diminution  a  higher  rate  of  interest  than  your 
courts  would  enforce  between  citizens,  and  may  demand  payment  of 
the  principal  in  gold  for  paper  lent,  while  your  courts  refuse  to  enforce 
a  special  contract  for  the  return  of  gold  for  gold.  Such  a  system  can 
not  endure  in  a  Government  not  entirely  despotic  without  creating  dis- 
content that  may  endanger  the  performance  of  the  public  engagements. 
You  can  not  disguise  your  knowledge  of  this  growing  discontent.  The 
unavoidable  effect  of  approaching  specie  payments  in  reducing  prices 
and  shrinking  values  Avill  increase  this  discontent.  In  that  painful  pro- 
cess the  people  will  see  that  the  untaxed  productive  annuities  of  the 
bond-holder  alone  will  be  increased  in  value,  while  all  other  forms  of 
property  will  be  reduced.  It  is  not  the  interest,  nor  do  I  think  it  will 
be  the  desire,  of  the  public  creditor  to  innate  this  discontent.  The  same 
motive  that  induced  him  to  trust  the  Government  in  its  hour  of  peril 
will  induce  him  to  accept  equity  from  those  who  are  willing  to  do  equity. 
And,  sir,  his  patriotism  will  not  be  lessened  when  he  reflects  that  while 


THE  FUNDING  BILL.  ITT 

his  money  aided  in  the  good  cause  it  has  been  the  most  profitable  in- 
vestment of  caj^ital  he  could  have  made. 

Senators  often  tell  us  that  we  must  not  be  influenced  by  public  dis- 
content or  clamor.  I  agree  with  this  when  the  discontent  is  not  founded 
ujDon  substantial  equity ;  but,  when  it  is  so  founded,  it  will  make  itself 
felt  through  you  or  over  you.  And  Senators  must  remember  that  this 
is  a  government  of  the  people,  for  the  people,  and  by  the  people.  It 
is  not,  like  the  government  of  Great  Britain,  a  despotic  oligarchy, 
where  the  rights  of  property  override  the  rights  of  persons ;  where 
the  laws  are  made  to  add  to  the  accumulations  of  the  rich,  though 
hundreds  of  thousands  may  thereby  be  pinched  with  poverty.  That 
is  the  land  of  entails,  where  the  offices  of  the  church  are  bought  and 
sold  as  property,  and  where  all  that  is  good  in  life — office,  honor,  prop- 
erty— is  confined  to  less  than  one-tenth  of  the  population ;  where  the 
laws  are  studiously  framed  to  exclude  the  poor  from  political  rights. 
We  borrow  from  these  people  of  kindred  blood  many  of  the  best 
guards  of  liberty,  but  we  nnist  take  care  not  to  ingraft  on  our  repub- 
lican system  the  leading  feature  of  their  present  government,  the  su- 
premacy of  property  over  labor. 

Their  wealth  consists  of  vast  accumulations  of  property  produced 
by  ages  of  labor.  A  generation  adds  but  little  to  this  aggregate  of 
wealth ;  therefore  their  laws  protect  property  at  the  sacrifice  of  labor. 
Here  all  the  acquisitions  of  the  past,  all  the  accumulations  up  to  this 
hour,  are  only  equal  to  the  accumulations  that  will  be  made  by  labor 
during  the  next  ten  yeai-s.  Our  wealth  is  in  the  energy  and  sinews  of 
30,000,000  free  people,  all  equal,  each  working  for  himself,  with  no 
privileged  hand  to  press  him  down  in  the  race  of  life.  It  is  this  that 
has  made  our  history  like  the  tales  of  Arabian  fiction.  Our  railroads 
alone,  built  since  we  were  all  young,  are  worth  $l,600,r)00,000,  or  more 
than  the  property  of  the  United  States  when  she  took  her  place  among 
the  nations  of  the  earth.  The  property  of  the  State  of  Ohio  is  now 
worth  more  in  gold  than  that  of  all  the  colonies  when  they  proclaimed 
independence ;  and  yet  Ohio  was  then  a  pathless  wilderness  where  no 
white  man  dwelt. 

The  entire  debt  of  the  Eevolution,  which  Alexander  Hamilton  ap- 
proached with  terror,  which  our  ancestors  debated  over  for  years,  upon 
which  parties  were  formed  and  dissolved,  was  $75,740,111.30,  including 
over  817,000,000  of  State  debts  assumed  ;  and  yet  now  we  appropriate 
one  half  of  that  sum  for  pensions,  and  will  this  year  reduce  our  current 
expenses  more  than  that  sum.  All  this  vast  progress  is  the  result  of 
labor.  To  encourage,  maintain,  and  reward  labor  must  be  the  principal 
object  of  our  legislation.  Capital  can  take  care  of  itself.  It  has  many 
advantages  in  competition  with  labor.  It  may  be  idle ;  labor  can  not 
be.  It  does  not  grow  hungry  ;  it  does  not  become  cold  or  sick ;  while 
labor  must  be  supported  by  food  and  clothing,  and  awaits  sickness  and 
death.  Capital  is  only  useful  to  the  country  as  it  gives  employment  to 
labor,  as  a  means  to  further  development,  while  all  labor  tends  to  create 
new  wealth. 

When  capital  is  invested  in  Government  bonds,  it  is  useful,  so  far 
as  further  development  is  concerned,  only  in  supplying  the  wants  of 
12 


178  SPEECHES  AND   REPORTS   OF  JOHX  SHERMAN. 

tlie  owner.  "When  employed  in  most  otlier  pursuits,  it  adds  to  the 
national  wealth.  Certainly  it  is  not  the  public  interest  to  make  this  in- 
vestment so  profitable  and  attractive  as  to  draw  into  it  the  capital  of 
the  country,  or  to  make  it  so  permanent  as  to  create  a  privileged  aris- 
tocracy. No  privilege  should  be  granted  to  the  bond-holder  that  is  not 
granted  to  the  note-holder.  Both  are  public  creditors,  and  both  6an 
equally  appeal  to  the  public  faith.  Tlie  whole  public  debt  should  be 
made  to  assume  such  form  that  it  may  be  a  part  of  the  circulating 
capital  of  the  country,  bearing  as  low  a  rate  of  interest  as  ])racticable, 
and  only  with  such  exemptions  as  Avill  maintain  it  at  par  with  gold. 
AVliether  this  bill  will  promote  these  objects  it  is  for  the  Senate  to  say. 
I  confidently  believe  it  will.  I  do  not  appeal  to  any  party  for  tlie  sup- 
port of  this  measure,  for  it  affects  all  alike.  All  must  contribute  to 
the  public  taxes,  and  all  will  share  in  the  benefits  of  any  relief. 

But  while  we  tnist  our  political  adversaries  may  support  this  as  a 
measure  of  relief  to  our  constituents,  yet  the  fate  oi  the  bill  must  rest 
mainly  upon  the  Republican  party.  It  is  my  pride  and  hope  that  this 
powerful  political  organization,  having  conducted  the  country  with 
safety  and  honor  through  the  most  memorable  scenes  of  our  history, 
may,  still  retaining  the  confidence  of  the  people,  gradually  guide  them 
back  into  the  channels  of  peace,  reduce  their  burdens,  relieve  them 
from  oppressive  taxes,  and  start  again  in  productive  labor  the  millions 
now  waitiug  to  develop  the  greatest  country  God  ever  gave  to  man. 

Now  distrust  seizes  upon  every  one.  Wild  schemes  have  been  pro- 
posed, which  drive  capital  from  its  moorings.  Taxes  are  bearing  heav- 
ily upon  unprofitable  industry,  and  complaints  are  made  of  the  burden 
and  distribution  of  these  taxes.  Sectional  divisions  are  already  show- 
ing their  hydra  heads,  and  disputes  as  to  the  terms  of  public  engage- 
ments cast  doubts  upon  the  public  faith.  It  is  in  such  a  time  that 
Congress  is  able  to  perform  its  highest  duty — ^that  of  an  arbitrator. 
Upon  questions  involving  the  public  debt,  it  is  only  the  arbitrator.  It 
can  not  shrink  from  this  duty.  I  trust,  sir,  before  this  session  closes, 
that  Congress  will  provide  for  the  redemption  of  our  maturing  bonds, 
thus  saving  ultimately  81T,0!>0,000  a  year;  that  it  will  adopt  such 
measures  as  will  gradually  inake  the  dollar  in  greenback  in  the  hands 
of  the  laboring  man  equal  to  a  dollar  in  gold  ]  that  it  will  throw  off 
the  great  mass  of  our  internal  taxes,  and  reduce  our  ordinary  expenses 
to  the  lowest  practicable  limit.  These  measures  adopted,  we  may  safely 
leave  to  our  constituents  the  renewal  of  trade,  the  restoration  of  con- 
fidence, and  the  development  of  industry. 


miERNATIONAL  MONETARY  STANDARD.  179 

INTEENATIOXAL  MONETARY  STANDARD. 

AY  TEE  SEXATE,  JUNE  9,  1868. 

Mr.  Sherman  made  the  following  report :  . 

The  following  documents  have  been  referred  to  the  Committee  on 
Finance  : 

1.  S.  217,  in  relation  to  the  coinage  of  ^old  and  silver. 

2.  S.  412,  to  promote  uniformity  of  coinage  between  the  moneys 
of  the  United  States  and  other  countries. 

3.  The  proceedings  of  the  International  Monetary  Conference, 
held  at  Paris  in  June,  1867. 

4.  The  report  of  Sanmel  B.  Ruggles,  Esq.,  delegate  from  the  United 
States  in  the  International  Monetary  Conference  at  Paris,  JSTovember 
7,  18G7. 

5.  Sundry  memorials  relative  to  changes  in  our  system  of  coinage. 

These  documents  present  to  the  Committee  of  Finance  the  interest- 
ing question  of  international  coinage,  and  in  considering  them  we  neces- 
sarily inquired  : 

First.  Whether  the  object  proposed  was  of  suflficient  importance  to 
justify  a  change  in  tlie  coinage  of  the  United  States. 

Second.  AVliether  the  plan  proposed  by  the  Paris  Conference  was 
the  host  mode  to  accomplish  the  end  desired. 

Third.  What  legislation  was  necessary  on  tlie  part  of  the  United 
States  to  adapt  our  coinage  to  the  plan  proposed. 

Fourth.  What  provision  should  be  made  for  existing  pubhc  and 
private  contracts. 

Your  Connnittee,  after  a  partial  consideration  of  these  questions, 
direct  that  the  bill  first  named  be  reported  with  amendments,  sup- 
ported \)\  the  following  report,  and  that  Mr.  Morgan,  of  the  same  com- 
mittee, be  authorized  to  submit  a  report  adverse  to  the  bill,  and  that  these 
reports  be  printed,  and  tliat  the  bill  be  postponed  until  the  next  session, 
with  a  view  to  elicit  a  fuller  discussion  by  the  people  of  the  several 
questions  embraced  in  the  bill. 

First.  The  importance  of  a  common  monetary  standard  among 
commercial  nations  has  always  been  conceded.  It  has  been  the  hope 
of  philosophers  and  statesmen  and  the  demand  of  writers  on  political 
economy  for  centuries,  but  has  been  as  strongly  opposed  by  the  jeal- 
ousies of  locality  and  the  interests  of  rival  nations.  Commerce  and 
peace  have  steadily  approximated  different  standards  of  exchange  to- 
ward each  other,  while  local  interests  and  war  liave  as  steadily  caused 
them  to  diverge  from  each  other.  In  all  ages  local  and  generally 
despotic  authority  has  endeavored  to  make  more  money  out  ol  a  given 
amount  of  gold  and  silver  bv  clipping  or  alloy,  while  the  general  laws 
of  trade  and  commerce  have  soon  after  reduced  the  current  value  of 
tlie  money  as  it  was  reduced  in  weight  and  fineness.  Formerly,  not 
onlv  each  nation,  l)ut  each  province,  duke,  bishop,  or  municipality, 
made  its  own  separate  and  distinct  coin,  often  of  the  same  name  but 


180  SPEECHES   AND   REPORTS   OF  JOHN  SHERMAN. 

different  values.  The  effort  to  unitize  the  different  moneys  of  a  nation 
was  but  a  part  of  the  process  by  which  the  modern  nations  of  Europe 
have  been  formed,  and  in  this  process  the  original  money  was  debased 
in  a  remarkable  way.  The  pound  sterling  of  England  was,  at  the  time 
of  William  the  Conqueror,  equivalent  to  a  pound  weight  of  silver ;  it 
is  now  3  oz.  12  dwt.  16  grs.  Tlie  German  ilorin  was  originally  a  gold 
coin,  worth  about  $2.10 ;  it  is  now  a  silver  coin,  worth  about  40  cents. 
The  French  livre  originally  contained  a  pound  of  silver,  worth  about 
$18.50  ;  it  is  now  worth  about  19  cents.  The  Spanish  maravedi  in  the 
year  1220  was  worth  $8.20  of  our  money ;  it  is  now  worth  about  a 
quarter  of  a  cent.  The  result  of  these  changes  has  been  to  secure  to 
all  parts  of  each  leading  nation  a  common  unit  of  money — of  fixed 
value.  The  pound  sterling  is  the  unit  in  Great  Britain;  the  franc  in 
France,  Italy,  Switzerland,  and  Belgium ;  the  Ilorin  in  South  Ger- 
many ;  the  thaler  in  North  Germany ;  the  dollar  in  the  United  States ; 
and  various  other  units  in  other  nations.  These  units  are  purely 
arbitrary,  based  upon  local  law,  and  diverse  in  weight,  value,  and  alloy. 
They  are,  in  some  nations,  of  gold  only ;  in  some,  of  silver  only ;  and 
in  some,  a  compound  standard  of  gold  and  silver,  differing  materially 
in  the  amount  of  alloy,  and  in  the  relative  value  of  the  two  metals. 

For  local  purposes  it  is  not  very  material  which  metal  is  the  standard, 
nor  of  what  weight  and  fineness  the  standard  may  be,  if  only  it  is  of 
fixed  and  invariable  value ;  for  the  value  of  property  and  all  internal 
commerce  adapts  itself  to  the  intrinsic  value  of  the  gold  and  silver  in 
the  prescribed  standard. 

The  inconvenience  of  different  standards  of  value  arises  mainly  in 
foreign  commerce,  in  the  exchange  of  commodities  among  nations. 
The  intercourse  between  modern  Christian  nations  is  now  more  inti- 
mate and  exchange  more  rapid  than  it  was  between  provinces  of  the 
same  country  two  hundred  years  ago.  The  annual  trade  between  the 
United  States  and  Great  Britain  is  now  greater  in  bulk  and  value  than 
the  aggregate  annual  trade  between  all  the  nations  of  Europe  two 
hundred  years  ago.  The  same  reasons  for  adopting  an  international 
standard  of  value  now  exist,  as  induced  the  American  colonies  less  than 
one  hundred  years  ago  to  abandon  their  diversified  standards  of  value, 
and  adopt  as  a  common  unit  the  American  dollar.  Every  advance 
toward  a  free  exchange  of  commodities  is  an  advance  in  civilization ; 
every  obstniction  to  a  free  exchange  is  born  of  the  same  narrow  despotic 
spirit  which  planted  castles  upon  the  Rhine  to  plunder  peaceful  com- 
merce. Every  obstruction  to  commerce  is  a  tax  upon  consumption ; 
every  facility  to  a  free  exchange  cheapens  commodities,  increases  trade 
and  production,  and  promotes  civilization.  Nothing  is  worse  than  sec- 
tionalism within  a  nation,  and  nothing  is  better  for  the  peace  of  nations 
than  unrestricted  freedom  of  intercourse  and  commerce  with  each  other. 
No  single  measure  will  tend  in  this  direction  more  than  the  adoption 
of  a  fixed  international  standard  of  value,  by  which  all  products  may 
be  measured,  and  in  conformity  with  which  the  coin  of  a  country  may 
go  with  its  flag  into  every  sea,  and  buy  the  products  of  every  nation, 
without  being  disconcerted  by  the  money  changes. 

This  has  been  the  wish  of  American  statesmen  since  the  revolu- 


INTERNATIONAL  MONETAEY  STANDARD.  181 

tionary  war.  The  Spanish  milled  dollar  was  adopted  as  the  basis  of 
our  coinage  before  the  Constitution  was  framed,  and  with  the  hope, 
expressed  by  Mr.  Jefferson,  that  it  would  lead  to  an  international  unit, 
Mr.  Hamilton  and  Mr.  Gallatin  each  desired  the  same  result,  but  the 
French  war  postponed  all  efforts  in  that  direction.  Mr.  John  Q. 
Adams,  in  his  remarkable  report  to  Congress  of  February  22,  1821, 
upon  the  kindred  but  more  comprehensive  subject,  "  the  uniformity  of 
weights  and  measures,"  says  : 

This  system  approaches  to  the  ideal  perfection  of  vniformity  applied  to  weights 
and  measures,  and,  whether  destined  to  succeed  or  doomed  to  fail,  will  shed  un- 
fading glory  upon  the  age  in  which  it  was  conceived  and  upon  the  nation  by  which 
its  execution  was  attempted  and  has  been  in  part  achieved. 

If  man  upon  earth  be  an  improvable  being ;  if  that  universal  peace,  which  was 
the  object  of  a  Saviour's  mission,  which  is  the  desire  of  the  philosopher,  the  long- 
ing of  the  philanthropist,  the  trembling  hope  of  the  Christian,  is  a  blessing  to  which 
the  futurity  of  mortal  man  has  a  claim  of  more  than  mortal  promise ;  if  the  spirit 
of  evil  is,  before  the  final  consummation  of  things,  to  be  cast  down  from  his  domin- 
ion over  men  and  bound  in  the  chains  of  a  thousand  years,  the  foretaste  here  of 
man's  eternal  felicity,  then  this  system  of  common  instruments  to  accomplish  all 
the  changes  of  social  and  friendly  commerce  will  furnish  the  links  of  sympathy 
between  the  inhabitants  of  the  most  distant  regions;  the  metre  will  surround  the 
globe  in  use  as  well  as  in  multiplied  extension,  and  one  language  of  weights  and 
measures  will  be  spoken  from  the  equator  to  the  poles. 

Several  efforts  have  been  made  by  negotiation  to  secure  uniformity 
of  coinage,  especially  with  Great  Britain. 

In  1857,  in  compliance  with  an  act  of  Congress,  passed  upon  the 
report  of  the  Committee  on  Finance  of  the  Senate,  Prof.  Alexander 
was  sent  as  a  special  commissioner  to  that  country  to  secure  a  unity  of 
coinage  between  the  two  countries  ;  but,  after  various  conferences,  the 
mission  failed  from  an  indisposition  of  the  English  Government  to 
modify  their  pound,  shilling,  and  penny.       ^ 

In  his  report  of  December,  1862,  Mr.  Secretary  Chase  invited  the 
attention  of  Congress  to  the  importance  of  uniform  weights,  measures, 
and  coins,  and  recommended  that  the  half-eagle  of  the  United  States 
be  made  equal  to  the  gold  sovereign  of  Great  Britain  in  weight  and 
fineness. 

The  Berlin  International  Statistical  Congress,  held  in  1863,  com- 
posed of  representatives  of  fourteen  countries,  and  at  which  the 
United  States  was  ably  represented  by  Mr.  Kuggles,  agreed  to  the 
following  resolutions : 

1st.  That  the  Congress  recommends  that  the  existing  units  of  money  be  reduced 
to  a  small  number ;  that  each  unit  should  be,  as  far  as  possible,  decimally  subdi- 
vided ;  that  the  coins  in  use  should  all  be  expressed  in  weiglits  of  the  metric  sys- 
tem, and  should  all  be  of  the  same  degree  of  fineness,  namely,  nine  tenths  fine  and 
one  tenth  alloy. 

2d.  That  the  different  governments  be  invited  to  send  to  a  special  congress^  dele- 
gates, authorized  to  consider  and  report  what  should  be  the  relative  weights,  in  the 
metrical  system,  of  the  gold  and  silver  coins,  and  to  arrange  the  details  by  which 
the  monetary  system  of  diflTerent  countries  may  be  fixed  according  to  the  terms  of 
the  preceding  propositions. 

This  Ifed  to  the  recent  Paris  Conference,  and  to  the  adoption  by 
Congress,  in  1866,  of  several  measures  for  the  use  of  the  metric  system 
of  weights  and  measures.     At  the  Paris  Conference  nineteen  nations 


182  SPEECHES   AXD  REPORTS   OF   JOHN  SHERMAN. 

were  represented,  comprisinp^  a  population  of  320,000,000  European 
and  American  and  190,000,0»J0  Asiatic. 

The  Conference  agreed  with  great  unanimity  upon  the  plan  here- 
after stated,  and  the  delegates  from  the  United  States  were  active  and 
influential  in  liarmonizing  conflicting  views  and  in  securing  the  result 
arrived  at.  Upon  the  flrst  part  of  their  inquiry,  your  Committee 
therefore  conclude  that  the  object  projiosed  is  of  the  highest  import- 
ance, constantly  sought  for  at  every  period  of  the  government,  and 
that  the  United  States  is  fully  committed  to  its  sujiport  if  the  plan 
projDOsed  is  practicable  and  just. 

Aside  from  the  general  advantages  which  we  will  share  with  the 
civilized  world  in  attaining  a  uniforiu  coinage,  there  are  special  reasons 
why  the  United  States  should  iioio  adopt  the  system. 

1.  The  United  States  is  the  great  gold-])roducing  country  of  the 
world,  now  producing  more  than  all  other  nations  combined,  and  with 
a  capacity  for  future  production  ahnost  without  limit.  (See  reports  of 
Mr.  Ruggles  and  J.  Ross  Browne.)  Gold  with  us  is  like  cotton — a 
raw  product.  Its  production  here  affects  and  regulates  its  value 
throughout  the  world.  Every  obstruction  to  its  free  use — such  as  the 
necessity  of  its  recoinage  when  passing  from  nation  to  nation — dimin- 
ishes its  value,  and  that  loss  falls  upon  the  United  States,  the  countiy 
of  production. 

2.  The  United  States  is  a  new  nation,  and  therefore  a  debtor  na- 
tion. By  placing  ourselves  in  harmony  with  the  money  units  of 
creditor  nations,  we  promote  the  easy  borrowing  of  money  and  pay- 
ment of  debts  witliout  the  loss  of  recoinage  or  exchange,  always  j)aid 
by  the  debtor.  This  is  necessarily  so  where  the  debt  is  payable  abroad ; 
and,  if  payable  here,  the  creditor  discounts  the  exchange  and  diiierence 
in  coinage  in  advance. 

3.  The  technical  rate  of  exchange  between  the  United  States  and 
Great  Britain,  growing  out  of  the  different  nominal  values  of  coin,  is 
a  standing  reproaph  which  can  be  got  rid  of  only  by  unifying  the  coin- 
age of  the  two  countries,  when  both  the  real  and  technical  rate  of  ex- 
change will  be  at  par,  with  only  such  shght  variations  as  will  indicate 
the  course  of  trade. 

4.  Gold  is  now  demonetized  as  a  currency,  and  the  great  bulk  of  it 
in  the  United  States  is  now  held  in  the  Treasury,  so  that  it  is  not  possi- 
ble to  select  a  time  when  this  great  international  change  of  coinage 
could  affect  the  interests  of  our  people  less.  From  inquiries  made  of 
the  oflicers  of  the  mint  we  find  that  the  cost  of  reminting  the  present 
coin  would  be  less  than  one  twentieth  of  one  per  centum.  The  fine- 
ness of  the  proposed  coin  being  the  same  as  the  old,  there  will  be  no 
assay,  and  the  cost  of  the  change  would  not  be  perceptible  to  the 
holder  of  the  coin,  and  scarcely  so  to  the  Government. 

Second.  The  second  inquiry  of  your  Committee  was  whether  the 
plan  proposed  by  the  Paris  Conference  was  the  best  mode  to  accom- 
plish the  end  desired. 

It  proposed : 

1.  A  single  standard,  exclusively  of  gold. 

2.  Coins  of  equal  weight  and  diameter. 


INTERNATIONAL  MONETARY  STANDARD.  183 

3.  Of  equal  quality  or  fineness — nine  tenths  fine. 

4.  The  weight  of  the  present  five-franc  gold  piece  to  be  the  unit. 

5.  The  coins  of  each  nation  to  bear  the  names  and  emblems  pre- 
ferred by  each,  but  to  be  legal  tenders,  public  and  private,  in  all. 

The  single  standard  of  gold  is  an  American  idea,  yielded  reluct- 
antly by  France  and  other  countries,  where  silver  is  the  chief  standard 
of  value.  The  impossible  attempt  to  maintain  two  standards  of  value 
has  given  rise  to  nearly  all  the  debasement  of  coinage  of  the  last  two 
centuries.  The  relative  market  value  of  silver  and  gold  varied  like 
other  commodities,  and  this  led  first  to  the  demonetization  of  the  more 
valuable  metal,  and  second  to  the  debasement  or  diminution  of  the 
quantity  of  that  metal  in  a  given  coin.  In  a  short  time  the  cheaper 
metal  would  by  a  diminished  sui)ply  become  the  dearer  metal,  and  then 
it  would  be  debased  and  cheapened  in  the  same  way.  This  process  re- 
peatedly occurred  in  Europe,  and  has  twice  occurred  in  the  United 
States  within  the  life  of  the  present  generation.  By  the  act  of  June 
28,  1834,  our  gold  coin  was  reduced  from  27('  grains  of  standard  gold 
to  258  grains,  or  4*-i  per  centum,  in  order  to  make  it  correspond  with 
the  market  value  of  silver.  In  consequence  of  the  discovery  of  gold 
in  California  that  metal  was  cheapened,  and  silver  became  relatively 
more  valuable  and  was  hoarded  or  exported.  To  avoid  this,  the  weight 
of  our  silver  coin  was  reduced  by  the  act  of  January  21,  1853,  from 
206  grains  of  standard  silver  to  192  grains,  or  G'T  per  centum. 

This  subject  early  excited  the  attention  of  financiers.  Mr.  Gorham, 
in  his  report  of  May  4, 1830,  as  Secretary  of  the  Treasury,  forcibly  says  : 

Amidst  all  the  embarrassments  wliioh  have  surrounded  this  subject  since  the 
adoption  (;f  metallic  standards  of  ])roperty,  it  is  remarkalile  that  governments  have 
so  tenaciously  persevered  in  the  etibrt  to  maintain  standards  of  different  materials, 
whose  relation  it  is  so  dilBcult  to  ascertain  at  any  one  time,  and  is  so  constantly 
changing;  and  more  especially  when  a  simple  and  certain  remedy  is  within  the 
reach  of  all.  This  remedy  is  to  be  found  in  the  establishment  of  one  standard 
measure  of  property  only.  The  evil  of  having  two  or  more  standards  arises,  as 
already  observed,  from  the  impossibility  of  so  fixing  their  relative  values  by  law 
that  one  or  the  other  may  not,  at  times,  become  of  more  value  in  market  than  esti- 
mated by  regulation ;  and,  when  this  happens,  it  will  be  bought  and  sold  according 
to  its  market  value,  regardless  of  the  law. 

The  proposition  that  there  can  be  but  one  standard  in  fact  is  self-evident.  The 
option  of  governments  charged  with  this  duty  is  therefore  between  having  property 
measured  sometimes  by  gold  and  sometimes  by  silver,  and  selecting  that  metal 
which  is  best  adapted  to  the  purpose  for  the  only  standard.  "Why  the  latter  course 
has  not  been  universally  adopted  it  is  not  easy  to  explain,  unless  it  may  be  attrib- 
uted to  that  prevalent  delusion  which  seeks  to  secure  the  possession  of  gold  and 
silver  by  restraining  their  exportation,  and  avoiding  the  payment  of  debts  rather 
than  improving  the  public  economy  by  giving  every  facility  to  it. 

The  opportunity  is  now  offered  to  the  United  States  to  secure  a 
common  international  standard  in  the  metal  most  valuable  of  all  others, 
best  adapted  for- coinage,  mainly  the  product  of  our  own  country,  and 
in  conformity  with  a  policy  constantly  urged  by  our  statesmen,  and 
now  agreed  to  by  the  oldest  and  wealthiest  nations  of  the  world. 
Surely  we  should  not  hesitate  for  trifling  considerations  to  secure  so 
imjoortant  an  object. 

The  equal  weight  and  diameter  of  coins  will  guard  against  adulter- 


184  SPEECHES  AND   REPOETS   OF  JOHN  SHERMAN. 

ation  and  counterfeiting,  and  will  familiarize  our  people  witli  tlie  metric 
system  of  weights  and  measures.  This  system  is  already  used  in  some 
of  our  coins,  and  is  permitted  by  our  laws,  and  will  by  gradual  means 
become  adopted  as  the  only  international  system.  The  provision  made 
that  each  nation  shall  retain  its  own  emblems  will  not  impair  the  ready 
currency  of  coin,  but  will  induce  care  in  coinage. 

All  the  provisions  of  the  plan  proposed  are  in  harmony  with  the 
American  system  of  coinage.  They  are  either  already  adopted  or  may 
be  without  inconvenience.  The  only  point  upon  which  a  diversity  of 
opinion  may  arise  is  as  to  the  unit  of  value,  and  here  tlie  chief  difficulty 
was  not  as  to  what  particular  quantity  of  gold  was  the  best  unit,  but 
upon  what  quantity  all  the  nations  represented  could  agree.  The  unit 
recommended  is  the  existing  five-franc  gold  piece,  620  of  which  weigh 
a  kilogramme. 

For  the  reasons  that  induced  the  adoption  of  this  unit  of  value, 
reference  is  made  by  your  Committee  to  the  report  of  Mr.  Kuggles. 
They  may  be  summed  up  as  follows : 

1.  The  coin  proposed  is  the  smallest  gold  coin  in  use,  and  therefore 
the  most  convenient  unit  of  value. 

2.  It  approximates  more  nearly  to  the  existing  coinage  of  the  great 
commercial  nations  than  any  other  proposed.  The  dollar  reduced  three 
and  a  half  cents  at  the  mint  becomes  the  unit  of  value,  and  its  decimal 
divisions  and  multiples  enable  us  to  retain  all  our  well-known  coins, 
both  of  gold  and  silver. 

A  very  slight  reduction  of  the  English  sovereign  makes  it  conform 
to  the  multiple  of  the  dollar  and  franc,  so  that  five  francs  are  a  dollar, 
and  five  dollars  are  a  sovereign,  or  a  half-eagle.  The  same  unit  is  easily 
adapted  to  existing  coinage  of  other  nations. 

3.  The  franc  is  already  in  use  by  72,000,000  of  the  most  industrious 
and  thrifty  people  of  Europe — France,  Belgium,  Italy,  Switzerland, 
and  Holland. 

4.  The  actual  gold  coinage  in  francs  from  1793  to  18G6  was  $1,312,- 
220,814,  while  the  gold  coinage  in  dollars  during  the  same  period  was 
^845,536,591,  and  in  sovereigns  was  $935,341,450 ;  thus  showing  that 
in  France  alone  the  existing  gold  coinage  on  the  proposed  standard  is 
greater  than  upon  any  other  that  could  be  adopted. 

It  must  be  remembered  that  the  great  body  of  our  coin  and  bullion 
has  been  exported,  and  is  now  in  foreign  coin ;  that  a  large  part  of  the 
remainder  is  held  in  the  treasury ;  and  that  less  gold  is  in  actual  circu- 
lation in  the  United  States  than  in  any  other  great  commercial  nation. 
It  is  unreasonable,  in  view  of  these  facts,  for  the  United  States  to  de- 
mand that  our  dollar,  composed  of  1,671'50  milligrammes  of  gold, 
should  be  the  standard  of  value.  As  the  nation  most  interested  in  inter- 
national coinage,  we  should  be  ready  to  yield  something  to  secure  that 
object.  By  the  plan  proposed  we  yield  nothing  except  the  very  snaall 
reduction  of  the  weight  of  our  standard,  and  without  any  other  change 
in  our  coins,  multiples,  divisions,  devices,  or  alloy. 

5.  France,  whose  standard  is  adopted,  makes  a  new  coin  similar  to 
our  half-eagle.  She  yielded  to  our  demand  for  the  sole  standard  of 
gold,  and  during  the  whole  conference  evinced  the  inost  earnest  wish 


INTERNATIONAL  MONETARY  STANDARD.  185 

to  secure  the  cooperation  of  tlie  United  States  in  the  great  object  of 
unification  of  coinage.  Her  metric  system  is  by  far  the  best  yet  de- 
vised, and  is  in  general  harmony  with  our  own ;  while  Great  Britain 
has  refused  even  to  negotiate  with  us  for  unity  of  coinage,  and  main- 
tains the  most  complex  system  of  weights,  measures,  and  coinage  now 
in  use  among  Christian  nations.  The  decimal  system,  the  basis  of  all 
our  computations,  she  rejects,  and  adheres  to  the  comjjlex  division  of 
pounds,  shillings,  and  pence,  which  we  rejected  with  colonial  depend- 
ence. 

These  reasons  induce  your  Committee  to  earnestly  urge  the  adop- 
tion by  the  United  States  of  the  general  plan  of  the  Paris  conference. 

Third. — What  legislation  is  necessary  on  the  part  of  the  United 
States  to  adapt  our  coinage  to  the  plan  proposed  ? 

On  this  point  your  Committee  have  consulted  the  Secretary  of  the 
Treasury  and  the  Director  of  the  Mint.  The  bill  herewith  reported  is 
the  result  of  this  conference,  and  is  all  that  is  needed  to  secure  the 
object  proposed.  The  provisions  in  regard  to  silver  coinage  are  urged 
by  the  Director  of  the  Mint  to  secure  hannony  between  the  present 
market  value  of  gold  and  silver;  but  this  coinage  can  be  regulated 
hereafter  by  the  varying  values  of  the  two  metals,  and  without  dis- 
turbing the  sole  legal  standard  of  value  for  large  sums.  The  general 
pK)visions  of  existing  law  relating  to  coinage  are  preserved. 

Fourth. — What  provisions,  if  any,  should  be  made  for  existing 
contracts  ?  Shall  they  be  discharged  in  the  money  made  a  legal  tender 
at  the  date  of  the  contracts,  or  in  the  money  provided  for  by  this  bill  ? 

In  determining  this  question,  a  distinction  must  be  made  between 
public  and  private  debts.  All  private  contracts  are  made  in  view  of 
the  power  of  Congress  to  regulate  the  value  of  coins.  This  power  has 
been  repeatedly  exercised  by  Congress,  and  in  no  case  was  any  j)ro vi- 
sion made  for  enforcing  existing  contracts  in  the  old  rather  than  the 
new  standard.  All  property  and  contracts  may  be  affected  by  legisla- 
tion, but  it  is  not  presumed  that  in  the  exercise  of  its  legislative  power 
Congress  will  be  controlled  by  either  the  debtor  or  creditor,  but  only 
by  the  general  good.  To  continue  a  distinction  between  the  old  and 
the  new  coin  in  the  payment  of  private  debts  would  result  in  great 
inconvenience,  while  making  the  new  coin  a  legal  tender  for  all  debts 
after  a  reasonable  time  would  enable  our  citizens  to  conform  the  great 
body  of  their  contracts  to  the  new  standard.  Such  has  been  the  prac- 
tice not  only  in  the  United  States  l)ut  in  other  countries,  whei'e  from 
time  to  time  the  standard  of  coin  has  been  changed.  Such  was  the 
principle  adopted  in  the  passage  of  the  present  legal-tender  act,  which 
if  made  applicable  only  to  future  contracts  would  have  banknipted  a 
large  portion  of  the  active  business  men  of  the  country,  whose  busi- 
ness compelled  them  to  contract  debts. 

It  must  be  remembered  that  all  private  debts  are  now  on  the  basis 
of  legal-tender  notes,  of  far  less  intrinsic  value  than  the  proposed  coin. 
The  depreciation  of  legal  tenders  had  the  effect  to  diminish  the  value 
of  all  debts  and  the  property  of  all  creditors  to  the  extent  of  the  de- 
preciation, and  was  only  justifiable  by  the  highest  considerations  of 
national  safety.     The  resulting  process  of  returning  to  a  specie  basis 


18G  SPEECHES   AND  KEPORTS   OF  JOHN   SHERMAN. 

will  be  far  more  severe  on  tlie  de1)tor  class.  The  lesseiiiiifi^  of  the 
burden  of  debt  is  a  loss  to  a  class  generally  benefited  by  the  increased 
yaliie  of  fixed  property,  and  better  able  to  bear  the  diminution  of  their 
capital ;  but  an  increase  of  the  l)urden  of  the  debt  to  the  debtor  class, 
by  requiring  payment  in  coin  instead  of  in  depreciated  paper  money, 
often  j)roduces  absolute  ruin  "without  fault  in  the  debtor.  All  con- 
tracts are  now  on  the  legal-tender  basis.  Every  private  creditor  would 
now  take  the  new  coin,  and  would  be  largely  benefited  by  the  changed 
medium  of  payment.  The  small  relief  ot  the  debtor  by  the  slightly 
diminished  standard  of  coin  will  tend  to  that  degree  to  lessen  the  un- 
avoidable hardshi])  to  him  of  a  return  to  specie  payment.  This  relief 
would  be  especially  just  on  the  payment  of  long  bonds  issued  by  rail- 
roads and  other  corporations  during  or  since  the  war,  which  were  al- 
most uniformly  sold  for  depreciated  paper  money.  Your  Committee 
therefore  conclude  that,  as  to  all  private  debts  or  contracts,  the  only- 
provision  necessary  in  this  bill  is  to  postpone  the  operation  of  its  legiil- 
tender  clause  for  a  reasonable  time  after  the  passage  of  the  act. 

Does  not  a  different  principle  prevail  as  to  public  debts  ^  As  to 
public  debts,  the  contract  of  loan  is  the  only  law  that  ought  to  affect 
the  creditor  until  his  debt  is  fully  discharged.  Congress,  as  the  au- 
thorized agent  of  the  American  people,  is  one  party  to  the  contract, 
and  it  may  no  more  vary  the  contract  by  subsequent  acts  than  any 
other  debtor  may  vary  his  contract.  As  to  the  public  creditor,  no  le- 
gislative power  stands  between  him  and  the  exact  performance  of  his 
contract.  Public  faith  holds  the  scales  between  him  and  the  United 
States,  and  the  penalties  for  a  breach  of  this  faith  are  far  more  severe 
and  disastrous  to  the  nation  than  courts,  constables,  and  sheriffs  can  be 
to  the  private  debtor.  These  penalties  are  national  dishonor  and  inabil- 
ity to  borrow  money  in  case  of  war  or  public  distress,  and  the  ultimate 
result  is  the  sure  and  speedy  decline  of  national  power  and  prestige. 
When  changes  in  our  coin  were  made  in  lS3-i  and  1853,  the  United 
States  had  no  public  debt  of  any  significance,  and  the  precedents  then 
made  do  not  apply  to  the  present  time.  Now  the  public  debt  is  so 
large  that  a  change  of  three  and  one  half  I3er  cent,  in  the  value  of  our 
coin  is  a  reduction  of  the  public  debt  of  §90,000,000.  So  much  of 
this  debt  as  exists  in  the  form  of  legal-tender  notes  will  be  received 
and  disbursed  as  money ;  and,  as  its  value  for  some  time  will  be  less 
than  that  of  the  new  coin,  no  provision  need  be  made  for  it ;  but  of  so 
much  of  the  debt  as  is  payable,  principal  or  interest,  in  coin  of  a  spe- 
cific weight  and  value,  provision  ought  to  be  made  for  the  exact  dis- 
charge in  that  coin  or  its  equivalent  in  the  new.  Youi?  Committee, 
therefore,  propose  an  amendment  to  that  effect. 

Your  Committee  have  been  led  to  inquire  whether,  if  the  United 
States  adopt  the  plan  of  the  Paris  Conference,  it  will  be  adopted  by 
other  nations  so  as  to  accomplish  the  object  proposed  of  an  interna- 
tional currency,  of  universal  circulation  throughout  the  civilized  world. 
Upon  this  point  we  have  the  most  satisfactory  assurances.  Since  the 
Paris  Conference  it  has  been  adopted  by  Austria,  and  will  in  all 
human  probability  be  adopted  by  the  ]^orth  German  Confederation. 
A    strong   party    in    Great    Britain,  including    many   of    her   ablest 


PUBLIC  DEBT  AND  CURRENCY.  187 

statesmen  and  the  great  body  of  her  commercial  classes,  has  urged 
the  adoption  of  the  plan,  even  in  advance  of  the  United  States ;  and 
they  concur  in  the  opinion  that,  if  adopted  by  the  United  States, 
Great  Britain  will  be  induced  bv  her  interests  to  modify  her  sovereign 
to  the  international  standard.  \Ve  have  the  highest  authority  for  say- 
ing that  Canada  stands  ready  to  adopt  the  plan  the  moment  it  is  adopt- 
ed by  the  United  States,  Diiferent  representatives  of  the  South 
American  States  say  those  States  will  readily  adopt  it.  So  that  upon 
Congress  now  rests  the  fate  of  a  measure  that,  according  to  the  opin- 
ion of  eminent  American  statesmen,  will  shed  unfading  glory  upon 
the  age  of  its  adoption,  that  will  give  to  international  law  an  interna- 
tional coinage,  and  will  lead  to  a  vast  extension  of  the  objects  of  inter- 
national law  common  to  Christian  and  civilized  nations,  thus  binding 
the  whole  family  of  man  by  the  same  ties  that  are  uniting  and  con- 
solidating neighboring  states.  Your  Connnittee  recommend  the  adop- 
tion of  this  measure  with  certain  amendments,  with  the  conviction  that 
it  will  not  only  promote  the  local  interests  of  the  Ignited  States,  but 
will  subserve  the  general  interests  of  all  the  nations  who  have  ah'eady 
joined  or  may  hereafter  juin  in  its  adoption. 


PUBLIC  DEBT  AND  CURRENCY. 

/iV  TBB  SENATE  OF  THE  UNITED  STATES,  JANUARYS,  1869. 

The  Senate  having  under  consideration  the  bill  in  relation  to  the  public  debt 
and  the  currency,  Mr.  Sherman  said  : 

Mr.  Peesident  :  I  suppose  it  is  expected  of  me  to  state  in  general 
terms  the  reasons  that  intiuenced  the  Committee  on  Finance  to  report 
this  measure,  and  also  to  state  why  other  measures  of  a  financial  char- 
acter referred  to  the  Committee  have  not  received  its  sanction. 

And,  in  the  tii-st  place,  it  is  but  right  to  recall  the  embarrassments 
of  the  Committee,  not  only  from  the  intrinsic  ditficulties  of  the  sub- 
jects referred  to  us,  but  from  the  great  diversity  of  opinion  that  exists 
in  all  parts  of  the  country  as  to  the  proper  measures  to  be  adopted.  ^  I 
appeal  to  no  party  to  sustain  this  measure,  yet  we  must  all  recognize 
the  difficulty  of  harmonizing  the  great  diversities  of  opinion  that  exist 
on  financial  measures,  except  by  a  partial  surrender  of  individual 
opinion  and  something  like  a  party  support  of  any  measure  that  may 
be  agreed  upon. 

In  order  to  consider  this  measure  properly,  we  must  have  a  clear 
perception  of  what  is  sought  to  be  accomplished.  The  object  we  have 
in  view  is  to  appreciate  our  currency  to  the  standard  of  gold  as  rapidly 
as  the  public  interest  will  allow.  ^Our  present  cun-ency  or  "  lawful 
money "  consists  of  notes  of  the  United  States,  and  these  are  a  legal 
tender  in  payment  of  all  debts.  Based  upon  them,  and  of  equal  value 
with  them,  is  a  subsidiary  currency  of  notes  of  national  banks,  and 
these  are  redeemable  in  United  States  notes,  and  are  receivable  in  pay- 


188  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

ment  of  taxes.  "We  have  also  a  form  of  demand  notes,  convertible  at 
the  will  of  the  holder  into  la-\vfnl  money,  called  three  per  cent,  certi- 
ficates. We  have  also  a  fractional  paper  currency  which  is  convertible 
into  lawful  money  on  demand.  These  four  species  of  notes  compose 
the  paper  currency  of  the  country,  and  the  amount  of  each  is  stated  as 
follows  : 

United  States  notes $356,021,0'73 

National-bank  notes 299,806,565 

Three  per  cent,  certificates 55,865,000 

Fractional  currency , 34,216,'715 

In  all §745,908,353 

All  this  currency  is  by  law  at  par.  By  law  it  is  either  made  the 
standard  of  value  or  may  at  pleasure  .be  converted  into  the  standard  of 
value.  It  is  the  legal  measure  of  all  connnodities  and  of  all  debts, 
except  for  duties  on  imported  goods  and  interest  of  the  public  debt. 
But  in  truth  and  in  fact  it  is  not  at  par  in  the  standard  money  of  the 
world.  One  dollar  of  it  has  only  the  same  purchasing  power  as  seventy- 
four  cents  in  gold.  Gold,  which  is  real  monej^ — not  the  representa- 
tive of  money,  but  money  itself,  of  intrinsic  value,  recognized  as  such 
by  every  man  in  all  civilized  countries  and  in  all  ages  of  the  world — 
gold  is  demonetized  by  the  law,  cannot  be  collected  in  the  courts,  and, 
like  cotton  or  wheat,  is  treated  as  a  commodity  whose  value  is  meas- 
ured by  what  we  call  "  lawful  money." 

iSTow,  it  seems  to  me  that  the  first  step  in  our  investigation  should 
be  to  abandon  the  attempt  to  reason  from  a  false  standard.  We  must, 
to  begin  with,  recognize  the  immutable  law  of  currency ;  and  that  is, 
there  is  but  one  true  standard,  and  that  standard  is  gold.  Since  the 
earliest  records  of  humanity  gold  and  silver  have  been  employed  as 
the  equivalent  for  effecting  exchanges.  From  Solon  to  our  day  innu- 
merable attempts  have  been  made  to  substitute  something  else  as 
money,  but  in  spite  of  all  gold  and  silver  have  maintained  their  exclu- 
sive dominion  as  the  money  of  mankind.  The  gold  in  the  shield  of 
Achilles,  the  shekels  that  bought  the  field  at  Machpelah,  the  pieces  of 
silver  that  were  the  price  of  the  blood  of  our  Saviour,  will  be  current 
coin  when  the  completed  history  of  nations  now  rising  into  greatness 
shall  be  folded  away  among  the  records  of  time. 

No  nation  can  permanently  adopt  a  standard  of  value  that  will  not 
be  controlled  and  regulated  by  the  standard  of  gold.  Ko  degree  of 
isolation,  no  expedient  of  legislation,  can  save  any  nation  which  main- 
tains any  intercourse  with  foreign  nations  from  the  operation  of  this- 
supreme  law.  Like  the  tides  of  the  ocean  or  the  movements  of  the 
planets,  it  is  beyond  our  jurisdiction.  This  higher  law  of  the  standard 
of  values  will  sooner  or  later  govern  and  regulate  all  prices,  even  of 
commodities  that  do  not  enter  into  foreign  exchanges.  It  is  utterly  idle 
for  a  commercial  people  like  the  United  States,  with  a  foreign  com- 
merce of  $800,000,000  annually,  with  citizens  trading  in  every  port  of 
the  world,  and  receiving  annually  four  hundred  thousand  immigrants, 
to  attempt  to  escape  from  the  operation  of  this  primary  law  of  trade. 
Different  nations  have  tried  various  expedients  to  evade  it,  and  have 


PUBLIC  DEBT  AND   CURRENCY.  189 

always  failed.  For  centuries  gold  and  silver  coins  were  clipped  and 
alloyed,  but  it  only  took  more  of  them  to  buy  a  certain  commodity. 
In  modern  times  paj^er  money  or  credit  has  been  substituted  for  real 
money.  Laws  compelled  the  people^to  take  paper  as  money.  As  long- 
as  this  money  did  not  exceed  the  amount  of  real  money  in  the  country, 
it  operated  well.  It  promoted  exchanges  and  gave  great  activity  to 
entei-prises,  and  its  nominal  value  was  the  same  as  its  real  value.  J3ut 
when  the  paper  money  was  increased  or  the  gold  exported,  the  paper 
money  depreciated ;  it  had  less  purchasing  power,  prices  rose,  and  either 
the  paper  money  became  demonetized,  was  rejected  and  repudiated,  or 
the  false  standard  was  advanced  in  value  to  the  gold  standard. 

The  most  successful  attempt  to  substitute  paper  money  for  real 
money  took  place  in  Great  Britain  in  1707.  The  Bank  of  England, 
then  having  in  circulation  $55,000,000  of  notes,  was  forbidden  by  an 
act  of  Parliament  to  pay  its  notes  in  coin,  and  they  were  in  effect  made 
a  legal  tender.  By  1810  the  amount  of  them  was  gradually  increased 
to  $110,000,000.  It  was  observed  that,  though  gold  was  demonetized 
and  its  export  prohibited,  yet  its  market  value  had  risen  near  twenty 
per  cent.,  or  from  £4:6  14^.  Gd.  to  £56  for  a  pound  of  gold.  An  emi- 
nent writer  on  political  economy  called  attention  to  this  fact  as  conclu- 
sive evidence  of  the  dejireciation  of  the  jjaj^er  currency.  A  committee 
of  the  House  of  Commons,  of  whom  were  several  of  the  most  eminent 
statesmen  and  financiers  of  England,  gave  the  subject  a  careful  exami- 
nation, and  the  result  was  the  famous  "  bullion  report."  A  majority 
of  this  committee  agreed  that  in  spite  of  the  act  of  Parliament  gold  was 
still  the  true  standard  of  value,  and,  measured  by  this  standard,  the 
currency  was  depreciated  by  an  excess  of  Bank  of  England  notes. 
They  say  "  that  no  safe,  certain,  and  constantly  adequate  provision 
against  an  excess  of  paper  currency,  either  occasional  or  permanent,  can 
be  formed,  except  in  the  convertibility  of  all  such  paper  into  specie." 

Still  driven  by  the  pressure  of  war,  the  bank  issued  more  notes, 
and  their  depreciation  continued  until  the  close  of  the  war.  The  bank 
slowly  entered  upon  the  hard  task  of  appreciating  its  notes  to  the  gold 
standard. 

During  our  brief  national  history  we  have  made  several  efliorts  to 
substitute  paper  money  for  real  money.  Continental  money  was  a 
revolutionary  effort  to  coin  paper  into  money.  General  Spinner  has 
had  occasion  recently  to  inform  some  Rip  Van  Winkle,  who  wished 
continental  money  redeemed  in  lawful  money,  that  provision  had  been 
made  to  redeem  it  at  the  rate  of  one  dollar  in  coin  for  one  hundred 
dollars  continental  money,  but  even  this  poor  privilege  exj^ired  in  1793. 

During  the  war  of  1812  the  United  States  undertook  to  treat  State- 
bank  bills  as  lawful  money.  They  soon  became  depreciated ;  and  when 
the  war  was  over,  and  it  became  necessary  to  appreciate  them  to  the 
gold  standard,  notes,  banks,  and  debtors  were  swept  into  general  bank- 
ruptcy, and  the  people  commenced  again  upon  the  solid  basis  of  gold 
and  silver  coin. 

So,  during  our  civil  war,  both  the  United  States  and  the  rebels 
undertook  to  make  paper  not  merely  the  representative  of  money, 
but  real  money.     The  j)aper  money  of  the  rebels  followed  the  course 


100  SPEECHES   AND  KEPORTS   OF  JOHN  SIIEKMAX. 

of  continental  money  anil  French  assifjjnats.  Ours,  carefully  lijnitod 
in  amount,  supported  by  heavy  taxes  and  by  great  resources,  is  still 
called  lawful  money ;  but,  after  all,  its  value  is  daily  measured  by  the 
gold  standard.  It  is  only  the  sul)stitute  of  money,  to  be  paid  at  a 
future  day,  and  is  not  real  money. 

Even  "silver,  long  the  standard  of  value  ainong  civilized  nations,  is 
now  demonetized  in  some  of  them  from  the  impossibility  of  maintain- 
ing a  double  standard.  It  was  found  by  experience  that  the  market 
value  of  these  two  precious  metals  varied  as  the  production  of  one  or 
the  other  increased  in  amount,  thus  creating  confusion  and  compelling 
alterations  in  the  coinage.  The  result  is  that  silver  in  (4reat  Britain 
and  the  T'nited  States  is  a  legal  tender  for  but  small  amounts,  while 
gold  is  the  nnivei"sal  standard  of  value.  Even  the  stamp  tixed  by  a 
Government  in  the  process  of  coining  d<»es  not  make  it  money  or  change 
its  value.  It  only  certifies  to  its  weight  and  fineness  as  a  matter  of 
convenience  and  not  as  an  addition  of  value.  Indeed,  the  mechanical 
process  of  coining  has  frequently  reduced  the  market  value  of  the  gold 
by  making  it  necessary  to  recoin  it  when  exported. 

Let  ns,  then,  recognize  as  an  axiom  that  nothing  but  coin  is  real 
money  before  we  undertake  to  deal  with  our  cuirency.  Senators  may 
think  I  consume  too  much  time  in  dealing  with  an  apparent  truism ; 
but  it  will  be  fonnd  that  the  denial  of  tins  truism,  both  in  Congress 
and  among  the  people,  is  the  cause  of  most  of  the  confusion  in  the  pul)- 
lic  mind  as  to  our  currency.  It  affects  our  minds  as  it  alfected  the 
Englishman  in  ISIO.  AVhen  told  that  the  Bank  of  England  note  was 
depreciated,  he  said :  "Is  not  this  pound  note  worth  twenty  shillings, 
and  you  tell  me  it  is  only  worth  sixteen  ( "  Or  like  the  reasoning  of 
the  learned  priests  in  the  time  of  (ialileo,  who  saw  the  sun  moving 
around  the  four  cornel's  of  the  earth,  and  knew  that  Galileo  was  an 
impostor.  So  we  reckon  our  paper  money  at  par,  and,  having  made  a 
god  with  our  own  hands,  com])are  all  other  gods  by  it.  We  must,  then, 
abandon  the  false  standard,  set  up  again  the  tnie  one,  and  com]iare  our 
money,  our  productions,  our  wealth,  and  our  resources  by  it,  or  we  shall 
be  led  by  false  premises  into  the  most  erroneous  conclusions. 

And  yet  this  does  not  impugn  the  wisdom  of  a  paper  currency 
founded  upon  the  credit  of  a  nation,  or  of  its  being  made  in  times  of 
great  public  danger  a  legal  tender  in  pa^nnent  of  (lebts.  Such  paper 
money  has  exercised  a  j^owerful  inlluence  in  ancient  as  well  as  modem 
history.  It  saved  Rome  in  her  fierce  conflict  with  Hannibal.  It  en- 
abled Great  Britain  to  maintain  her  wars  against  Napoleon.  Without 
paper  money,  and,  as  I  believe,  without  making  it  a  legal  tender,  we 
could  not  have  mustered  and  maintained  our  immense  armies  during 
the  recent  war.  Gold  was  banished  by  the  war.  The  quantity  was 
too  small  for  the  vast  expenditure  required.  AVe  had  then  no  legal 
paper  representative  of  value.  The  State-bank  notes  were  wisely  ex- 
cluded from  national  circulation.  We  then  cautiously  issued  our  legal- 
tender  notes,  carefully  limiting  their  amount,  and  only  increasing  the 
amount  when  we  could  not  borrow  them  back  at  a  reasonable  rate  of 
interest.  We  called  them  lawful  money,  and  as  a  measure  of  the  high- 
est necessity  compelled  our  citizens  to  receive  them  as  such ;  but  after 


PUBLIC  DEBT  AND  CURRENCY.  191 

all  they  were  only  a  forced  substitute  for  mouev,  the  promise  to  pay 
money,  and  not  real  money.  Though  they  were  made  the  legal  stand- 
ard of  value,  their  own  value  was  daily  iixed  in  gold  in  the  open  mar- 
ket in  Xew  York.  W^  watched  their  depreciation  during  the  dark 
days  of  the  war,  and  tried  to  arrest  it.  We  utterly  failed.  The  effort 
was  patriotic,  but  it  was  impossible.  England  did  the  same  in  her 
M'ars.  She  passed  laws  forbidding  the  purchase  and  sale  or  exportation 
of  gold,  but,  like  ours,  her  efforts  were  abortive.  I  am  not  ashamed  to 
confess  my  part  in  all  the  efforts  made  during  the  war  to  maintain  our 
paper  money  as  the  true  standard  of  value,  and  I  confess  it  was  impos- 
sible. Every  intelligent  business  man  watched  daily  the  gold  barome- 
ter, which  with  unerring  certainty  fixed  the  value  of  our  greenbacks, 
of  our  public  credit  and  bonds,  as  it  did  the  value  of  our  cotton  and 
corn. 

A  distinction  between  the  standard  of  value  and  the  actual  agent  of 
exchange  must  always  be  kept  in  view.  One  must  be  gold,  and  the 
other  ought  to  be  paper  money  convertible  into  gold.  Such  paper  cur- 
rency, with  proper  measures  to  meet  panics  or  extreme  drains  of  specie, 
is  proven  by  all  experience  to  be  the  best  possible  currency  that  lias 
yet  l)een  devised  by  man.  An  unmixed  coin  currency  cannot  exist  in 
a  commercial  country,  for  necessity  will  compel,  merchants  will  devise, 
and  the  people  will  use  some  representative  of  money,  whether  it  be 
bankers'  bills  of  exchange,  certihcates  of  deposit,  or  bank  or  (Tovern- 
ment  paper  money.  And  one  unbending,  unrelaxing  rule  that  compels 
payment  in  coin  at  all  times,  during  ])anics,  distress,  or  war,  as  well  as 
in  peace,  will  periodically  produce  disaster  and  bankruptcy.  The  requi- 
sites of  a  good  currency  are  : 

1.  That  it  be  a  paper  currency. 

2.  That  it  be  amply  secured  either  by  the  credit  of  a  nation  or  l)y 
unquestioned  collaterals. 

3.  That  except  in  extreme  cases  of  panic  it  be  convertible  into  coin. 

4.  That  provision  be  made  for  a  susjjension  of  the  right  to  demand 
coin  during  such  panics. 

And  the  only  legislative  questions  that  can  arise  on  these  points 
are  whether  the  paper  money  should  be  issued  by  the  nation  or  by  cor- 
porators, and  what  relief  should  be  provided  in  case  of  a  necessary  sus- 
])ension  of  specie  payments.  As  to  the  first  question,  both  England 
and  the  Ignited  States  have  settled  upon  a  bank  currency  secured  by 
the  public  credit.  As  to  the  second,  they  have  tried  various  devices, 
as  the  raising  of  the  rate  of  interest,  a  temporary  suspension  of  pay- 
ments, making  the  paper  a  legal  tender ;  but  all  these  expedients  are 
merely  temporary  to  bridge  over  a  war,  a  panic,  a  period  of  starvation, 
or  an  unnatural  adverse  balance  of  trade.  They  are  remedies  in  sick- 
ness, to  be  discarded  the  moment  that  health  comes  again.  Whatever 
theorists  may  suggest,  however  sugar-coated  the  remedy  may  be,  there 
is  l)ut  one  test  of  a  healthy  paper  currency,  and  that  is  its  convertibility 
into  gold  coin. 

If,  then,  gold  only  is  the  true  standard  of  money ,_  why  shall  we  not 
commence  our  financial  measures  by  restoring  it  to  its  place  as  a  legal 
standard  of  money  i     Why  not  allow  our  citizens  to  base  their  future 


192  SPEECHES  AND   REPORTS   OF  JOHN"  SHERMAN. 

contracts  on  gold  ?  ^V'liy  not  enforce  these  contracts  in  the  courts  as 
legal  and  valid  i  There  are  difficulties  in  applpng  a  new  standard  to 
existing  contracts  made  upon  a  different  standard ;  but  this  dithculty 
does  not  apply  to  future  contracts.  We  wish  to  restore  specie  pay- 
ments, and  yet  we  forbid  all  men  from  dealing  in  specie.  Such  con- 
tracts are  put  upon  the  same  legal  footing  as  gaming  contracts.  It 
would  seem  that,  if  we  are  at  all  sincere  in  wishing  specie  pajnnents,  we 
should  not  only  allow  specie  contracts,  but  should  encourage  them. 

Contracts  to  a  vast  amount  are  now  from  necessity  made  upon  the 
gold  basis.  All  our  foreign  commerce,  exports  and  imports,  amounting 
annually  to  over  eight  hundred  million  dollars,  are  based  upon  gold. 
The  price  of  all  public  securities  is  fixed  by  the  gold  standard  of  Lon- 
don and  Frankfort.  The  sale  of  all  imported  goods  by  the  importer  to 
the  jobber  is  by  the  gold  standard.  The  daily  transactions  in  gold  in 
New  York  often  amount  to  $100,000,000.  On  the  Pacific  slope  gold 
is  the  only  standard  of  value.  We  cannot  alter  this  if  we  would. 
Why  not  recognize  tlie  fact,  legalize  these  contracts,  and  conform  our 
measures  to  the  gradual  adjustment  of  existing  contracts,  including 
paper  money,  to  the  standard  of  gold  ?  And,  sir,  let  us  also  recognize 
the  general  principle  that  it  is  wiser  and  more  in  accordance  with  the 
spirit  of  our  Government  to  leave  this  adjustment  to  the  voluntary 
contracts  of  the  people,  than  to  undertake  it  by  arbitrary  rules  of  law. 
If  our  people  are  left  free,  they  can  do  this  without  injury  to  debtor  or 
creditor,  without  confiscation  of  property,  and  without  any  change  in 
its  intrinsic  value. 

For  these  reasons  the  Committee  on  Finance  regard  the  first  section 
of  this  bill,  which  legalizes  gold  contracts,  as  an  indispensable  prelimi- 
nary to  any  j^lan  for  appreciating  our  currency  to  gold.  This  section 
has  twice  received  the  sanction  of  the  Senate,  and  its  primary  impor- 
tance has  generally  been  admitted  in  popular  discussions. 

The  objections  to  this  section  are  stated  by  the  Senator  from  Indi- 
ana [Mr.  Morton]  as  follows  : 

The  means  be  suggests  for  returning  to  specie  payments  are  twofold.  The  first 
is  to  legalize  specific  contracts  to  be  executed  in  coin.  I  voted  for  a  bill  for  that 
purpose  last  session  without  much  consideration,  and  have  since  become  satisfied  it 
was  an  error.  The  unwary  would  be  enticed  into  such  contracts  by  the  crafty,  and 
those  in  straitened  circumstances  or  under  heavy  pressure  would  be  forced  into 
them.  No  man  can  safely  make  a  contract  to  be  executed  in  coin  while  the  cur- 
rency is  depreciated  and  the  financial  condition  of  the  country  is  fluctuating.  Such 
contracts,  where  not  brought  about  by  coercion  and  fraud,  would  be  in  the  nature 
of  gold  gambling— tlie  one  party  trusting  that  gold  would  be  at  a  large  premium 
when  the  contract  was  due,  and  the  other  that  it  would  command  little  or  none. 
It  could  hardly  be  distinguished  from  a  contract  for  the  delivery  of  gold  at  a  future 
time. 

This  whole  objection  is  based  upon  the  theory  that  contracts  cannot 
be  safely  left  to  the  free  assent  of  the  parties  thereto ;  that  the  parties 
cannot  be  trusted  to  make  their  own  contracts,  lest  the  creditor  oppress 
the  debtor.  Sir,  the  time  is  not  likely  to  come  in  our  day  when  the 
crafty  will  not  have  the  advantage  of  the  unwary.  If  we  were  legis- 
lating to  protect  the  unwary,  we  should  not  for  a  day  permit  the  exist- 
ence of  inconvertible  paper  money.    Mr.  Webster  said  that,  "  of  aU  the 


PUBLIC  DEBT  AND   CUEEENCY.  193 

contrivances  for  cheating  the  laboring  classes  of  mankind,  none  has 
been  more  eilectnal  than  "that  which  deludes  them  with  paper  money." 
The  chief  reason  is  that  such  paper  money  is  so  fluctuating  that  none 
but  the  intelligent  and  crafty  can  estimate  its  fluctuations,  while  the 
unwary  assume  that  it  is  equivalent  to  gold.  If  we,  then,  legislate  to 
protect  the  unwary,  we  should  require  all  contracts  to  be  on  the  gold 
basis  ;  but  experience  shows  that  the  true  basis  of  contracts  is  the  assent 
of  the  parties.  AVe  can  leave  the  interest  of  parties  to  regulate  equiva- 
lents, and  we  can  jorotect  a  gold  contract  against  usury  and  fraud  much 
more  easily  than  a  contract  payable  in  currency. 

The  Senator  from  Indiana  proposes  to  add  to  the  burden  of  existing 
contracts  an  annual  interest  equivalent  to  twelve  per  cent,  by  requiring 
gold  payment  in  two  and  a  half  years.  If  the  parties  are  left  to  adjust 
this  matter  by  contract,  they  are  not  likely  to  adopt  a  more  severe 
measure  to  the  debtor  than  that.  If  it  is  unsafe  to  allow  parties  to 
make  a  contract  in  coin,  how  can  they  be  allowed  to  make  contracts  in 
currency  to  be  appreciated  to  coin  in  two  and  a  half  years  'i  If  coin 
contracts  are  brought  about  by  coercion  and  fraud,  the  courts  will  not 
enforce  them  ;  and,  if  gold  is  required  as  a  consideration  for  payment 
of  a  currency  contract,  "it  is  usurious  and  will  not  be  enforced.  Practi- 
cally, any  law  requiring  a  resumption  of  specie  payments  is  a  law  add- 
ing to  tlie  amount  of  a  currency  debt  the  full  depreciation  of  the  cur- 
rency, unless  you  either  scale  the  debt  or  allow  the  parties  to  adjust 
the  inatter  between  themselves.  The  former  proposition  is  indefensible, 
and  the  latter  is  the  only  way  by  which  the  creditor  and  debtor  may 
by  mutual  agreement  adjust  a  currency  contract  by  equivalent  coin. 
All  contracts  to  pay  money  are  contracts  for  the  delivery  of  gold ;  and 
a  contract  in  currency  is  only  a  contract  to  pay  an  indeflnite  amount  of 
gold,  depending  upon  the  uncertain  depreciation  of  the  currency  at  the 
time  of  the  pavment.  Why  may  not  the  parties  fix  for  themselves  the 
amount  of  gold  to  be  paid,  rather  than  leave  it  to  be  fixed  by  the  bulls 
and  bears  ?  When  contracts  are  authorized  in  gold,  all  the  provisions 
of  the  municipal  law  which  protect  contracts  from  fraud,  usury,  or 
coercion,  apply  to  them  as  well  as  to  contracts  in  currency.  And  the 
reason  why  such  contracts  were  ever  forbidden  was  because  public 
policy  demanded  for  a  time  the  suspension  of  specie  payments ;  while 
now  the  very  fact  that  we  are  providing  for  specie  payments  is  conclu- 
sive in  favor  of  the  policy  of  specie  contracts  in  the  future. 

Every  such  contract  smooths  the  way  to  a  general  resumption.  If 
they  become  general,  gold  now  hoarded  will  be  let  loose.*  This  will 
produce  an  expansion  of  the  currency.  When  during  specie  payments 
we  estimate  the  aggregate  of  currency,  we  add  the  amount  of  specie  to 
the  amount  of  convertible  paper  money.  So,  when  specie  payments 
are  suspended,  if  specie  can  be  made  to  perform  some  of  the  functions 
of  currency,  it  adds  so  much  to  the  volume  of  the  currency  ;  and,  when 
specie  contracts  become  general,  the  process  of  resumption  is  complete. 

Again,  while  specie  is  the  best  standard  of  currency,  it  is  not  the 
most  convenient  for  transportation,  even  from  hand  to  hand.  To  obvi- 
ate this,  commercial  paper,  bills  of  exchange,  drafts,  and  certificates  of 
deposit  have  been  devised  for  distant  exchanges,  and  paper  money  con- 
13 


194  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

vertible  into  coin  lias  been  nsed  for  exclianges  from  liand  to  hand. 
When  you  authorize  contracts  in  gold  and  make  a  demand  for  gold, 
you  at  once  unlock  for  daily  use  the  coin  now  hoarded  in  private  hands. 
You  can  then  provide  the  most  important  agency  of  modern  times — a 
convertible  paper  currency,  always  equal  in  value  to  gold,  its  true  rep- 
resentative, easy  to  guard,  conceal,  and  transport.  It  is  only  by  restor- 
ing gold  contracts  that  you  can  safely  avail  yourself  of  all  the  nndtiplied 
uses  of  paper  money.  When  this  is  done,  gold  now  lying  idle  in  the 
Treasury  may  be  utilized,  made  to  produce  an  interest  by  the  issue  of 
coin  notes  based  upon  it,  and  gradually  to  perform  all  the  uses  of  money 
now  performed  by  a  depreciated  currency.  This  is  the  basis  of  the 
fourth  section  of  the  bill,  which  utilizes  the  gold  by  the  issue  of  gold 
notes  based  upon  it,  and  their  application  to  the  purchase  of  bonds  and 
the  reduction  of  interest. 

And  the  right  to  make  contracts  in  gold  may  now  safely  and  prop- 
erly be  extended  to  banks  organized  under  the  national  banking  system. 
Upon  a  deposit  of  bonds,  banks  may  be  authorized  to  issue  gold  notes 
equal  to  sixty-five  per  cent,  of  the  value  of  United  States  bonds  de- 
posited to  secure  their  circulation.  Their  payment  will  be  in  coin,  but 
in  all  other  respects  they  may  be  subject  to  the  general  provisions  and 
limitations  of  the  banking  act.  Many  of  the  banks,  especially  in  com- 
mercial cities,  will  gladly  avail  themselves  of  such  a  provision  to  with- 
draw their  present  circulation  and  substitute  gold  notes  convertible  on 
demand  into  coin.  AVith  such  a  provision  and  on  such  a  basis  the  sys- 
tem may  be  free,  and  thus  all  the  embarrassing  questions  about  the 
inequality  of  the  distribution  of  banking  circulation  will  be  avoided. 
A  right  conferred  upon  all,  without  limit  as  to  amount  and  upon  regu- 
lations applicable  to  all,  would  at  once  secure  to  the  South  and  West 
new  banking  facilities,  and  would  rapidly  tend  to  substitute  coin  or  its 
equivalent  for  legal-tender  notes,  and  without  the  severe  process  of 
contraction.  The  objection  made,  that  this  would  create  two  currencies 
of  unequal  values,  applies  as  well  to  the  present  state  of  the  currency, 
for  we  have  now  two  currencies  of  unequal  value — gold  and  legal 
tenders. 

If  we  are  sincere  in  wishing  specie  payments,  we  must  not  only 
increase  the  demand  for  coin,  but  we  must  encourage  coin  contracts, 
and  authorize  the  issue  of  coin  notes,  both  by  the  United  States  and  by 
the  banks,  and  thus  without  contraction  dispense  with  the  use  of  the 
inferior  and  depreciated  currency. 

The  superior  value  of  coin  notes,  their  use  in  commercial  cities,  their 
convenience  in  the  gold-producing  States,  will  soon  give  them  higher 
credit,  and  secure  them  in  every  part  of  the  country.  I  am  confident 
that  under  such  a  system  the  national  banks  will,  if  allowed,  and  before 
specie  payments  are  resumed,  substitute  coin  notes  for  their  present 
circulation,  and  that,  too,  without  diminishing  the  aggregate  of  circula- 
tion. Many  of  them  have  now  reserves  and  profits  enough  to  make  the 
requisite  deposit  of  additional  bonds ;  and  the  gold  certificates  now 
issued  from  the  Treasury  might  be  used  for  their  coin  reserves  without 
creating  new  demands  for  coin. 

There  is  but  one  other  consideration  I  wish  to  urge  in  favor  of  the 


PUBLIC  DEBT  AND   CURRENCY.  195 

sections  of  this  bill  relating  to  gold  contracts  and  gold  notes,  and  that 
grows  out  of  the  doubt  that  rests  uj)on  the  validity  of  the  legal-tender 
act.  We  must  not  forget  that  currency  contracts  depend  not  upon  the 
agreement  of  parties,  but  entirely  upon  the  validity  of  that  act.  This 
has  always  been  doubted,  and  is  now  contested  before  the  Supreme 
Court,  I  remember  very  well  the  discussions  in  the  Senate  when  this 
act  passed.  Its  validity  was  then  denied  by  Judge  Collamer  and  other 
able  jurists,  and  it  was  only  maintained  by  myself  and  other  Senators 
from  the  imperative  necessity  of  supporting  armies  then  in  the  field. 
This  necessity  has  long  since  ceased.  There  can  be  no  pretense  that  as 
to  future  contracts  there  is  any  necessity  that  the  public  credit  should 
take  the  place  of  real  money.  The  legal-tender  act  is  only  material  as 
it  atfects  existing  contracts.  Is  it  wise  to  continue  a  measure  only  jus- 
tified by  a  grave  public  necessity  when  the  necessity  has  passed  ?  It 
may  be  that  the  Supreme  Court  will  deny  the  validity  of  the  legal-ten- 
der act,  or  limit  its  operation  to  existing  contracts  made  since  its  passage. 
It  may  subject  currency  contracts  to  enforcement  in  coin.  Is  it  not 
wiser  to  bridge  over  this  uncertainty  by  authorizing  the  adjustment  of 
this  matter  between  the  creditor  and  debtor  ? 

Again,  sir,  the  law  as  it  now  stands  is  productive  of  gross  injustice." 
You  require  nearly  one  half  of  your  taxes  to  be  paid  in  gold,  and  yet 
you  will  not  enforce  a  contract  by  which  the  merchant  buys  the  gold 
for  you.  Cargoes  of  tea,  coffee,  and  merchandise  can  only  be  bought 
in  gold,  and  yet,  if  property  is  delivered  upon  a  promise  to  pay  gold, 
it  cannot  be  enforced.  Gross  and  palpable  injustice  may  be  done  in  a 
multitude  of  transactions  necessarily  based  upon  gold  by  appealing  to 
the  legal-tender  act. 

I  conclude,  then,  this  branch  of  the  subject  by  the  earnest  opinion 
that  it  was  a  good  policy  three  years  ago,  and  it  is  good  policy  now, 
to  allow  all  parties  to  stipulate  the  time, '  the  amount,  and  the  me- 
dium of  payment,  subject  to  the  general  laws  relating  to  fraud,  usury, 
and  force.  Free  trade  m  domestic  productions,  liberty  to  contract  and 
be  contracted  vnth,  has  never  been  restrained  before.  Let  us  restore 
these  rights ;  and,  having  also  provided  a  paper  representative  of  the 
coin  in  the  Treasury  of  the  United  States  and  a  bank  currency  con- 
vertible into  gold  and  founded  upon  the  highest  securities,  let  us  now 
deal  with  the  much  more  difficult  question — the  appreciation  of  the 
present  currency  to  the  standard  of  gold. 

If  this  question  affected  alone  the  Government  of  the  United  States, 
we  might  resume  specie  payments  very  soon.  By  funding  a  portion 
of  the  United  States  notes,  by  requiring  the  banks  to  maintain  their 
full  reserves  in  legal  tenders,  by  withdrawing  the  three  per  cent,  cer- 
tificates, and  by  the  use  of  the  gold  in  the  Treasury,  we  could  resume 
at  once.  This  process  might  increase  the  bonded  indebtedness  of  the 
United  States  8100,000,000  and  the  interest  $5,000,000 ;  but  our  rev- 
enues are  ample  in  gold  to  pay  the  increased  interest,  and  the  actual 
saving  in  the  current  expense  of  the  Government  by  the  reduction  of 
prices  to  the  gold  standard  would  be  double  and  perhaps  quadruple  the 
increased  interest,  Tlie  body  of  our  expenditure,  the  interest  of  the 
public  debt,  is  now  payable  in  gold ;  and  its  burden  would  not  be  in- 


196      SPEECHES  AND  REPORTS  OF  JOHN"  SHERMAK 

creased  by  specie  payments,  wliile  tlie  saving  in  expenditure  and  the 
probable  saving  by  the  funding  of  the  debt  at  a  lower  interest  would 
largely  exceed  any  interest  we  would  have  to  pay  on  notes  withdrawn 
from  circulation. 

And,  if  the  burden  of  resumption  fell  alone  upon  the  national  banks, 
the  task  would  be  an  easy  one.  Their  securities,  deposited  with  the 
Treasurer  of  the  United  States,  are  now  nearly  equal  in  gold  to  the 
amount  of  their  circulation.  A  call  under  the  banking  act  of  ten  per 
cent,  additional  security  could  be  easily  met  by  the  great  body  of  them, 
and  thus  enable  them  to  resume  whenever  the  United  States  is  prepared 
to  do  so.  Their  profits  in  the  past  have  been  large.  Those  not  now 
strong  enough  to  perform  the  great  object  of  their  organization,  namely, 
to  furnish  a  uniform  currency  convertible  into  gold,  may  well  give  way 
to  other  banks  ready  to  take  their  places. 

But  redemjDtion  by  the  banks  means  redemption  by  all  their  debtors 
— by  the  merchants,  manufacturers,  and  traders  of  the  country.  And 
we  are  therefore  compelled  to  deal  with  this  question,  not  as  it  affects 
the  United  States  and  the  banks  merely,  but  as  it  affects  all  the  people 
of  the  United  States.  How  will  the  appreciation  of  the  currency  affect 
their  interests  ?  A  person  entirely  out  of  debt  and  possessed  of  pro- 
ductive property  would  not  be  affected  by  the  change.  His  property 
would  be  of  less  nominal  but  of  the  same  intrinsic  value  ;  its  j^roducing 
capacity  would  be  undiminished,  and  it  would  buy  the  same  food,  cloth- 
ing, and  necessaries  of  life. 

If  the  currency  is  depreciated,  it  will  take  more  of  it  to  purchase 
an  article ;  if  it  is  appreciated,  it  will  take  less ;  but  the  appreciation 
or  depreciation  of  the  currency  does  not  affect  the  value  of  other  com- 
modities relative  to  each  other.  This  can  only  be  affected  by  supply 
and  demand,  and  ultimately  by  the  cost  of  production. 

So  a  man  without  property  and  not  in  debt,  but  who  depends  upon 
his  labor  for  his  support,  is  not  in  the  end  affected  merely  by  an  appre- 
ciation in  the  currency.  His  wages  may  be  less,  but  what  he  receives 
of  the  appreciated  currency  has  the  same  purchasing  power  as  the  higher 
wages  received  before.  The  change  does  affect  him  for  a  time,  for  land 
and  labor  are  the  last  commodities  to  feel  a  change  in  the  currency. 
The  immediate  effect  of  a  depreciation  in  the  currency  is  injurious  to 
him,  for  his  food  and  clothing  rise  in  price  more  quickly  than  his  labor ; 
but  appreciation  of  the  currency  is  immediately  beneficial  to  him,  for 
the  reason  that  his  labor  does  not  fall  as  quickly  as  food  and  clothing. 
The  value  of  labor,  however,  may  be  disastrously  affected  by  the  mode 
of  appreciation.  If  it  is  brought  about  by  a  sudden  contraction,  the 
result  will  be  a  suspension  of  work,  of  entei'prises,  and  consequently  a 
reduction  in  the  price  of  labor. 

Persons  of  fixed  salaries  and  incomes  are  benefited  by  an  apprecia- 
tion of  the  currency  to  the  full  extent  of  the  appreciation.  Their  in- 
comes have  increased  purchasing  power,  and  they  are  enabled  to  extend 
their  purchases,  supply  new  wants,  and  add  to  their  capital.  Deprecia- 
tion of  the  currency  produced  the  opposite  effect  during  the  war,  carry- 
ing distress  and  poverty  into  many  comfortable  homes.  It  fell  with 
severe  effect  upon  preachers,  widows,  and  old  men,  who  saw  the  pur- 


PUBLIC  DEBT  AND   CURRENCY.    »  197 

chasing  power  of  tlieir  annuities  melt  away,  and  a  condition  of  inde- 
pendence destroyed.  They  will,  by  an  appreciation  of  the  currency, 
be  restored  to  their  own  again. 

Merchants,  dealers,  traders,  and  bankers  will  be  affected  by  an  ap- 
preciation of  tlie  currency  according  to  the  proportion  their  debts  and 
credits  bear  to  each  other.  If  they  owe  more  than  they  can  promptly 
collect  on  debts  due  to  them,  they  must  lose  to  the  full  extent  of  the 
appreciation.  As  a  general  rule,  any  appreciation  of  the  currency  is 
injurious  to  all  these  classes,  for  they  are  generally  in  debt ;  and  even 
where  enough  is  due  them  to  pay  with,  yet  the  delay  in  payment  or 
the  failure  of  their  debtors  almost  always  embarrasses  them.  Commer- 
cial and  banking  usage  compels  promptness,  so  that  a  merchant  or  a 
banker,  however  prudent  he  may  be,  is  often  compelled  to  sacriiice  his 
assets  to  meet  a  sudden  appreciation  of  the  currency. 

But  the  distress  caused  by  an  appreciation  of  the  currency  falls 
mainly  on  the  debtor ;  others  suifer  only  by  reason  of  his  inability  to 
pay.  What  does  specie  payment  mean  to  a  debtor  ?  It  means  the  pay- 
ment of  one  hundred  and  tiiirty-five  dollars  where  he  has  agreed  to  pay 
one  hundred,  or,  which  is  the  same  thing,  the  payment  of  one  hundred, 
dollars  where  he  has  am-eed  to  pay  seventy-four.  Where  he  has  pur- 
chased property  and  paid  for  one  fourth  of  it,  it  means  the  loss  of  the 
amount  paid ;  it  means  the  addition  of  one  fourth  to  all  currency  debts 
in  the  Tnited  States.  A  measure  to  require  a  debtor  now  to  pay  his 
debt  in  gold  or  currency  equivalent  to  gold  requires  him  to  pay  one 
hundred  ^and  thirty-five  bushels  of  wheat  when  he  agreed  to  pay  one 
hundred ;  and,  if  this  appreciation  is  extended  through  a  period  of  three 
years,  it  requires  him  to  pay  an  interest  of  twelve  per  cent,  in  addition 
to  the  rate  he  has  agreed  to  pay.  When  we  consider  the  enormous  in- 
debtedness of  a  new  country  like  ours,  where  capital  is  scarce,  and 
where  credit  has  been  substituted  for  capital,  it  presents  a  difficulty 
that  may  well  cause  us  to  pause.  We*  may  see  that  the  chasm  must  be 
crossed,' but  it  will  make  us  wary  of  our  footsteps.  Good  faith  and 
public  policy  demand  that  we  appreciate  our  currency  to  gold ;  but  in 
the  process  we  must  be  careful  that  bankruptcy,  distress,  and  want  do 
not  result.  The  debtors  of  this  country  include  the  active,  enterprising, 
energetic  men  in  aU  the  various  employments  of  life.  It  is  a  serious 
proposition  to  change  their  contracts  so  .as  in  effect  to  require  them  to 
pay  one  third  more  than  they  agreed  to  pay.  They  have  not  paused  in 
their  business  to  study  questions  of  political  economy.  They  have  based 
their  operations  upon  this  money,  which  has  been  declared  to  be  lawful 
money.'  Its  relative  value  may  be  changed,  but  a  reasonable  opportu- 
nity should  be  given  them  to  change  their  contracts  so  as  to  adapt  them 
to  the  new  standards  of  value. 

Before  discussing  the  measure  proposed  by  the  Committee,  which 
Senators  may  consider  not  specific  or  rapid  enough,  let  us  look  to  his- 
tory for  lights  to  guide  us 'in  a  most  difficult  and  dangerous  passage. 

'The  appreciation  of  the  currency  is  a  far  more  distressing  opera- 
tion than  Senators  may  suppose.  Our  own  and  other  nations  have 
gone  through  it  before,  and  always  with  the  sorest  distress.  Some- 
times they  have  repudiated  the  depreciated  currency,  to  the. utter  de- 


198  SPEEC3^ES  AND  REPORTS  OF  JOHN  SHERMAN. 

stniction  of  credit  and  trade,  and,  from  the  necessity  of  the  case,  fallen 
back  upon  barter  and  ^old.  As  I  have  already  stated,  snch  was  the 
case  with  the  continental  money,  with  the  French  assi^nat.s,  and  with 
Confederate  scrip.  ^Ve  have  also  to  guide  us  several  examples  of  the 
appreciation  of  a  debased  currency. 

At  the  revolution  of  1G88  in  England,  the  silver  coin,  then  a  le»al 
tender,  had  become  so  depreciated  by  wear  and  by  clipping  as  to  oe 
worth  only  seventy-five  per  cent,  of  the  mint  standard,  and  this  was 
practically  the  only  currency.  As  all  prices  and  obligations  of  debt 
had  become  adjusted  to  the  lowered  value  of  the  existing  coin,  it  was 
proposed  either  to  reduce  the  mint  standard  to  the  current  standard, 
or  to  issue  new  shillings  of  full  value.  The  latter  proposition  was  ad- 
vocated by  Isaac  Newton  and  John  Locke,  the  two  "  foremost  men  of 
all  the  world,"  who  contended  that  if  the  loss  of  recoinage  was  thrown 
upon  the  mint  it  would  not  affect  individuals  at  all.  This  view  was 
strongly  opposed  by  practical  merchants,  but  new  shillings  of  full 
value  were  issued  and  exchanged  for  tiie  old  depreciated  ones  at  par. 
As  between  the  mint  and  the  h(»lder  of  the  old  shillings  this  Wiis  all 
right ;  but  the  effect  was  innnediately  disastrous  upon  all  prices.  It 
took  one  third  more  conmiodities  to  get  the  new  shillings,  but  the  same 
number  of  shillings  as  before  was  recpiired  to  ])ay  a  debt.  Merchants, 
traders,  and  debtors  were  ruined.  The  J3ank  (»f  England,  then  in  its 
infancy,  only  escaped  failure  hy  issuing  its  notes  ])ayable  in  install- 
ments. A  rival  bank  was  utterly  wrecked.  Small  capitalists  found 
themselves  mined,  and  laborers  and  artisans  deprived  oi  employment. 
Hence  the  unpopularity  of  AVilliam  III.  and  the  prevalence  of  general 
discontent  during  his  reign. 

A  condition  of  currency  similar  to  our  own  existed  in  Great  Bnt- 
ain  after  the  general  peace  of  1815.  For  eighteen  years  the  notes  of 
the  Bank  of  England  were  practically  a  legal  tender,  and  upon  them, 
as  upon  our  greenbacks,  was  based  a  currency  issued  by  the  country 
banks.  Though  the  aggregate  of  all  this  paper  circulation  never 
amounted  to  S-50,000,000,  yet  at  times  it  depreciated  from  twenty  to 
thirty  per  cent.  When  the  war  was  over  measures  were  slowly  adopted 
for  its  appreciation  to  the  gold  standard.  These  measures  resulted  in 
a  reduction  of  the  paj^er  currency  from  s231,000,000  in  1.S15  to  $152,- 
000,000  in  1821.  Commercial  paper,  discounted  at  the  Bank  of  Eng- 
land, fell  from  875,000,000  in  1815  to  813,000,000  in  1821.  It  is  only 
necessary  to  appeal  to  the  histories  of  the  time  to  show  the  disastrous 
effect.  The  purchasing  value  of  capital  was  increased  fifty  per  cent. 
A  thousand  dollars  in  1821  would  buy  more  than  eighteen  hundred 
dollars  in  1815.  Small  traders,  debtors,  and  laborers  were  reduced  to 
the  sorest  distress.  The  loss  to  them  was  far  greater  than  the  actual 
depreciation  of  the  currency,  for  all  confidence  and  trust  were  lost. 
The  only  compensation  to  Great  Britain  was  the  rapid  fall  in  the  rate 
of  interest  from  the  abundance  of  idle  capital,  which  enabled  her  to 
reduce  the  interest  of  her  public  debt  within  a  short  period  to  three 
per  cent. 

If  Senators  wish  other  examples  of  the  severe  process  of  passing 
from  a  depreciated  currency  to  a  gold  currency,  or  to  a  jDaper  currency 


PUBLIC  DEBT  AND  CUREEXCY.  199 

convertible  into  gold,  let  them  read  the  story  of  the  times  after  the 
Revolution  and  the  war  of  1812,  and  after  the  revulsion  of  1837,  all 
of  which  were  periods  of  transition  from  a  depreciated  paper  currency 
to  a  convertible  paper  currency.  Sir,  it  is  not  possible  to  take  this 
voyage  without  sore  distress.  To  every  person  except  a  capitalist  out 
of  debt,  or  to  the  salaried  officer  or  annuitant,  it  is  a  period  of  loss, 
danger,  prostration  of  trade,  fall  of  wages,  suspension  of  enterprise, 
bankruptcy,  and  disaster.  To  every  raih-oad  it  is  an  addition  of  at 
least  one  third  to  the  burden  of  its  debt ;  and  more  than  that,  deduc- 
tion from  the  value  of  its  stock.  To  every  bank  it  means  the  neces- 
sity of  paying  one  hundred  and  fifty  dollars  for  one  hundred  of  its 
notes  and  deposits,  except  so  far  as  the  bank  may  transfer  this  to  its 
debtors.  It  means  the  ruin  of  all  dealers  whose  debts  are  twice  their 
capital,  though  one  third  less  than  their  property.  It  means  the  fall 
of  all  agricultural  productions  M'ithout  any  very  great  reduction  of 
taxes.  To  attempt  this  task  suddenly,  by  a  surpnse  upon  our  people, 
by  at  once  paralyzing  their  industry,  by  aiTCSting  them  in  the  midst 
of  lawful  business  and  applying  a  new  standard  of  value  to  their  prop- 
erty, without  any  reduction  of  their  debt  or  giving  them  an  opportu- 
nity to  comjiound  with  their  creditoi's  or  distribute  their  loss,  would  be 
an  act  of  folly  \\ithout  exam])le  in  modern  times. 

It  is  sometimes  said  that  we  did  this  in  the  passage  of  the  legal-ten- 
der act;  that  we  inflicted  the  same  loss  on  the  creditor  that  Me  now 
deprecate  for  the  debtor.  This  is  not  true.  The  effect  of  the  legal- 
tender  act  Mas  undoubtedly  to  depreciate  our  notes,  Ijut  the  process  M-as 
veiy  slow  and  gradual.  For  more  than  a  year  it  scarcely  operated  as  a 
depreciation,  and  during  all  that  time  the  capital  paid  off  by  depreciated 
notes  was  invested  in  bonds,  bank  stocks,  railroads,  and  manufacturing 
pursuits  created  l)y  the  M-ar,  Mhich  }nelded  as  much  in  gold  as  the  capi- 
tal produced  before  the  war.  Capital  lost  nothing  by  the  war  even 
when  paid  in  greenbacks,  for  the  demands  for  capital  during  the  war  made 
ample  amends  for  the  loss  by  the  depreciation  in  greenbacks.  It  is 
estimated  that  the  interest-bearing  capital  of  this  country  now  is,  upon 
the  gold  basis,  more  than  double  that  of  18G0.  And,  if  it  were  true 
that  appreciation  now  would  only  M'ork  the  same  injury  to  the  debtor 
that  depreciation  did  to  the  creditor,  we  should  not  be  justified  in  in- 
flicting in  peace  the  injuries  M'hich  were  justified  by  war ;  and  the 
creditor,  M'ho  is  usually  the  holder  of  property,  is  better  able  to  bear 
the  loss  of  a  portion  of  the  money  due  him  than  the  debtor  is  to  bear 
an  addition  to  his  burden.  Our  power  over  the  creditor  is  unlimited  ; 
we  may  levy  taxes  upon  him  to  any  amount ;  but  we  have  no  power  to 
vary  a  contract  or  add  to  the  burden  of  an  existing  debt. 

The  question  then  remains,  ^\niat  mode  of  appreciation  of  the  value 
of  greenbacks  will  operate  least  injuriously  to  the  varied  business  in- 
terests of  our  constituents  ?  And  upon  this  point  your  Committee, 
after  the  most  careful  consideration,  have  come  to  the  conclusion  that 
the  only  and  best  plan  is  to  allow  the  legal-tender  notes  to  be  funded  at 
the  pleasure  of  the  holder  into  interest-bearing  bonds  of  the  United 
States. 

In  designating  the  bond,  we  have  selected  that  now  familiar  to  the 


200  SPEECHES  AND   REPORTS  OF  JOHN   SHERMAN. 

people,  the  ten-forty  bond.  Its  market  value  is  now  but  slii;litl_v  above 
that  of  the  legal  tenders,  so  that  the  process  of  appreciation  of  the 
notes  will  be  slow,  and  their  value  will  advance  only  with  the  improv- 
ing credit  of  the  country.  This  bond  bears  as  low  a  rate  of  interest 
as  we  are  likely  to  negotiate,  but  is  of  such  intrinsic  value  that  we  may 
hope  to  see  it  at  par  with  gold  within  a  short  })eriod.  It  will  enable 
lis  after  ten  years  to  take  advantage  of  the  money  market  to  reduce  tiie 
interest  still  further.  Its  credit  is  suj)p(»rted  by  a  permanent  appropri- 
ation from  a  fund  sufficient  without  further  act  of  Congress  to  pay  olf 
every  dollar  of  the  debt  in  twenty-five  yeare. 

Again,  sir,  this  provision  of  the  bill  is  right  when  tested  by  the 
moral  sense.  When  for  sufficient  reasons  we  cannot  ])ay  the  note  in 
coin,  we  are  bound  to  give  to  the  holder  our  note  with  interest.  Such 
from  the  beginning  was  the  policy  of  the  Government.  When  the 
notes  were  lirst  issued  under  the  act  of  February'  25,  1802,  they  were 
convertible  at  will  into  bonds.  We,  with  a  (juestionable  device,  by  the 
act  of  March  3,  18G3,  took  away  that  right,  and  should  now  restore  it. 
During  the  war  a  greenl)ack  would  purchase  an  ecpud  amount  of  bonds 
of  any  character  olicred  in  the  market.  It  paid  at  par  for  the  iive- 
twenties,  the  ten-forties,  and  the  seven-tliirties.  It  is  now  less  valuable 
than  these  bonds  only  because  it  is  dishonored  pa])er,  which  though  due 
is  not  paid,  and  is  valuable  only  as  a  forced  currency,  which  we  comjiel 
our  citizens  to  take  in  payment  of  their  debts,  but  refuse  to  take  for 
our  own  bonds  except  at  a  discount.  We  give  the  bond  the  benefit  of 
the  improving  credit  of  the  country,  but  deny  it  to  the  note.  The  sim- 
plest and  plainest  rule  of  equity  requires  ns,  if  we  cannot  })ay  the  note, 
to  give  in  exchange  for  it  a  bond  bearing  interest.  AikI  here,  sir,  a 
difficulty  presents  itself  that  forms  the  basis  of  all,  or  nearly  all,  the 
division  in  the  Connnittee  as  to  this  measure.  What  shall  be  done  with 
the  United  States  notes  received  into  the  Treasury  in  the  process  of 
funding?  One  contends  that  they  should  be  retired  as  they  are  re- 
ceived ;  another,  that  they  should  not  be  retired,  but  should  be  reis- 
sued ;  and  still  another  wishes  to  limit  the  funding  of  greenbacks  to  a 
specific  sum  each  month ;  and  amendments  are  pending  for  these  pur- 
poses. No  doubt  similar  differences  as  to  details  will  occur  in  the  Sen- 
ate. My  own  conviction  is,  that  the  notes  and  ten-forty  bonds  should 
be  convertible  and  reconvertible  within  certain  limits  until  both  rise  to 
the  par  of  gold.  Such  a  provision  was  reported  at  the  last  session,  and 
is  still  approved  by  the  Committee ;  but  the  opposition  to  it  by  those 
who  widely  differed  from  each  other  as  to  its  effect,  some  insisting  that 
it  would  produce  contraction  and  others  expansion,  caused  it  to  be  de- 
feated. The  jDroposition  in  this  bill  to  substitute  coin  notes  for  legal- 
tender  notes,  as  the  latter  are  retired  by  voluntary  conversion  into 
bonds,  is  an  attempt  of  the  Committee  on  Finance,  in  deference  to  the 
vote  of  the  Senate  at  the  last  session,  to  guard  against  a  too  rapid  con- 
traction of  the  currency.  I  must,  however,  insist  upon  my  conviction 
that  the  true  way  to  guard  against  both  undue  expansion  and  contrac- 
tion while  sj)ecie  payments  are  suspended  is  to  allow  the  public  cred- 
itor, whether  note-holder  or  bond-holder,  to  exchange  one  for  the  other, 
without  any  limitation  except  that  the  aggregate  of  circulation  should 


PUBLIC  DEBT  AND  CURRENCY.  201 

not  exceed  the  United  States  notes  now  outstanding ;  and  tliis  aggre- 
gate may  be  gradually  reduced  as  specie  payments  are  resumed.  If  the 
Senate  agrees  with  this  opinion,  then  some  changes  will  have  to  be 
made  in  the  fourth  section.  If,  however,  the  Senate  still  opposes  this 
mutuality  of  conversion,  the  substitution  of  coin  notes  should  precede 
the  cancellation  of  the  greenbacks,  or  a  reserve  of  legal  tenders  should 
be  maintained  by  the  Secretary  of  the  Treasury,  to  be  issued  at  his 
discretion. 

Such,  sir,  are  the  general  provisions  of  this  bill.  It  seeks  to  substi- 
tute gradually,  by  the  voluntarv  action  of  the  people,  coin  contracts, 
coin  notes,  and  convertil)le  bank  bills  for  currency  contracts  and  irre- 
deemable and  inconvertible  paper  money.  It  seeks  to  secure  to  the 
public  creditor  the  prompt  payment  of  his  interest  in  coin,  and  to  the 
people  the  Hke  payment  in  coin  of  the  depreciated  notes  held  by  them. 
If  the  process  is  slow  it  is  safe,  and  the  danger  of  a  more  rapid  process 
is  great.  Let  no  man  deal  witli  thiscpiestion  witli  the  hasty  impulse  of 
first  impressions.  Let  no  man  be  contident  of  his  own  opinions  until 
he  has  examined  those  of  others.  lie  will  find  that  nuinyhave  traveled 
this  path  before  him ;  but  no  man  yet  has  found  an  easy  road  to  the 
resumption  of  specie  payments. 

It  now  remains  for  me  very  briefly  to  state  why  other  propositions 
submitted  to  the  Committee  have  not  been  a])proved.  Your  patience 
will  not  allow  me  to  examine  any  of  the  multitude  of  suggestions  that 
have  been  made  in  the  public  prints,  though  many  of  them  are  worthy 
of  careful  study.  I  will  only  allude  to  some  propositions  that  have 
been  referred  to  the  Committee.  The  suggestion  of  the  President  to 
pay  the  interest  for  sixteen  years  if  the  creditor  will  surrender  the  prin- 
cipal has  already  been  disposed  of.  The  plan  of  the  Secretary  of  the 
Treasury  to  contract  the  currency  until  we  reach  the  specie  basis  has 
already  been  incidentally  referred  to.  The  proposition  of  the  Senator 
from  Massachusetts  [Mr.  Sumner],  though  not  formally  referred  to  the 
Committee,  yet,  having  the  sanction  of  his  great  name,  was  carefully 
considered,  and  so  much  of  it  as  was  approved  was  embodied  in  the 
bill  reported ;  but  its  principal  feature,  the  repeal  of  the  legal-tender 
act  after  the  1st  of  July  next,  would  be  far  too  sudden  in  its  effects, 
and,  if  I  am  correct  in  the  views  already  exj)ressed,  disastrous  to  the 
great  'body  of  the  active  business  men  of  the  country. 

The  plan  of  the  Senator  from  Indiana  [Mr.  Morton],  supported  by 
an  able  speech,  was  carefully  considered  by  the  Committee.  It  rests 
upon  two  leading  ideas  : 

1.  The  accumulation  of  gold  in  the  Treasury ;  and 

2.  The  Hxing  a  specific  day  for  the  resumption  of  specie  payments. 
Now,  in  most  of  his  speech  I  heartily  concur.     All  that  he  says  of 

the  necessity  of  resuming  specie  payments,  of  the  effect  of  contraction, 
and  the  unjust  discrimination  that  now  exists  between  the  note-holder 
and  the  bond-holder,  meets  my  hearty  approval.  It  is  the  remedy  he 
suggests  we  have  to  deal  witlu  Would  not  the  effect  of  his  measure 
be  "that  the  Government  would  hoard  the  gold  and  the  people  the 
greenbacks,  and  thus  make  the  contraction  he  fears  ?  AVliat  more  prof- 
itable investment  could  any  man  make  than  to  take  this  dollar,  now 


202  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

having  a  purchasing  power  of  seventy-four  cents  in  gold,  and  lock  it  in 
his  safe  with  a  certainty  that  in  two  years  it  ninst  be  worth  one  dollar 
in  gold,  an  annual  advance  of  seventeen  and  a  half  per  cent.  (  AVould 
not  every  bank  sharjjly  contract  its  currency  and  hoard  greenbacks  as 
the  best  investihent  it  could  make  i  AV'hat  prudent  man  will  dare 
build  a  house  or  factory,  a  railroad  or  barn,  with  the  certain  fact  before 
him  that  the  greenbaclcs  he  puts  into  his  improvement  will  be  worth 
thirty-live  per  cent,  more  in  two  years  than  the  improvement  i  Would 
he  not  hold  his  money  for  two  years  until  his  building  would  cost  him 
one  third  less  i  AV'hen  the  day  of  resum])tion  comes  every  man,  as  the 
sailors  say,  will  be  close-reefed  ;  all  enter])rise  Mill  be  suspended ;  every 
bank  will  have  contracted  its  currency  to  the  lowest  limit ;  and  the 
debtor,  compelled  to  meet  in  coin  a  debt  contracted  in  currency,  will 
find  the  coin  hoarded  in  the  Treasury,  no  representative  of  coin  in  cir- 
culation, and  his  j)r()perty  shrunk  not  only  to  the  extent  of  the  appre- 
ciation of  the  currency,  but  still  more  by  the  artificial  scarcity  made  by 
the  hoarders  of  gold. 

All  the  historical  precedents  show  that  fixing  the  day  for  resump- 
tion inevitably  leads  to  a  contraction  of  the  currency  by  the  banks,  so 
that  when  the  day  comes  the  scarcity  of  cun-ency  shall  prevent  a  de- 
mand for  coin.  This  ])rocess  of  contraction  both  in  P^ngland  and  the 
United  States  produced  the  sorest  distress ;  and  this  distress  was  only 
relieved  in  England  by  the  Parliament  requiring  tlie  loan  of  exche(|uer 
bills  and  the  issues  of  new  notes  by  the  Bank  of  England.  At  the  be- 
ginning of  our  Government  the  Continental  bonds  were  a  species  of  cur- 
rency;  and  as  a  part  of  the  funding  system  of  Alexander  Hamilton,  he 
provided  for  a  new  paper  currency  convertible  into  coin,  to  l)e  issued  by 
the  Bank  of  the  United  States,  without  which  he  declared  his  funding 
system  would  be  a  failure.  So,  sir,  after  the  war  of  1812  the  sore  dis- 
tress caused  by  the  failure  of  the  State  banks  was  only  relieved  l)y  a 
new  paper  currency  issued  by  the  second  Bank  of  the  United  States, 
whicli  Mr.  Madison,  yielding  his  constitutional  objections,  approved. 
We  therefore  think  that  the  general  objects  sought  for  by  the  Senator 
from  Indiana  [Mr.  Morton]  can  be  better  attained  by  legalizing  specie 
contracts,  by  utilizing  the  coin  in  the  Treasury,  by  the  gradual  substi- 
tution of  coin,  United  States  notes,  and  bank  bills  for  the  present  cur- 
rency, rather  than  by  the  accumulation  of  gold  and  the  fixing  of  a  day 
for  resumption. 

And  now,  sir,  a  multitude  of  collateral  topics  present  themselves — 
questions  affecting  the  construction  of  contracts  and  the  public  debt, 
questions  of  funding,  of  the  reduction  of  the  rate  of  interest,  of  taxa- 
tion and  protection,  of  banking  and  the  distribution  of  bank  circulation. 
All  these  have  been  considered,  and  no  doubt  will  be  presented  to  the 
Senate ;  but  we  have  not  embraced  them  in  this  bill,  for  the  manifest 
reason  that  by  attempting  too  much  we  should  be  likely  to  defeat  any 
measure  tending  to  the  resumption  of  specie  payments. 

This  primary  duty  accomplished  will  solve  many  of  these  questions 
and  prepare  the  way  for  other  measures.  I  submit  to  Senatoi*s  who 
favor  this  bill  whether  it  is  not  wiser  to  leave  to  time,  to  the  progress 
of  events,  and  to  the  next  Congress,  to  deal  with  other  matters  not  vital 


THE  PUBLIC  CREDIT.  203 

to  this  measure.  It  is  only  iu  this  way  that,  with  the  confused  and 
scattered  opinions  in  the  public  mind,  we  can  hope  to  accomplish  any- 
thing. All  these  questions  will  be  resolved  wisely  if  we  are  content  to 
follow  the  example  set  by  Mr.  Lincoln  and  by  Congress  during  the  war, 
to  make  haste  slowly. 

Sir,  you  and  I  and  many  of  our  associates  have  been  here  during  all 
the  great  events  of  our  civil  war,  "We  have  seen  Senators  from  tlieir 
places  openly  proclaim  in  safety  their  intended  infamy  and  perjury,  AVe 
have  seen  our  only  army  Ijroken  and  demohshed,  tilling  the  streets  of 
this  city,  and  the  rebel  Hag  lioating  within  sight  of  the  dome  of  the  Cap- 
itol. We  have  seen  a  vast  section  of  our  country  filled  with  armed  men, 
bold,  defiant,  and  confident,  engaged  in  fierce  war  for  the  overthrow  of 
our  Government.  AVe  were  deserted  by  nearly  all  the  Governments  of 
Christian  Europe.  AVe  have  seen  four  hundred  thousand  of  our  coun- 
trymen slain  in  battle  or  falling  by  disease.  AVe  have  met  defection 
and  doubt  at  home,  and  suifered  disaster  again  and  again.  But  all  this 
has  passed  away.  The  long-vacant  seats  are  nearly  all  filled,  and  new 
States  then  in  wilderness  are  now  represented  here.  Our  flag  floats  in 
undisputed  authority  over  every  part  of  our  territory.  All  the  ques- 
tions of  debate  that  have  risen  from  time  to  time  in  this  Senate  cham- 
ber have  been  so  decided  that  authority  has  been  vindicated  and  liberty 
been  made  universal.  AVe  are  soon  to  sec  the  great  hero  of  the  \var 
clothed  with  the  executive  authority  of  the  nation,  and  bearing  with 
him  into  his  high  ofiice  the  hearty  good  will  of  nearly  all  the  people 
of  the  United  States.  But  one  thing  more, is  to  be  accomplished,  and 
that  is  to  place  our  public  credit  on  a  firai,  enduring  foundation,  so 
that  the  Morld  may  say  that  this  reiuiblic  is  not  wanting  either  in  valor 
or  lionor.  We  may  then  give  M'ay  to  those  who  are  rapidly  treading 
in  our  footsteps  with  a  consciousness  of  having  perfonned  our  full  duty 
to  our  country. 


THE  PUBLIC   CREDIT. 

7iV  THE  SEN'ATE,  FEBRUARY  27,  1869. 

The  bill  to  strengtlien  the  public  credit  being  before  tbe  Senate,  Mr.  Sherman 
said  : 

I  TuouGHT  nothing  in  the  world  could  tempt  me  at  this  late  hour  of 
the  night  to  say  a  word  upon  this  bill ;  but  the  remarks  made  by  the 
honorable  Senator  from  Indiana  are  so  extraordinary  that  I  deem  it 
my  duty  to  reply,  and  if  it  were  night  or  morning  I  would  do  it  alike. 

The*^  Senator  seems  to  attack  with  great  violence  the  Connnittee  on 
Finance  ever  since  it  had  the  misfortune  to  disagree  with  him  in  regard 
to  his  plan  to  promote  the  pubhc  credit  and  resume  specie  payments. 
Not  being  able  to  report  in  favor  of  his  plan,  we  reported  against  it, 
and  ever  since  that  time  everything  that  we  do  seems  to  meet  his  dis- 
favor. He  says  the  bill  reported  by  us  is  dead.  I  dispute  it.  The 
bill  is  not  only  not  dead,  but  it  liveth  and  will  be  the  law  of  the  land  ; 


204:  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

and  you  liere  in  tliis  bill  will  make  one  of  its  most  important  and  fun- 
damental provisions,  the  first  section  of  tliat  l)ill,  the  law  of  the  land, 
and  I  have  no  doubt  that  eveiy  section  of  it  will  be  hereafter  made  so. 
Now,  in  justice  to  the  Committee  on  Finance,  let  me  state  what  those 
sections  are,  because  one  of  the  organs  of  this  body  can  not  hear  its 
measures  thus  arrai<^ned  and  sit  here  quietly  at  any  time,  in  the  ni»ht 
or  in  the  mornini;,  without  a  reply.  What  are  the  measures  of  tiiat 
bill  ?  The  first  is  that  •i^old  contracts  shall  be  leg^alized.  Here  it  is  in 
this  bill.  The  second  is  that  s14(»,(I(MI,(MI(>  shall  be  set  aside  to  redeem 
the  public  debt,  and  that  will  be  done  unquestionably.  Xow,  more 
than  that  is  already  set  a.side,  but  it  is  not  ajiplied  because  the  law  is 
not  put  in  force.  The  third  is  to  tie  the  fate  ot  the  s^nvenbacks  to  the 
fate  of  the  bonds.  That  is  done  here  by  the  amcmlnient  proposed  by 
the  C^ommittee  on  Finaiu'e,  so  as  to  put  the  bond  and  the  note  on  pre- 
cisely the  same  footin<i:,  both  to  be  paid  in  gold,  Itoth  to  be  treated 
alike  ;  and  I  have  no  doubt  whatever  that  at  the  next  session  of  Con- 
gress the  demand  of  the  public  as  well  as  the  sense  of  justice  of  Con- 
gress M'ill  compel  us  to  authorize  the  holder  of  the  greenback  to  receive 
his  bf»nd,  dollar  for  dollar,  for  his  ])aper  money  ;  there  is  no  doubt  of 
it.  What  else  i  The  other  section  of  the  bill,  the  oidy  material  one, 
is  a  section  which  })rovides  for  free  banking.  The  Senator  himself 
professed  to  be  in  favor  of  it.  He  himself  desired  pud  voted  to  with- 
draw from  all  the  Eastern  States  more  than  one  half  of  their  circula- 
tion with  a  view  to  place  it  in  the  South,  and  then  to  compensate  the 
East  by  free  banking.  Thtise  were  the  provisions  of  the  bill  fi'om  the 
Connnittee  on  Finance,  and  there  was  not  one  of  them  that  I  think 
the  honorable  Senator  himself  would  not  approve. 

But  now  this  bill  came  to  us  from  the  House  of  Ticpresentatives, 
and  I  will  state  very  briefly  what  it  is,  for  I  know  it  is  wrong  for  me 
to  delay  the  action  or  vote  of  the  Senate  upon  it.  AYhat  is  tlie  first 
section  of  this  bill  ?  It  is  simply  a  solenm  pledge  of  the  Ignited  States 
that  all  the  obligations  of  the  United  States,  notes  and  bonds,  shall  be 
paid  in  gold  and  silver  coin,  except  only  those  M'here  the  law  expressly 
provides  that  they  shall  be  paid  in  lawful  money.  But  my  honorable 
friend  says,  why  the  exception  ?  The  question  shows  that  he  has  not 
examined  this  matter  with  his  usual  care,  or  he  would  not  have  asked 
it.  Why,  sir,  there  are  some  fifty  or  sixty  inillion  dollars  of  three  per 
cent,  certificates  expressly  payable  in  currency.  But  for  this  exception 
they  would  to-morrow  be  payable  in  coin  on  demand  at  the  Treasury 
of  the  United  States.  There  are  also  bonds  issued  to  the  railroads,  ex- 
pressly payable  in  currency.  But  for  this  exception  they  would  be 
paid  principal  and  interest  in  gold.  The  •  interest  on  those  bonds  is 
semi-annually  paid  in  lawful  money.  It  is  necessary  to  except  obliga- 
tions exj^ressly  payable  in  currency.  But  we  say  that  with  regard  to 
all  other  obligations,  paper  money  and  bonds,  they  shall  be  paid  in  gold 
and  silver  coin. 

Now,  sir,  the  first  part  of  this  section  I  should  like  to  see  the  Senate 
stx'ike  out,  because  it  makes  the  declaration  clearer,  stronger,  and  more 
emphatic  than  I  wish.  Why  (  I  do  not  believe,  and  I  never  could 
reason  myself  into  the  belief,  that  the  laws  which  authorized  the  issue 


THE  PUBLIC  CREDIT.  205 

of  these  bonds  made  a  discrimination  against  the  lawful  tender  money 
of  the  United  States.  I  do  believe  that  by  a  fair  and  reasonable  con- 
struction of  those  laws  the  bonds  of  the  United  States  might  be  paid 
in  lawful  money  issued  within  the  limits  and  according  to  the  terms  of 
those  laws.  But  do  we  propose  to  pay  those  bonds  in  lawful  money  ? 
Certainly  not.  We  have  not  the  money  to  pay  them.  We  dare  not 
increase  the  taxes  for  this  purpose,  and  so  we  must  postpone  the  pay- 
ment of  the  bonds.  I  repeat  that  under  the  condition  of  our'finances 
it  is  impossible  to  pay  any  considerable  sum  of  the  principal  of  this 
public  debt  either  in  lawful  money  or  in  gold.  Our  people  do  not  and 
will  not  ask  us  to  levy  more  taxes  upon  them  in  order  to  avail  them- 
selves of  the  legal  privilege  or  right  which  they  have  to  pay  in  lawful 
money. 

They  desire  to  pay  of  the  principal  of  this  public  debt  not  more 
than  one  per  cent.  })er  anmiin,  a  small  amount,  and  to  adopt  a  policy 
which  will  in  the  end  pay  the  whole  of  it.  But  what  shall  we  do  in 
the  mean  time  i  Shall  we  siis])end  sj)ecie  payment  until  we  can  pay 
the  whole  of  this  debt  by  taxes  ^  Is  the  payment  in  specie  to  be  post- 
poned indefinitely  s!  My  friend  from  Indiana  says  only  for  two  years, 
and  then  lie  would  bring  it  about  by  hoarding  gold  and  by  hoarding 
greenbacks. 

Do  our  Democratic  friends  propose  to  postpone  the  resumjition  of 
specie  i)ayments  until  this  debt  matures,  until  we  can  gather  in  a  suffi- 
cient amount  of  taxes  to  pay  otf  the  jirincipal  of  the  debt  in  lawful 
money  'i  Ko,  sir.  The  honor  of  the  country,  the  good  faith  of  the 
nation,  tlie  interest  of  the  la])orer,  of  the  rich  and  the  poor,  and  of  all 
classes,  demand  that  we  should  resume  specie  ])ayments  as  early  as  pos- 
silde,  and  place  all  the  obligations  of  the  peo])le  of  the  Ignited  States 
upon  the  solid  basis  of  gold  and  silver  coin.  We  can  not  delay  that 
primary  duty ;  and  thei'efore  I  look  upon  this  first  section  as  simply  a 
declaration  that  we  will  now  perform  our  primary  duty  of  making  our 
notes  equal  to  coin,  and  I  have  no  doubt  that  if  that  policy  is  pursued 
and  adopted  the  bondholder  will  be  glad  to  get  the  lawful  money  of 
the  United  States  in  payment  of  his  bond.  All  that  this  tii'st  section 
does  is  to  declare  as  a  matter  of  public  ])olicy  that  the  notes  and  the 
bonds  shall  alike  be  paid  in  gold  ;  the  bonds  as  they  gradually  mature, 
and  the  notes  long  before  any  of  the  bonds  mature.  Why,  sir,  none 
of  these  bonds  mature  until  1881,  and  we  can  not  get  the  lawful  money 
to  redeem  them  even  at  the  end  of  five  years,  \yhen  we  have  the  right 
to  redeem  them,  except  by  taxes.  We  can  not  draw  in  the  lawful 
money  of  the  United  States  except  by  taxation.  AVe  can  not  adopt  the 
repudiating  scheme  of  our  Democratic  fellow  citizens  of  the  United 
States  of  issuing  broadcast  in  violation  of  law  a  large  amount  of  legal 
tenders,  and  thus  repudiating  our  debt.  I  never  could  see  how  honest 
men  could  propose  that.  Then,  the  only  way  we  can  get  lawful  money 
to  pay  this  debt  is  by  taxation,  and  our  people  will  endure  no  more 
than  now  exists.  They  have  no  desire  to  assume  the  burden  of  pajang 
the  public  debt  at  once.  They  are  willing  to  see  a  portion  of  the  -pay- 
ment postponed,  but  in  the  n^ean  time  we  can  not  prolong  this  suspen- 
sion of  specie  payments  until' we  can  avail  ourselves  of  that  privilege. 


206  SPEECHES  AXD  REPORTS  OF  JOHN  SHERMAN. 

I  say,  then,  that  the  primary  duty  of  the  United  States  is  to  resume 
specie  payments  as  quickly  as  possil)le,  and  make  tlie  lawful  m«»noy  of 
the  United  States  e(piivalent  to  gold.  I  look  to  see  the  honds  of  the 
United  States  advancing  step  l)y  step  with  the  money  of  the  United 
States  until  their  par  value  in  coin  is  reached.  Sir,  it  gave  me  a  thrill 
of  pleasure  when  I  saw  that  the  bonds  of  the  Ignited  States  were 
worth  eighty-nine  cents  in  gold  in  the  markets  of  London.  I  do  not 
care  who  made  money  by  the  advance  ;  God  knows  I  did  not.  1  had 
no  interest  in  it  directly  (tr  indirectly.  I  was  glad  to  see  our  bonds  ap- 
preciate in  the  market,  and  the  holders  get  the  benefit  of  that  aj)precia- 
tion ;  and  I  trust  that  in  three  or  four  or  six  months,  or  a  year,  these 
bonds  will  reach  par  value  in  gold. 

But  it  is  said,  how  can  you  fund  the  public  debt  ?  We  will  do  it 
just  as  England  and  just  as  every  other  country  did  that  reduced  the 
rate  of  interest.  AVhenever  the  bonds  of  the  T  nited  States  rise  above 
par  in  gold,  then  we  can  place  in  the  money  market  of  the  world  a 
bond  Ix'aring  a  lower  rate  of  interest.  If  our  bonds  this  day  had 
reached  the  par  of  gold  we  could  put  in  the  market  without  question 
or  difficulty  a  bond  bearing  a  lower  rate  of  interest.  Sir,  I  believe 
that  if  we  would  now  wisely  and  persistently,  tirndy  and  boldly,  march 
to  the  resumption  of  specie  payments  in  such  a  way  as  not  to  distress 
our  people,  not  by  increasing  taxes,  but  by  steadily  appreciating  our 
public  credit  until  the  five  per  cent,  bonds  rise  to  par  in  gold,  the 
whole  of  the  six  per  cent,  bonds  could  be  paid  otf.  There  is  now  only 
about  fifteen  per  cent,  difference  between  the  market  value  of  the  ten- 
forty  bonds  and  gold.  If  we  can  wipe  out  that  fifteen  per  cent,  by  an 
appreciation  of  the  public  credit,  then  funding  will  go  on  with  rapid 
speed  ;  the  whole  of  the  five-twenty  bonds  will  be  paid  off. 

Why,  sir,  when  the  bonds  of  England  rose  to  one  hundred  and  three 
per  cent.,  then  the  rate  of  interest  was  reduced  one  per  cent,  by  put- 
ting a  bond  at  a  lower  rate  of  interest  in  tJie  money  market.  That  is  the 
only  way  that  you  can  carry  out  a  process  of  funding.  If  we  were  able 
to  levy  upon  our  people  a  larger  amount  of  taxes  and  apply  fifty  or  one 
hundred  million  dollars  to  the  payment  of  the  principal  of  the  debt, 
we  could  carry  on  the  process  of  reducing  the  interest  just  so  much  the 
more  rapidly,  but  we  dare  not  extend  our  system  of  taxation  for  fear 
of  losing  the  confidence  of  the  people.  The  only  other  resort  is  to 
advance  our  public  credit,  to  elevate  our  bonds  from  the  slough  of 
despond  in  which  they  were  cast  by  the  burden  of  the  war,  to  elevate 
our  public  credit  to  where  it  was  before  the  war,  and  then  the  burden 
of  this  interest  will  pass  away,  and  we  may  hope  to  see  our  bonds  bear- 
ing in  the  money  market  of  the  Avorld,  in  the  hands  of  the  rich  and  the 
poor,  the  foreign  and  the  native,  all  the  credit  that  now  clusters  round 
the  three  per  cent,  consolidated  debt  of  England.  Then  it  may  be  that 
we  will  not  satisfy  ourselves  by  reducing  the  rate  of  interest  to  five 
but  to  four  and  a  half  or  four  per  cent. ;  and  probal)ly  within  twenty 
or  tliirty  years  we  may  stand  as  Great  Britain  does,  w^th  our  credit  such 
that  we  can  get  par  for  our  bonds  at  three  and  a  half  per  cent,  interest 
in  gold. 

But,  sir,  in  the  mean  time  we  must  not  be  diverted  from  the  diffi- 


NATIONAL  BANKS.  207 

culties  that  stand  in  onr  way.  In  my  judgment  the  plan  reported  at 
this  session  by  tlie  Committee  on  Finance  is  the  best,  the  most  rapid, 
and  the  most  effectual  way  to  bring  about  this  state  of  affairs.  I  am 
not  discouraged  by  the  reluctance  of  the  Senate  to  assume  it.  I  know 
that  such  ]u-opositions  are  always  of  slow  growtli.  But  I  assure  my 
honoral)le  friend  from  Indiana  that  if  he  supposes  that  any  section  or 
line  or  word  of  that  currency  bill  is  dead,  or  even  that  it  sleeps,  he  is 
very  much  mistaken.  He  will  find  it  either  in  whole  or  in  part  meet- 
ing him  at  every  stage  of  this  progress  until  every  word  of  it  is  in- 
grafted in  the  laws  of  the  United  States. 

I  know  that  my  friend,  for  wlK)m  I  have  the  utmost  kindness  and 
the  greatest  good  feeling,  did  not  intend  any  unkindness  in  the  remarks 
he  made ;  but  when  he  attacks  a  connnittee  of  this  body,  and  speaks  of 
me  as  the  chairman  of  that  committee,  and  accuses  us  of  being  guilty 
of  vacillation  and  mutations  and  changes  in  our  reports  and  bills,  as  a 
matter  of  course  he  naturally  excites  a  feelmg  which  will  not  submit  in 
quiet  to  such  an  imputation. 

Sir,  I  myself  came  with  slow  reluctance  to  the  declaration  made  in 
the  tirst  section  of  this  bill.  I  declare  now  to  you  that  my  construc- 
tion of  the  law  under  which  these  five-twenties  and  under  which  the 
greenl)acks  were  issued  still  remains  unchanged  ;  but  I  do  assert,  as  a 
question  of  public  policy,  that  it  is  wise  now  for  us  to  declare  in  the 
language  of  this  bill  that  the  bonds  and  greenbacks  alike  shall  be  jiaid 
in  gokV  as  rapidly  as  we  can  do  so ;  that  these  greenbacks  and  these 
bonds  may  be  linked  together  in  every  law  that  is  passed  ;  that  every 
privilege  that  is  given  to  the  bond-holder  shall  be  given  to  the  holder 
of  the  greenback  ;  that  both  together  shall  rise  gradually  to  par  in  gold, 
when  the  bond-holder  may  be  paid  off  by  bonds  bearing  a  lower  rate 
of  interest  with  a  large  saving  to  the  people  of  the  United  States.  I 
think  this  question  has  been  fully  considered,  and  I  hope,  therefore, 
that  without  any  more  debate  on  the  subject  to-night  we  may  have  a 
vote  upon  it. 

Tho  bill,  after  being  amended,  became  the  act  of  March  18,  1869. 


XATIOXAL  BAXKS. 

IX  THE  SEXATE,  MARCH  29,  18G9. 

The  Senate  having  under  consideration  the  bill  supplementary  to  an  act  entitled 
■"An  act  to  provide  a  national  currency  secured  by  a  pledge  of  United  States 
bonds,  and  to  provide  for  tlie  circulation  and  redemption  thereof,''  approved  June 
3,  1864,  Mr.  Sherman  said: 

If  I  can  get  the  attention  of  the  Senate,  at  the  request  of  several 
Senators  who  have  become  members  of  the  body  since  the  subject  was 
under  debate  at  the  last  session  I  will  state  very  briefly  the  pui-jjort  of 
this  bill.  Although  the  Senators  who  listened  to  the  debate  at  the  last 
session  will  not  need  the  information,  still,  as  the  bill  contains  several 


208  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

important  changes  in  the  existing  law,  it  is  right  that  all  should  under- 
stand it. 

The  first  section  of  the  bill  is  a  modification  of  the  currency  act  so 
fur  as  it  relates  to  <le|)Osit  banks.  It  recjuires  in  all  cases  deposit  banks 
to  give  security  in  I'liited  States  bonds  ecpial  to  the  amount  of  tlie  de- 
posits. Under  the  present  law  the  security  is  fixed  by  the  Secretary  of 
the  Treasury.  This  section  fixes  it  by  law ;  so  that  in  no  case  shall  the 
Government  deposits  in  a  national  bank  exceed  the  amount  of  security 
fuiiiislied. 

The  second  section  is  intended  to  cure  an  evil  that  has  sprung  up 
mainly  in  the  State  of  New  York,  where  banks  organized  under  the 
national  banking  system  have  given  notice  of  their  intention  to  wind 
u])  their  affairs,  and  have  thus  relieved  themselves  from  the  restrictions 
and  limitations  of  the  national  banking  act,  but  have  in  fact  not  wound 
up  their  business,  and  liave  got  the  benefit  of  the  circukition  without 
any  of  tlie  ])urdens  imposed  by  the  currency  act.  It  is  for  the  ])urpose 
of  com])elling  l)anks  that  have  given  notice  of  their  intention  to  wind 
up  to  do  what  they  give  their  notice  to  do — to  require  them  to  redeem 
their  notes,  or  in  cfise  of  a  failure  to  redeem  their  notes  to  authorize 
their  l)onds  to  l)e  sold  with  a  view  of  canceling  an  equal  amount  of 
United  States  notes.     That  is  very  plain. 

The  third  secti<m  of  the  l)ill  is  to  limit  and  greatly  reduce  the  fees 
allowed  by  the  courts  to  receivers  of  banks.  In  several  Ciises  that  I 
cited  at  the  last  session  the  fees  allowed  to  receivere  and  officers  of 
banks  by  the  district  courts  and  circuit  courts  of  the  United  States 
were  very  large  indeed,  mucli  larger  than  they  ought  to  have  been, 
thus  absorbing  a  portion  of  the  money  that  belonged  to  the  creditors 
of  the  bank.  The  third  section  limits  the  amount  of  fees  to  what  we 
conceive  to  be  a  reasonalile  rate.  These  three  sections  I  believe  have 
always  passed  without  o])jection. 

The  fourth  section  presents  a  very  difficult  problem.  Tender  the 
existing  distribution  of  bank  circulation  the  Eastern  States,  where  capi- 
tal mainly  accumulates,  have  a  very  large  excess  over  their  proportion 
of  banking  circulation.  This  was  caused  by  the  fact  that  State  banks 
had  been  organized  in  those  States,  and  by  an  amendment  offered  by 
the  gentleman  who  now  occupies  the  chair,  in  the  summer  of  1S«U,  the 
existing  State  i)anks  were  allowed  a  preference  in  going  into  the  na- 
tional banking  system.  The  result  is  that  the  distribution  provided  for 
by  the  national  currency  act  was  substantially  defeated ;  and  the  State 
banks  being  very  numerous  in  the  older  States  they  went  into  the  na- 
tional banking  system,  and  thus  absorbed  the  banking  circulation,  leav- 
ing n(^ne  for  the  Western  and  Southern  States  when  the  rebellion  was 
subdued.  The  result  is,  as  will  appear  from  the  table  which  I  have 
before  me,  and  wliich  Senators  can  find  in  the  report  of  the  Comptroller 
of  the  Currency  at  the  last  session  of  Congress,  that  the  distribution  of 
banking  circulation  is  very  largely  disproportionate.  In  Massachusetts 
I  believe  it  is  some  fifty-four  dollars  an  inhabitant ;  in  Rhode  Island 
about  sixty  dollars  an  inhabitant ;  in  Connecticut  some  forty  or  fifty 
dollars  an  inhabitant ;  while  in  some  of  the  States  it  is  less  than  one 
dollar,  and  in  the  State  of  Illinois,  a  very  prosperous  and  thriving  com- 


NATIOXAL  BANKS.  209 

munity,  it  is  only  three  or  four  dollars.  Consequently  great  complaint 
exists  on  account  of  the  disproportion  of  circulation.  Jis  business  re- 
vives in  the  South  there  is  a  necessity  for  establishing  new  banks,  but 
the  amount  of  §300,000,000  having  already  been  exhausted  no  national 
banks  can  be  started  in  those  States. 

Varimis  plans  have  been  proposed  and  discussed  from  time  to  time 
to  relieve  this  difficulty ;  and  tinally,  the  fourth  section  of  the  bill,  as 
reported  from  the  Connnittee  on  Finance  at  the  last  session,  we  thought 
was  the  most  equitable  to  pi'ovide  a  general  rule  by  which  one  half  of 
the  circulation  should  be  distributed  according  to  population,  and  the 
other  half  according  to  MX'alth  and  property,  and  to  require  that  redis- 
tribution to  be  made  gradually.  This  section  confines  the  redistribution 
within  one  year  to  §20,000,000  upon  certain  rules  that  are  fixed  by  the 
section. 

The  next  section  authorizes  the  existing  banks  in  any  of  the  older 
States  M'here  they  have  an  excess  of  banking  circulation  to  remove 
themselves  bodily  with  their  capital  and  circulation  to  the  Southern  or 
Western  States  tliat  liavc  less  than  their  ])ro]i()rtion.  There  are  many 
banks  within  my  knowledge  in  Xew  England  and  in  New  York,  and 
])erhai)s  some  in  (Jliio,  that  will  avail  themselves  of  the  ])rivilege  of 
this  section  to  remove  from  their  ])resent  location  to  the  South  and 
West,  thus  supplying  to  some  extent  the  want  that  is  com])lained  of; 
while  the  S20,U0( »,(!()( j  withdrawn  from  circulation  according  to  the 
mode  ])rovided  by  this  bill  will  l>e  withdrawn  from  those  States  having 
the  largest  excess  of  circulation  in  accordance  to  the  rule  prescribed 
here,  and  that  also  will  i)e  made  uj)  by  banks  to  be  established  hereafter 
in  the  South  and  extreme  West. 

The  section  provides  that  the  circnilation  is  to  be  given  up  j-zro  rato. 
Suppose  for  instance  that  after  making  the  statement  provided  for  by 
the  fourth  section  it  liecomes  necessary  to  withdraw  from  the  banks  in 
the  State  of  Massachusetts  ten  ])er  cent,  of  their  circulation,  it  is  done 
2)ro  rata  ten  per  cent,  upon  the  circulation  issued  by  the  different 
banks. 

My  own  impression  is  that  this  arrangement  will  give  to  the  South 
and  ^Vest  all  the  banking  circulation  and  capital  they  can  absorb  within 
one  or  two  years ;  and  I  suppose  that  at  the  end  of  that  time  we  shall 
probably  establish  a  free  banking  system.  I  have  no  doul)t  that  as 
soon  as  we  resume  specie  payments  a  free  banking  system  will  be  estab- 
lished, which  will  avoid  all  this  controversy  about  distributing  banking 
circulation. 

There  is  only  one  further  point  to  which  I  wish  to  call  the  attention 
of  the  Senate ;  and  that  is,  to  assure  them  that  in  my  judgment  and 
the  judgment  of  the  Committee  on  Finance  it  is  not  wise  now  to  pass 
a  more  radical  measure  than  this.  At  the  last  session  a  proposition  to 
redistribute  the  entire  banking  circulation  of  the  country  was- j^roposed 
here,  and,  without  much  debate,  was  almost  carried.  It  seems  to  me  a 
proposition  of  that  kind  would  derange  and  tear  up  the  business  of  this 
country  to  an  extent  that  would  be  very  injurious.  We  had  better  ac- 
complish this  redistribution  by  slow  and"  gradual  means.  After  we 
have  resumed  specie  pavments  there  will  be  no  contest  about  it.  If 
14 


210  SPEECUES   AXD   REPORTS   OF  JOHN   SIIERMAX. 

the  proposition  sliould  now  be  made  to  increase  the  amount  of  $20,- 
000,000  to  §30,000,000,  or  any  higher  sum,  I  should  feel  bound  to 
oppose  it.  . 

My  constituents,  I  may  say,  are  entirely  impartial  in  this  nuitter. 
We  neither  lose  nor  gain  by  this  bill.  AVe  have  al)Out  our  proportion, 
a  little  less  than  our  proportion,  and  I  do  not  wish  for  any  more  ;  and 
under  tliis  bill  we  shall  lose  nothing  and  gain  nothing.  I  would  not  be 
willing  to  vote  for  a  general  redistribution  of  the  banking  circulation, 
which  would  disturb  all  the  business  of  the  New  England  and  Middle 
States,  merely  to  secure  a  nominal  equality  in  the  distribution  of  circu- 
lation. It  is  better,  in  my  judgment,  to  take  this  measure,  which  will 
supply  tlie  South  and  West  in  a  partial  degree  with  banking  circula- 
tion, clependingon  future  legislation  and  upon  the  resumption  of  specie 
payments  for  a  settlement  of  the  question  upon  a  more  general  basis. 

Mr.  Morrill  having  moved  to  amend  the  fourth  section,  so  that  it  should  read 
"  hanks  having  a  capital  exceeding  $100,000,"  Mr.  Sherman  said : 

This  amendment  has  been  thought  of  and  discussed  before.  It 
was  offered  in  committee  at  the  last  session,  but  I  am  not  sure  Avhether 
it  was  offered  in  the  Senate  or  not.  It  confines  the  M'ithdrawal  of  the 
circulation  to  banks  exceeding  $10(1,000  of  capital,  I  can  see  no  rea- 
son why  a  strong  bank  with  8200,0(  )0  capital  should  be  discriminated 
against  in  favor  of  a  small  bank  with  850,000  capital.  One  object  of 
the  currency  act  was  to  discourage  very  small  banks.  Uidess  tlie  Sen- 
ate can  see  some  good  reason  why  the  reduction  should  a})ply  to  a 
large  bank  and  not  to  a  small  one  the  amendment  ought  not  to  prevail. 
It  seems  to  me  that  if  we  are  going  to  make  this  reduction  it  ought  to 
be  done  by  one  uniform  rule  applicable  to  banks  of  all  kinds,  condi- 
tions, and  degrees.  The  Connnittee  on  Finance  considered  various 
plans  of  making  a  discrimination  between  banks  of  large  capital,  and 
therefore  large  circulation,  and  banks  of  a  small  capital  and  small  cir- 
culation. We  found  we  could  apply  no  such  rule  which  would  be  just 
or  equitable.  If  by  this  withdrawal  you  take  from  a  bank  having 
$50,000  circulation  only  three  or  four  thousand  dollars  it  would  be 
easier  for  that  bank  to  withdraw  that  amount  than  for  a  bank  with 
$500,000  to  withdraw  $50,000.  There  is  no  reason  why  the  same  rule 
should  not  apply  to  one  as  to  tlie  other.  I  prefer  to  see  whatever  rule 
is  adopted  applied  equally  to  all  banks  without  regard  to  their  caj)ital 
or  their  circulation. 

The  second  amendment  suggested  by  the  Senator  from  Vermont 
proposes  to  introduce  as  an  element  into  this  computation  the  former 
State  bank  circulation  in  cities.  The  effect  of  that  undoubtedly  would 
be  to  withdraw  more  from  the  city  of  New  York  than  would  be  done 
otherwise,  because  New  York  under  the  present  system  has  largely 
increased  its  circulation.  But  such  a  rule  as  this  is  not  of  universal 
application,  because  in  Illinois  they  had  no  State  bank  circulation  when 
the  national  currency  act  went  into  effect.  It  so  happened  that  in  1857 
all  their  banks  broke  up  and  they  had  no  State  banks,  and  other  States 
had  none.  Therefore  the  rule  proposed  would  be  a  rule  ajDplicable 
only  to  the  condition  of  things  in  New  York  City  and  other  large  cit- 


NATION"AL  BANKS.  211 

ies.  I  do  not  see  any  object  in  changing  or  varying  the  rule,  or  refer- 
ring to  the  state  of  the  banking  circulation  before  the  national  bank 
act  took  effect.  It  is  better,  in  my  judgment,  to  adopt  a  rule  and  apply 
it  to  all  cases,  all  banks,  and  all  sections  alike.  The  Senator,  no  doubt, 
can  give  some  reason  ^vhy  a  bank  with  a  small  circulation,  doing  a 
small  business  in  a  country  neighborhood,  ought  not  to  be  affected  by 
the  nile,  but  after  all,  when  you  come  to  apply  it,  I  can  not  see  any 
weight  in  it. 

1  am  asked  by  what  right  we  take  from  the  State  of  Massachusetts 
813,000,000  of  its  circulation.  It  is  a  fair  question  and  I  will  give  it  a 
fair  answer ;  but  in  order  to  do  so  it  is  necessary  for  me  to  refer  to  one. 
or  two  well-estal)lished  facts  known  to  the  public  records  of  the  coun- 
try. I  hold  in  my  hand  the  last  report  of  the  Comjitroller  of  the  Cur- 
rency, from  which  it  appears  that  the  amount  of  circulation  of  national 
1  tanks  in  the  State  of  Ehode  Island,  having  between  two  and  three 
hundred  thousand  inhabitants,  is  $12,491,480,  and  the  circulation  in 
Massachusetts  is  almost  the  same  in  pro])ortion  to  its  population.  Tliere 
are  in  thirteen  States  of  the  Union  about  ten  million  people,  and  in 
those  thirteen  States  the  amount  of  circulation  is  85,851,000.  The  cir- 
culation of  all  the  "Western  and  Southern  States  combined,  including 
Ohio,  is  less  than  the  combined  circulation  of  Massachusetts  and  Rhode 
Island.  Why  is  this  ?  Is  it  because  the  South  and  West  have  no  need 
of  banking  capital,  no  occasion  for  banking  facilities,  no  business,  no 
enterprise,  no  industry,  nothing  to  demand  banking  circulation?  Not 
at  all.  It  is  simply  because  an'  iron  rule  of  law,  passed  during  the  civil 
war,  prevents  the  South  and  West  from  having  that  which  these  States 
enjoy.  Now,  the  question  is :  Will  you  relax  that  rale  ;  will  you  allow 
this  standing  evil,  this  standing  complaint  made  in  every  household  in 
the  West  and  South,  to  remam  without  any  attempt  to  correct  it,  or 
will  you  try  to  apply  a  remedy  i  How  shall  it  be  coiTCcted  ?  You  may 
enlarge  the  limit  of  circulation.  Would  the  Senator  from  Massachu- 
setts vote  for  a  proposition  to  enlarge  the  present  limit  of  $300,000,000 
before  the  resumption  of  specie  payments  ?  Two  or  three  years  ago 
the  Committee  on  Finance  reported  a  proposition  to  add  to  the  amount 
of  circulation  $20,000,000.  Simply  to  avoid  the  difiiculty  of  withdraw- 
ing any  portion  of  the  then  existing  circulation  it  was  thought  better 
to  remove  this  inequality,  to  some  extent  at  least,  by  adding  to  the 
amount  of  circulation.  After  a  long  debate  it  passed  the  Senate,  but 
was  defeated  in  the  House  of  Eepresentatives,  and  so  that  measure 
failed. 

What  then  ?  It  is  proposed  to  withdraw  the  greenbacks  on  which 
the  people  of  the  United  States  are  paying  no  interest,  and  issue  bank 
circulation  in  their  stead  before  specie  payments  are  resumed.  We 
know  that  such  a  proposition,  although  very  plausible  on  its  face,  can 
not  be  adopted.  How  can  we  withdraw  $50,000,000_of  notes  that  are 
now  outstanding  ?  Plave  you  a  surplus  revenue  with  which  to  pay 
them  ?  Not  at  all.  There  is  no  pretense  of  that  kind.  Will  jou  con- 
tract your  currencv  now  at  a  time  when  we  have  contracted  it  two  or 
three  hundred  million  dollars  ?  or  will  you  issue  bonds  and  thus  in- 
crease the  pennanent  funded  debt  of  the  countiy  in  order  to  settle 


212  SPEECHES  AND  KEPORTS  OF  JOHN   SHERMAN. 

this  question  of  the  distribution  of  circulation  ?  What  kind  of  bonds 
will  you  issue  ?  What  rate  of  interest  will  you  pay  i  Will  you  tax 
the  bonds  ? 

The  proposition  of  the  Senator  from  Massachusetts  briiifj^s  into  this 
debate  all  these  dithcult  questions — (juestions  that  I  pressed  last  winter 
upon  the  Senate  time  and  time  again,  and  utterly  failed  to  secure 
attention  because  there  was  a  disposition  everywhere  to  delay  the  mat- 
ter. The  Senate  did  not  want  to  consider  and  decide  these  questions ; 
and  yet  it  is  now  proposed  to  bring  them  all  up  and  attach  them  as  an 
amendment  to  this  bill.  Here  is  a  proposition  to  withdraw  greenbacks 
and  issue  more  bonds  without  giving  any  authority  to  issue  the  bonds, 
without  declaring  the  kind  of  bonds,  without  lixing  any  of  the  details 
that  are  necessary.  Such  a  proj)osition  is  only  one  of  those  riders  very 
commonly  attempted  to  be  put  on  a  bill  as  a  means  of  defeating  it. 

When  you  propose  to  reduce  the  volume  of  greenbacks  and  add  to 
the  burdens  of  interest  of  this  country  at  this  time,  you  do  introduce  a. 
question  that  alfects  all  of  us  alike,  and  I  say  that  whenever  we  fund 
the  greenbacks  it  must  not  be  for  the  pur])ose  of  giving  bank  circula- 
tion ;  it  must  be  for  reducing  our  currency  so  as  to  get  back  to  specie 
payments.  The  question  of  the  reduction  of  the  greenbacks  is  a  ques- 
tion of  public  policy.  This  is  simply  a  question  ol  equality  among  the 
States,  of  a  fair  distribution  of  the  banking  circulation. 

Is  it  right  and  fair  to  witlidraw  from  Massachusetts,  Connecticut, 
and  Rhode  Island  a  portion  of  their  circulation  i  I  say  it  is  right. 
They  are  now,  on  account  of  the  peculiar  circumstance  that  surrounded 
them  during  the  war,  enjoying  a  legal  privilege  under  an  act  of  Con- 
gress that  is  denied  to  the  Southern  and  the  Western  States.  They 
have  a  circulation  out  of  proportion  to  their  population,  out  of  propor- 
tion to  their  business  and  their  resources — a  circulati<jn  that  is  a  source 
of  profit  not  only  to  individuals  but  to  States. 

Now,  my  friend  from  Kliode  Island  and  my  friend  from  Massachu- 
setts say  that  an  increase  of  circulation  is  no  advantage  to  the  South ; 
that  if  these  banks  were  to  move  there  they  would  do  the  South  no 
good.  If  they  would  do  them  no  great  good  they  would  contribute 
by  taxation  to  help  pay  the  expenses  of  the  Southern  States,  and  we 
know  very  well  that  local  banks  furnish  great  facilities  for  business  to 
the  districts  where  they  are  located.  It  would  l)e  impossilde  to  locate 
any  one  of  the  New  England  banks  in  a  Southern  city  without  con- 
tributing largely  to  that  city  by  the  amount  of  business  and  the  facili- 
ties therefor  which  it  would  afford,  and  also  to  the  State  in  taxes  as 
well  as  business  facilities.  But  if  it  is  of  so  little  advantage  to  the 
South  to  have  these  banks,  what  is  the  objection  to  allowing  them  to 
go  there  ?     There  can  be  none  whatever. 

It  seems  to  me  that  it  is  right — to  respond  to  the  question  put  to 
me — it  is  fair,  it  is  just  to  withdi'aw  circulation  from  the  States  that 
have  an  excess ;  and  I  assure  my  friend  from  Massachusetts  that  if 
Ohio  was  in  the  same  predicament,  or  if  by  any  fair  and  just  rule  of 
withdrawing  bank  circulation  a  portion  of  it  might  be  withdra'uni  from 
the  State  of  Ohio,  I  would  vote  for  the  withdrawal  with  great  pleasure, 
because  it  is  not  for  the  interest  of  any  State  in  this  republic  to  enjoy  an 


NATIONAL  BANKS.  213 

advantage  in  legal  privileges  over  any  other  State.  If  its  industry  is 
superior,  if  its  climate  is  better,  if  its  soil  is  rielier,  those  are  the  gifts 
of  God ;  but  no  State  has  a  right  to  enjoy  a  privilege  by  law  which  is 
not  conferred  upon  another,  and  no  State  and  no  individual  in  a  State 
has  a  right  to  enjoy  any  privilege  conferred  by  law  that  is  not  fairly 
and  equally  shared  by  every  other  citizen  and  every  other  State.  It  is 
because  the  isew  England  States  in  this  distribution  of  banking  cur- 
rency have  an  advantage,  that  it  is  right,  it  is  just,  and  it  is  proper  to 
make  a  partial  redistribution.  I  do  not  wish  to  disturb  the  business  re- 
lations of  those  States.  I  think  it  would  be  wrong  to  do  it,  and  I  have 
frequently  publicly  and  privately  begged  Senators  not  to  make  this 
withdrawal  more  tliai^is  absolutely  necessary  to  secure  some  reasonable 
banking  facilities  in  the  South.  I  should  dislike  very  much  indeed  to 
see  the  amount  of  withdrawal  so  large  as  to  impair  or  derange  the 
business  of  New  England,  because  I  know  that  our  country  is  so  inter- 
Jinked  and  bound  together  that  everything  that  affects  the  interests  of 
that  section  will  affect  the  interests  of  the  South.  I  would  only  pro- 
pose this  as  a  temporary  measure  to  meet  a  temporary  exigency  until 
we  can  have  the  resumption  of  specie  payments  and  can  jirovide  a  free 
banking  system. 

But  pending  the  present  anomalous  state  of  affairs  we  are  bound  at 
least  to  render  reasonable  facilities  to  the  South  by  some  kind  of  bank 
circulation.  If  it  is  proposed  to  go  back  to  specie  payments,  they  can 
not  be  reached  in  a  day  or  a  montli  or  a  year.  I  am  as  willing  to  adopt 
measures  to  that  end  as  any  Senator ;  and  resumption  of  specie  pay- 
ments will  settle  all  these  questions ;  but  meanwhile  it  is  only  fair  and 
right  that  this  accidental  advantage  in  the  distribution  of  the  banking 
capital  should  be  removed  to  a  reasonable  extent. 

I  ought  to  say  that  this  act  does  not  affect  my  constituents  in  the 
least.  Although  the  State  of  Ohio  has  somewhat  less  than  its  fair  pro- 
portion of  banking  circulation,  I  do  not  know  of  any  application,  cer- 
tainly none  that  I  would  lieed,  from  that  State  for  more  circulation. 
This  bill  will  not  either  take  from  or  add  to  its  circulation.  I  there- 
fore feel  that  in  pressing  this  act  of  partial  justice,  even  though  it  may 
be  an  inconvenience  to  our  friends  in  the  ]S  ew  England  States,  we  are 
doing  what  is  right  and  proper,  and  that  we  sliould  not  in  doing  it 
open  U])  the  question  of  the  increase  of  the  banking  circulation  in  any 
way  whatever.  AVith  my  present  convictions,  I  never  Mill  vote  for  the 
increase  of  the  circulation  of  the  national  banks  until  we  get  back  to 
specie  payments,  and  then,  in  my  judgment,  the  amount  now  outstand- 
ing is  amply  sufficient  for  all  the  purposes  of  this  country.  Before  the 
war  the  whole  ])ank  circulation  was  only  $168,000,000 ;  now  it  is  $300,- 
000,000 ;  and  certainly  I  would  vote  for  no  proposition  to  increase  in 
any  form  the  paper  money,  either  greenbacks  or  national-bank  notes, 
until  we  get  back  to  the  standard  of  gold  and  silver  coin. 

A  proposition  to  increase  the  national-bank  notes  and  decrease  the 
greenbacks,  attached  to  this  bill,  will  not  meet  the  sanction  of  Con- 
gress, and  will  defeat  the  entire  bill.  The  only  effect  of  that  proposi- 
tion, should  it  become  a  law,  would  be  to  add  to  our  national  burdens 
the  interest  on  $50,000,000  of  new  bonds,  merely  to  secure  a  more  just 


214-  SPEECUES  AND  REPORTS  OF  JOHN  SHERMAN. 

distribution  of  baiikiiiij^  circulation ;  while  if  the  bill  as  it  stands  is 
passed,  the  effect  will  be  to  give  to  the  South  and  a  few  of  the  new 
States  of  the  West  in  the  next  year  an  oi)portunity  to  get  a  little  bank- 
ing circulation,  and  to  give  to  banks  in  the  old  States  an  opportunity  to 
move  themselves  bodily  to  the  South,  and  this  Mill  relieve  a  political 
and  sectional  complaint  that  is  founded  in  substantial  justice. 

One  or  two  observations  have  been  made  to  which  I  wish  briefly  to 
reply.  One  is  that  this  is  a  case  of  extreme  hardship  and  violation  of 
faith.  In  my  judgment,  according  to  the  law  the  apporti(jnment  to 
these  States  of  the  large  amount  they  have  is  in  violation  of  law,  and 
is  a  case  of  great  hardshij).  What  is  the  case  i  Allot  to  Massachusett.s, 
Connecticut,  aud  liht»de  Island  twice  their  projjtr  proj)ortion  of  tliis 
banking  circulation,  give  that  to  them  ou  account  of  their  manufactur- 
ing business,  and  they  still  have  $50,573,837  more  than  their  share 
under  existing  laws.  We  })ropose  to  take  §20,000,000  of  tliat,  and  dis- 
tri])ute  it  among  those  States  that  have  not  any.  That  is  the  whole 
proj)osition. 

lint  it  is  said  that  they  luive  the  pledge  of  the  public  faith,  that 
they  acted  in  accordance  with  law,  upon  our  invitation,  and  got  this 
proportion  of  circulation,  and  now  it  is  not  fair  for  us  to  withdraw  it. 
If  that  argument  were  true  in  ]>oint  of  fact  it  would  have  some  weiglit 
in  equity,  not  in  law,  because  the  law  expressly  ])rovi(les  that  the  act 
itself  may  be  repealed,  changed,  or  modified  at  the  ])leasure  of  Con- 
gress. If  in  pursuance  of  our  policy  pei'sons  had  entered  into  this 
banking  business  and  got  more  than  their  proportion  of  circulation,  it 
would  not  be  exactly  fair  to  withdraw  it.  But,  sir,  this  is  in  violation 
of  law,  and  it  is  only  necessary  for  me  to  recite  certain  well-known  facts 
to  show  it. 

By  the  original  banking  act,  ])assed  Febniary  25,  1SG3,  an  appfir- 
tionment  of  circulation  was  provided  1)V  which  one  half  was  to  be  di- 
vided according  to  population  and  the  other  half  according  to  resources. 
Massachusetts,  Connecticut,  and  Khode  Island — for  those  are  the  only 
three  States  affected — got  their  full  proportion  under  that  law,  every 
dollar  of  it ;  and  the  State  of  New  York  also  got  its  projiortion.  It 
was  found  that  the  limit  of  §300,(»00,0()()  prevented  some  of  the  State 
banks  from  coming  into  the  system,  and  in  June,  1804,  an  act  was 
passed  to  allow  State  banks,  M'ithout  regard  to  the  limitation,  to  come 
into  the  system.  Under  the  operationof  that  law,  from  June,  1864, 
to  March,  1865,  certain  banks  in  the  States  of  Massachusetts,  Connecti- 
cut, Rhode  Island,  and  Xew  York  came  in,  thus  exceeding  the  propor- 
tion allotted  to  them  by  the  law ;  but  they  had  not  very  far  exceeded 
the  proportion  up  to  March,  1865.  They  had  in  no  case  gone  over 
thirty  dollars  an  iidiabitant,  because  the  banks  were  slow. 

I  am  asked  how  did  it  happen  that  the  law  was  violated  and  there 
was  so  much  of  an  excess.  I  will  explain  in  a  moment.  On  the  3d  of 
March,  1865,  Congress  passed  a  law^  which,  after  making  certain  other 
provisions,  reads  as  follows  : 

And  that  $150,000,000  of  the  entire  amount  of  cirenlatinsr  notes  antliprized  to  bo 
issued  shall  be  apportioned  to  associations  in  the  States,  in  the  District  of  Columbia, 
and  in  the  Territories,  according  to  representative  population,  and  the  remainder 


NATIONAL  BANKS.  -215 

shall  be  apportioned  by  the  Secretary  of  the  Treasury  among  associations  formed  in 
the  several  States,  in  the  District  of  Columbia,  and  in  the  Territories,  having  due 
regard  to  the  existing  banking  capital,  resources,  and  business  of  such  States,  Dis- 
trict, and  Territories. 

This  section  restored  the  old  provision  of  apportionment  and  re- 
pealed the  act  of  June,  1864,  which  authorized  existing  banks  to  go 
beyond  the  limit  of  $1300,000,000.  It  has  never  been  changed,  modi- 
fied, or  altered,  except  as  I  sliall  liereafter  sliow. 

Unfortunately,  after  this  section  liad  passed,  as  I  supposed,  into  a 
law,  although  it  was  not  finally  a])proved  until  the  3d  of  March,  1865, 
an  amendment  was  attached  to  an  internal  revenue  bill  which  became 
law  on  the  same  day  (March  3,  1865),  in  words  as  follows : 

Tbat  any  existing  bank  organized  under  the  laws  of  any  State,  having  a  i)aid-up 
capital  of  not  less  tlian  $75,000,  whicb  sliall  ax)])ly  Ijofore  tlio  1st  day  of  July  next 
for  authority  to  become  a  national  bank,  under  the  act  entitled  "An  act  to  provide 
a  national  currency  secured  by  a  jdcdge  of  United  States  bonds,  and  to  provide  for 
tlie  circulation  and  redemption  tlieroof,"  approved  June  3,  18G4,  and  shall  comply 
with  all  the  reipiirements  of  said  act,  shall,  if  such  bank  be  found  by  the  Comptroller 
of  the  Currency  to  be  in  good  standing  and  credit,  receive  such  authority  in  prefer- 
ence to  new  associations  applying  for  the  same. 

Now,  one  construction  of  this  amendment  would  seem  to  bo  that  if, 
in  the  State  of  KIkkIc  Island,  any  ])urti()n  of  their  share  under  existing 
law  remained  to  be  distributed,  it  should  be  given  to  an  old  bank  rather 
than  to  a  new  bank.  The  amendment  did  not  change  the  rule  of  ap- 
portionment. It  said  nothing  about  it  except  who  was  to  get  the  allot- 
ment, and  that  the  old  banks  should  have  the  preference  therein ;  and 
in  the  State  of  New  York  the  thing  actually  existed ;  the  old  banks 
and  the  new  banks  were  coming  in,  atnl  this  provision  was  intended  to 
give  the  old  banks  tlie  preference.  But  the  Comptroller  of  the  Cur- 
rency, as  I  think  in  violation  of  law,  constnied  the  amendment  as  a 
repeal  of  the  section  first  mentioned,  and  disregarding  that  section  en- 
tirely allowed  the  old  banks  to  come  in. 

Let  me  say  that  up  to  the  close  of  the  war  tliere  was  no  very  great 
inequality  of  circulatii^n.  Up  to  that  time  the  baid\S  of  Massachusetts 
had  not  come  into  this  system  to  the  extent  that  they  afterward  did  ; 
but  availing  themselves  of  this  privilege  after  the  war  was  over,  when 
everybody  saw  that  it  was  a  great  advantage  to  have  national  banking 
circulation,  when  the  difficulties  had  passed  away,  adopting  the  con- 
Btruction  of  the  Comptroller  of  the  Currency,  they  rushed  in  and  got 
this  enormous  aggregate  of  circulation.  So  that,  upon  what  I  conceive 
to  be  an  erroneous  constniction  of  the  law,  they  now  claim  to  hold  an 
unfair  advantage  of  the  rest  of  the  people  of  the  United  States. 

In  the  application  of  a  general  rule  like  this  for  Avithdrawing  circu- 
lation, I  liave  no  doubt  there  will  be  some  inconvenience,  perhaps  some 
injustice.  I  certainly  do  not  desire  to  injure  any  banks  or  any  citizen 
of  those  States.  But  now,  when  we  are  compelled  to  do  what  is  right, 
is  it  not  just  that  we  should  give  some  circulation  to  the  States  that 
have  none,  even  if  we  have  to  withdraw  that  which  is  held,  I  think 
without  law,  in  other  States  'i 

Mr.  President,  the  question  after  all  comes  down  to  this — for  I  do 


216  8PEECIIES   AND   REPORTS  OF  JOHN   SHERMAN. 

not  think  we  onglit  to  bring  into  this  debate  the  subject  of  funding  the 
(Jebt — shall  there  be  a  redistribution  of  banking  circulation  i 

"VVe  were  very  careful  in  touching  this  (question  not  to  do  anything 
that  was  harsh  or  injurious.  It  would  be  only  even-handed  justice  to 
withdraw  from  these  IStates  in  excess  under  a  general  rule  the  whole 
$60,000,00(1  I  have  not  proposed  and  do  not  intend  to  propose  such  a 
thing,  l)ecause  a  general  interference  with  the  Inisincss  of  the  people 
of  those  States  to  the  extent  of  enforcing  a  fair  and  equal  rule  would 
work  injury  to  them  and  work  injury  to  the  whole  country;  but,  in 
my  judgment,  the  transfer  of  a  reasonable  amount  (»f  this  circulation, 
wiiile  it  may  give  local  advantages  to  the  Southern  States,  would  not 
materially  injure  the  business  of  these  older  States.  At  any  rate,  it  is 
just  and  fair,  aiul,  jus  I  said  yesterday,  if  my  own  State  were  in  excess 
1  sliould  still  feel  disposed  to  vote  for  the  withdrawal. 

All  that  there  is  in  this  bill,  and  all  that  is  jnvtposed  by  this  bill,  is 
to  secure  a  partial  redistribution  <»f  the  banking  circulation  until  we 
can  adopt  some  permanent  iinancial  measure  looking  to  free  banking 
and  specie  payments.  It  is  temporary  in  its  character ;  and  I  must 
confess  that  the  great  objection  I  have  to  this  measure  is  that  it  is  tem- 
porary in  its  character.  I  W(»uld  not  press  this  bill  now  to  secure  this 
partial  justice  to  the  Southern  States  but  for  the  fact  that  the  l>ill  re- 
ported from  the  Committee  on  Finance,  or  some  bill  of  that  kind  htok- 
ing  toward  specie  payments  and  free  banking,  would  not  be  adoj)ted 
during  the  present  session  of  Congress.  The  redistribution  of  S2(»,- 
000,000  of  circulation  will  give  temporary  relief,  will  probaldy  l)e  all 
that  can  be  absorbed  in  those  States  for  the  next  year  <»r  so,  and,  in  my 
judgment,  will  not  do  any  considerable  injury  to  the  ]>eople  of  the 
States  whose  currency  will  be  decreased. 

I  hope,  without  any  further  prolonged  debate — and  I  beg  pardon 
for  occupying  so  much  time  now  in  replying  to  the  observations  that 
have  been  made  this  morning — that  we  may  have  a  vote  on  this  bill 
and  get  it  out  of  the  road. 


THE  CURREXCT. 

AY  THE  SENATE,  JANUARY  2 I^,   1S70. 

The  regular  order  being  the  bill  to  provide  a  national  currency  of  coin  notes  and 
to  equalize  the  distribution  of  circulating  notes,  Mr.  Sherman  said : 

Mr.  President  :  I  do  not  propose  in  opening  the  debate  on  this  bill 
to  make  any  elaborate  financial  speech.  AVhat  I  desire  to  say  will  be 
addressed  solely  to  the  Senate,  and  bear  entirely  upon  the  points  pre- 
sented by  this  bill.  The  bill  proposes  to  deal  with  two  questions  :  first 
the  equalization  of  the  national  currency,  and  second  the  establishment 
of  banks  to  issue  coin  notes  ;  and  these  two  propositions  are  the  only 
subjects  on  which  I  shall  say  anything.  I  shall  speak  as  briefly  as  pos- 
sible, and  present  the  questions  involved  as  clearly  as  I  can,  so  as  to 


THE  CURRENCY.  217 

confine  the  debate,  if  possible,  to  these  two  questions.  There  are  a 
great  nuiltitude  of  financial  questions  now  agitating  the  public  mind 
that  are  somewhat  connected  with  these  two.  The  enlargement  of  the 
discussion  by  introducing  them  would,  I  think,  rather  obscure  the  ar- 
gimient  than  make  it  plain. 

The  first  two  sections  of  this  bill  provide  for  a  partial  equalization 
of  the  bank  circulation  of  the  United  States.  The  present  circulation 
is  distributed  with  such  gross  inc(|uality  as  to  be  revolting  to  the  sense 
of  justice.  Three  States  whose  people  are  among  the  most  cntcr])rising 
anci  active  of  our  countrymen,  containing  a  population  of  1,8G5,S33,  or 
one  fifteenth  of  the  population  of  the  United  States,  have  an  aggregate 
circulation  amounting  to  SU<j,8'J0,4l>S,  Tiiese  States  are  MaHsacliusetts, 
KJKjde  Island,  and  Connecticut.  With  a  population  of  less  than  two 
millions,  they  have  one  third  of  the  whole  national  circulation,  so  that 
one  fifteenth  of  the  population  absorbs  and  monopolizes  one  third  of 
the  national  circulation.  The  Southern  States,  with  a  population  of 
about  eleven  millions,  liave  scarcely  any  circulation,  perhaps  a  few 
millions.  I  have  here  the  tables  in  detail,  but  I  can  not  give  the  aggre- 
gate. It  is  proljablv  not  one  fourth  as  much  as  the  State  of  Massachu- 
setts alone.  The  \\'estern  States,  all  of  them  rapidly  growing  com- 
munities, with  cities  and  towns  and  business  springing  up  with  amaz- 
ing rapidity,  some  of  them  formed  into  States  within  a  few  years,  have 
practically  no  circulation.  The  Pacific  coast  is  practically  excluded 
irom  our  banking  system,  simply  because  there  coin  alone  is  used  in 
circulation  and  our  currency  is  sold  at  a  discount. 

Thus  the  present  system,  which  ought  to  be  a  national  one  equally 
and  fairly  diffused  through  the  United  States,  is  confined  in  its  bene- 
ficial effects  to  the  Eastern  and  mainly  to  the  New  England  States. 
This  gross  and  palpable  injustice  has  grown  out  of  a  violation  of  law  by 
the  Comjitroller  of  the  (Airrency  and  the  Secretary  of  the  Treasury. 
This  fact  I  stated  at  the  last  session,  and  1  wish  now  to  call  the  atten- 
tion of  the  Senate  distinctly  to  the  law  under  which  this  grossly  un- 
equal distribution  was  nuide.  The  first  national  bank  act  contained  a 
provision  for  the  distribution  of  the  banking  circulation.  The  act  of 
February  25,  18G3,  contained  this  clause  : 

Tliat  the  entire  amount  of  circulatinfr  notes  to  be  issued  under  this  act  shall  not 
exceed  $300,000,000,  $150,000,000  of  which  sinn  sliall  be  apportioned  to  associations 
in  the  States,  in  the  District  of  Columbia,  and  in  the  Territories,  according  to  repre- 
sentative pojnilation ;  and  the  remainder  shall  be  apportioned  by  the  Secretary  of 
the  Treasury  amonp  associations  formed  in  the  several  States,  in  tlie  District  of  Co- 
lumbia, and  in  the  Territories,  having  due  regard  to  the  existing  banking  capital,  re- 
sources, and  business  of  such  States,  District,  and  Territories. 

Under  this  act  each  State  would  have  been  entitled  to  a  little  more 
than  five  dollars  for  each  inhabitant,  according  to  the  census  of  18G0, 
out  of  the  first  si. 50,000,000,  and  then  the  other  §150,000,000  should 
have  been  distributed  according  to  business,  capital,  and  resources. 
The  Eastern  States,  being  much  wealthier  than  the  Southern  and  West- 
em,  as  a  matter  of  course  would  have  received  much  the  larger  portion  of 
the  last  Sl.'i0,000,000;  but  under  the  other  provisions  of  this  act  each 
State  would  have  at  least  five  dollars  for  each  inhabitant.     The  revised 


218  SPEECHES   AND  REPORTS  OF  JOllX  SHERMAN. 

banking  act  of  June  3,  18(14,  omitted  this  provision  for  a  distribution, 
for  the  reason  that  the  old  State  banks  and  new  banks  formed  under 
the  national  bankinf^  system  very  slowly.  The  disposition  was  to  en- 
courage the  old  banks  to  form  under  the  new  banking  system  as  rapidly 
as  they  could.  Section  forty-four  of  that  revised  act  contained  this 
provision : 

That  any  bank  incorporated  by  special  law,  or  any  bankinij  institution  orpanized 
under  a  general  law  of  any  State,  may,  by  authority  of  this  act,  become  a  national 
association  under  its  i)rovisiont>,  by  the  name  prescribed  in  its  organization  cor- 
titicatc. 

This  gave  to  each  existing  baid<,  witliout  regard  to  the  rule  of  dis- 
tribution, the  right  to  organize  under  the  national  banking  system.  It 
was  supposed  that  when  this  act  took  effect  these  ])anks  would  rapidly 
go  into  the  new  system,  but  that  the  amount  of  $3(>0,(K)(i,(»u<>  would 
still  be  amply  sufficient  to  secure  to  cacli  State  its  proper  proportion. 
So  matters  went  on.  In  the  fall  of  18»>-1  the  old  banks  were  rapidly 
going  into  the  new  system.  Then  it  was  found  necessary  to  reenact 
the  old  provision  requirin<]j  a  distribution.  After  a  considerable  debate 
in  the  Senate,  in  the  session  of  18G4—'65,  Congress  by  an  amendment 
to  the  national  banking  act  restored  in  the  same  words  the  old  provision 
of  the  act  of  1862.  I  will  read  it  again.  By  the  act  approved  March 
o,  1805,  it  was  provided  : 

And  that  $150,000,000  of  the  entire  amount  of  circulatinp  notes  authorized  to 
be  issued  shall  be  apportioned  to  associations  in  the  States,  in  the  District  of  Colum- 
bia, and  in  the  Territories,  according  to  representative  population,  and  the  remainder 
shall  be  apportioned  by  the  Secretary  of  the  Treasury  among  associations  formed  in 
the  respective  States,  in  the  District  of  Columbia,  and  in  the  Territories,  having 
due  regard  to  the  existing  banking  capital,  resources,  and  business  of  such  State, 
District,  and  Territory. 

According  to  the  last  report  before  that  time  there  was  only  $65,- 
000,000  of  circulation  outstanding,  so  that  this  old  provision  or  barrier 
against  unequal  distribution  was  restored  to  the  law  long  before  there 
was  any  large  amount  in  circulation.  The  amount  outstanding  on  the 
1st  of  October,  1864,  according  to  the  official  statement,  which  I  have 
in  my  hand,  was  $65,864,650. 

When  the  war  closed,  and  as  the  credit  of  the  country  revived, 
banks  were  rapidly  organized  under  the  national  banking  system. 
Then  it  was  that  this  pri^ilege,  which  for  a  long  time  had  gone  a-beg- 
ging, was  eagerly  sought  for  by  old  and  new  banking  associations ; 
and  as  the  ca])itai  of  the  country  was  accumulated  mainly  in  the  older 
States,  immediately  after  the  war  was  over  there  was  a  great  nish  to 
organize  national  banks  there.  The  Comptroller  of  the  CuiTency 
utterly  disregarded  the  law  that  I  have  read,  and  authorized  banks  to 
be  formed  without  any  reference  whatever  to  that  rale  of  distribution. 
He  did  not  even  refer  to  such  a  law  in  his  next  report.  Now  he  justi- 
fies himself  by  a  provision  of  an  act  passed  on  the  same  day,  the  3d  of 
March,  1865,  an  amendment  made  to  an  internal  revenue  act,  thrust 
into  a  place  where  it  did  not  belong,  and  offered  and  adopted  with 
scarcely  any  consideration,  in  the  last  hours  of  the  session.  It  is  a 
striking  evidence  of  the  effects  of  tacking  legislation  on  appropriation 


THE  CURRENCY. 


219 


and  other  bills  during  the  last  hours  of  a  session.  Under  that  amend- 
ment the  Comptroller  sought  to  excuse  or  justify  his  disregard  of  the 
provision  passed  after  debate  on  the  same  day,  1  will  read  that  amend- 
ment. It  was  inserted  on  motion  of  the  Senator  from  Rhode  Island 
[Mr.  Anthony],  I  think  at  midnight,  or  at  a  very  late  hour : 

Tliat  any  existing  bank  organized  under  the  laws  of  any  State,  having  a  "paid-up 
capital  of  not  less  than  $75,000,  which  shall  apply  before  the  1st  day  of  July  next, 
shall  have  authority  to  become  a  national  bank  under  the  act  entitled  "An  act  to 
provide  a  national  currency  secured  by  a  pledge  of  United  States  bonds,  and  to  pro- 
vide for  the  circulation  and  redemption  thereof,"  approved  June  3,  1804,  and  shall 
comply  with  all  the  requirements  of  said  act,  shall,  if  such  bank  be  found  by  the 
Comptroller  of  the  Currency  to  bo  in  good  standing  and  credit,  receive  such  au- 
thority in  preference  to  new  associations  applying  for  the  same. 

That  is,  it  continued  the  old  privilege  in  favor  of  the  old  banks  up  to 
the  1st  of  July  then  following.  Xow,  it  seems  to  me  that  an  execu- 
tive officer,  in  construing  these  two  laws  together,  both  being  of  the 
same  date,  would  give  eliect  to  both.  lie  would  naturally  say  that  the 
distribution  would  be  made  under  the  act  of  March  3,  1805,  first  read 
by  me,  and  then  that  in  availing  themselves  of  tiiat  distribution  the 
existing  banks  Avithin  the  State  might  under  the  second  act  I  read  have 
the  priority  witliin  the  limits  assigned  to  that  State  under  tlie  distribu- 
tion. That  was  undoubtedl}'  tlic  true  constniction  of  the  acts;  but 
even  this  limited  operation  of  the  amendment  of  Mr.  Anthony  expires 
on  the  1st  of  July,  1SG5 ;  and  yet  on  that  day  the  whole  amount  of 
l)anking  circulation  was  less  tlian  one  hundred  and  lifty  million  dollars; 
and  the  other  §150,000,000  was  issued  in  ])lain  disregard  of  law,  with- 
out any  pretense  of  justification,  and  that  has  created  all  this  difficulty. 

I  have  in  my  hand  the  report  of  the  Comptroller  of  the  Currency, 
showing  that  on  the  1st  of  October,  1805,  three  months  after  this  j)riv- 
ilege  had  exhausted  itself,  the  whole  amount  of  circulation  then  out- 
standing was  8190,847,055,  leaving  $110,000,000  yet  to  be  distributed; 
and  yet  this  8110,000,000  was  issued  to  banks  in  the  old  States,  not 
only  in  violation  of  the  act  of  March  3,  1805,  which  I  have  read,  but 
in  violation  of  the  act  under  pretense  of  which  it  was  done.  That  act 
expired  by  its  own  limitation  on  tlie  1st  of  July  preceding.  I  call  at- 
tention to  this  matter  simply  to  show  that  this  whole  difBculty  grew 
out  of  a  disregard  of  the  law ;  that  it  was  not  the  defect  of  the  law, 
but  a  violation  of  the  law. 

Xow,  Mr.  President,  this  unequal  distribution  creates  an  iron  mo- 
nopoly, which  is  the  source  of  sectional  complaint  in  this  country,  and 
which,  as  sure  as  fate,  will  overthrow  this  system  of  banking  unless  it 
is  corrected  in  some  way.  You  can  not  maintain  in  this  country  a  sys- 
tem which  is  bound  witliin  limits  beyond  Avhich  it  can  not  go ;  a  system 
which  is  now  regarded  as  a  profitable  privilege,  the  chief  benefits  of 
which  have  been  absorbed  by  a  single  section  of  the  country.  When 
you  add  the  fact  that  this  unequal  distribution  was  brought  about  by  a 
plain  and  palpable  violation  of  law,  you  have  a  case  of  injustice  that 
will  not  be  submitted  to.  It  will  be  overthrown  even  if  the  whole  sys- 
tem must  be  overthrown.  From  the  very  time  this  inequality  was 
ascertained,  at  the  very  next  session  of  Congress,  bills  were  introduced 


220  SPEECHES  AND  REPORTS  OF  JOHX  SHERMAN. 

both  in  tlie  Senate  and  in  the  House  to  provide  for?t  redistril)ution  of 
the  currency.  Complaints  were  made  tliat  the  new  States,  where 
credit  is  needed,  where  money  is  needed,  where  more  than  anywhere 
else  the  convenience  of  Ijaiikini^  is  necessary,  were  utterly  excluded  ; 
that  they  were  allowed  no  banks,  no  means  of  borrowing;  while  the 
older  States,  where  credit  was  less  needed,  where  capital  had  been 
accumulated  by  ages  of  labor,  had  a  supertluity  of  circulation.  Then 
it  was  that  in*^  the  West  there  arose  a  great  cry  for  more  currency. 
Every  Western  State  demanded  of  its  Kepre*sentatives  and  Senators 
more  currency,  while  the  Kastern  States,  who  had  a  suq^lus  of  it  under 
the  law  and  under  the  distribution,  rather  demanded  contraction.  Yet 
when  the  Western  States  called  on  the  Eastern  States  to  render  a  por- 
tion of  this  circulation,  dithculties  occurred.  They  then  claimed  that 
these  banks  had  vested  rights ;  that  they  had  received  the  circulation 
in  good  faith,  in  accordance  with  law  ;  that  it  would  be  wrong  to  take 
it  away  from  them  ;  that  it  would  derange  their  business,  call  in  debts 
and  loans,  and  would  be  very  embarrassing. 

So  strong  was  the  necessity  felt  of  ecpializing  this  distribution  that 
during  the  last  Congress  both  Houses  passed  bills  withdrawing  from 
the  Kew  England  States  their  excess  of  circulation  and  distributing  it 
among  the  AVestern  and  Southern  States;  but  the  Senate  and  House 
diifered  as  to  the  extent  and  manner  of  the  redistribution.  The  House 
demniuled  a  general  revision  and  tearing  u]i,  you  may  say,  of  the  old 
banking  institutions  in  the  Eastern  States  and  the  distributi(m  of  that 
circulation  in  the  West.  The  House  bill  was  so  general  in  its  charac- 
ter that  I  felt  the  force  of  the  argument  of  the  Senators  who  opposed 
it,  that  it  would  derange  business  so  as  to  do  more  hann  to  the  inter- 
ests of  the  whole  country  than  good  to  the  Western  States.  In  the 
Senate  we  proposed  to  limit  the  redistribution  to  twenty,  thirty,  or  forty 
million  dollars,  and  to  that  extent  we  did  provide  for  it ;  but  the  dif- 
ference l)etween  the  two  Houses  caused  both  propositions  to  fail,  and 
now  the  circulation  continues  unequally  distributed  as  before. 

The  question  now  is,  what  remedy  ought  to  be  provided  ?  There 
are  but  two.  The  tirst  is  to  carry  out  the  plan,  proposed  at  the  last 
Congress,  to  recall  from  the  banks  in  the  Eastern  States  their  excess  of 
circulation  and  distribute  it  to  the  AVest  and  South,  maintaining  the 
limit  of  8300,000,000  of  national  bank  circulation.  The  objection  to 
that  has  already  been  stated  by  me,  and  will  no  doubt  be  made  by 
others  if  the  debate  should  go  so  far,  that  it  would  derange  business 
more  in  the  East  that  it  would  help  the  West  and  South  ;  that  although 
the  officers  of  the  Government  may  have  done  wrong,  yet,  as  these 
banks  have  a  kind  of  vested  right  in  the  privilege  granted  to  them 
for  a  certain  length  of  time,  it  would  be  hard  to  take  it  away  from 
them.  That  argument  was  felt  here  in  the  Senate,  and  I  presume 
will  now  prevent  ami;hing  like  a  general  redistribution  of  the  national 
banking  circulation. 

The  only  other  way  is  to  increase  the  limit  of  banking  circulation. 
It  is  now  limited  to  "$300,000,000.  The  Committee  on'Finance  pro- 
posed to  raise  the  limit  to  $345,000,000  and  allow  this  increase  of  $45,- 
000,000  to  be  distributed  in  the  West  and  South.     Here  at  once  objec- 


THE  CURRENCY.  221 

tion  is  made  that  this  is  an  inflation  of  the  cnrreney.  For  one  I 
must  say  tliat,  with  my  views  of  wluit  is  hest  for  the  ])ul)lic  interests,  I 
can  not  suppoit  any  measure,  pending  the  present  condition  of  affairs 
and  the  suspension  of  specie  payments,  tliat  will  increase  the  volume  of 
paper  currency  in  this  country,  until  we  get  down  to  the  solid  basis  of 
gold  and  silver  coin.  And  yet  at  the  same  time  I  see  the  vital  necessity 
of  repairing  this  unequal  distribution  of  banking  circulation.  We  must 
do  that  or  else  be  i)repared  to  see  the  whole  system  of  national  banking 
overthrown  and  ivplaced  by  the  old  system  of  State  banks. 

The  national  banking  system  is  intinittjv  ])refei"able  to  any  State 
banking  system.  I  do  not  think  any  intelligent  man  who  examines  this 
question  will  hesitate  on  that  ])oint.  The  old  State  banks  were  gov- 
erned l>y  a  diversity  of  laws ;  they  were  bound  in  a  diversity  of  securi- 
ties, and  in  many  cases  without  any.  The  notes  were  as  multifarious 
in  form,  color,  and  dies  as  the  skill  of  bank-note-engravers  could  make 
them.  I'nder  the  national  system  we  liave  absolute  security  to  the  bill- 
holder.  ^\'e  have  unifonnity  in  the  notes.  There  are  but  a  few  forms 
of  notes,  so  that  any  })lain  man  carrying  on  the  ordinary  business  of  life 
can  tell  whether  a  note  is  good  or  not.  They  are  all  printed  with  the 
greatest  care  by  the  (iovermnent.  The  Govennnent  is  the  guarantor. 
The  Government  holds  in  its  hands  absolute  security  for  their  redemp- 
tion. They  are  a  unifonn  currency,  floating  all  over  the  United  States, 
as  good  in  one  place  as  another;  while  under  the  State  banking  system 
the  notes  were  good  only  within  the  limits  of  the  State.  The  national 
banking  system  is  much  better,  much  more  secure,  but  at  the  same 
time  it  can  not  be  maintained  as  a  sectional  mono])oly.  This  is  tlie 
fatal  weakness  of  the  sy.stem,  which  if  removed  would  leave  us  the 
best  pa]ier  currency  yet  devised. 

iSow,  Mr.  President,  in  order  to  avoid  any  expansion  of  the  cur- 
rency there  were  two  courses  open  to  the  Conmiittee  on  Finance,  and 
on  this  there  was  some  difference  of  opinion.  One  was  as  the  new 
bank  notes  were  issued  to  withdraw  the  United  States  notes,  or,  as  the^ 
are  conmionly  called,  the  greenbacks.  This  projjosition,  even  if  it 
shouhl  receive  the  assent  of  the  Senate,  MCtuld  probably  not  receive 
that  of  the  House.  The  greenbacks  are  a  great  favorite  of  the  people. 
They  were  the  agency  and  means  by  which  our  country  was  carried 
through  the  war.  They  are  a  convenient  form  of  currency.  During 
the  8us])ension  of  specie  payments  they  are  the  best  fonn  of  currency. 
Any  contraction  of  the  amount  of  greenbacks,  except  as  a  means  of  ap- 
proaching specie  payments,  would  be  met  by  a  strong  popular  opjiosi- 
tion.  Even  if  our  reason  should  convince  us  that  it  is  wiser  and  better 
to  withdraw  them,  in  order  to  give  place  to  national-bank  notes  and 
gold  and  silver  coin,  the  02:)inions  of  our  constituents  Avould  prevent  us 
Irom  doing  it. 

This  feeling  is  the  great  obstacle  to  specie  payments.  If  we  should 
attempt  it,  it  will  cause  a  contraction  of  the  currency  more  severe  and 
stringent  than  any  we  have  yet  felt.  Heretof(jre  any  contraction  that 
has  gone  on  has  been  made  good  by  some  other  form  of  circulation. 
We  have  already  retired  fifty  or  sixty  million  dollars^  of  greenbacks, 
but  during  that  process  we  issued  over  one  hundred  million  dollars  of 


222  SPEECHES  AND  REPORTS  OF  JOHN  SHEUNfAN. 

national-bank  notes.  If  now  the  process  of  contraction  should  ffo  on, 
if  we  should  withdraw  ijreonbacks  merely  to  equalize  the  distribution 
of  bank  circulatiuii,  we  i^hould  create  a  strin<;ency  in  the  money  market 
and  prevent  the  formation  of  new  banks,  leaviuij:  the  ])resent  distribu- 
tion a  festerinj^  sore  of  sectional  irritation.  The  payment  of  the  green- 
backs or  the  fundin<i;  of  them  into  bonds  should  be  treated  as  a  distinct 
measure  of  financial  ])olicy — as  a  measure  of  resumption,  and  not  at  all 
as  a  means  of  distributing  bank  circulation.  But  this  is  a  subject  that 
is  scarcely  wi>rth  discussing  now,  because  in  view  of  the  geneml  senti- 
ment in  all  parts  of  our  country  a  retirement  now  of  greenbacks  to 
give  way  to  national-lmiik  ncttes  would  not  receive  the  approval  of  our 
constituents,  and  no  financial  measure  ought  to  ])ass  Congress  unless  it 
receives  the  assent  of  the  substantial  peoj>le  of  the  country. 

The  only  alternative,  then,  was  the  withdrawal  of  what  are  called 
the  three  ])er  cent,  certiticates.  Tiiesc  certificates  are  a  demand  loan 
by  the  United  States,  payable  in  greenbacks  on  demand  or  after  ten 
days'  notice.  They  draw  three  per  cent,  interest.  They  are  held  by 
the  banks  as  a  portion  of  their  reserve  in  the  ])lace  of  greeid)acks.  They 
are,  therefore,  the  most  dangerous  form  of  (rovernment  indebtedness, 
because  we  are  liable  to  be  called  for  the  amount  of  them  at  a  time 
when  it  is  most  inconvenient  to  pay  them.  AVe  are  liable  to  be  called 
upon  to  pay  them  in  the  midst  ot  a  ])anic.  As  we  approach  specie  pay- 
ments we  may  be  called  upon  to  pay  them  in  coin.  They  were  issued 
only  under  the  ])ressure  of  necessity.  Senators  around  me  will  remem- 
ber very  well  their  history.  The  banks  held  a  large  amount  of  matur- 
ing compound-interest  note.s.  Those  were  in  the  nature  of  currency, 
and  were  presented  for  ])ayment  as  they  became  due.  The  Secretary 
of  the  Treasury  had  no  means  to  pay  them  except  by  issuing  a  new 
form  of  certiticates  or  more  bonds.  He  did  not  desire  to  increase  the 
bonded  debt  of  the  United  States,  and  therefore  called  upon  Congress 
to  authorize  him  to  issue  these  temporary  loan  certificates.  The  only 
reason  why  they  were  taken  at  all,  bearing  as  they  did  so  low  a  rate  of 
interest  as  three  per  cent.,  was  l)ecause  we  gave  the  l)anks  who  hold 
them  the  privilege  of  counting  them  as  a  part  of  their  reserve.  They 
may  at  any  time  by  a  contraction  of  the  currency  be  forced  out  of  the 
banks  upon  the  Treasury  for  payment.  This  form  of  indebtedness 
ought  to  be  paid  off  as  rapidly  as  possible. 

But  the  payment  of  these  three  per  cent,  certificates  operates  as  a 
contraction  of  the  currency.  As  they  are  paid  off  and  retired  their 
place  must  be  supplied  by  the  same  amount  of  greenbacks  in  the  vaults 
of  the  banks.  They  are  in  every  essential  particular  except  actual  cir- 
culation among  the  people  a  ciurency  precisely  to  tlie  same  extent  as 
the  United  States  notes.  The  very  moment  they  are  paid  off  their 
place  must  be  supplied  by  United  States  notes.  If  they  are  presented 
for  payment  they  must  be  paid  in  United  States  notes  or  coin.  The 
bill  therefore  proposes  to  retire  $45,000,000  of  three  per  cent,  certifi- 
cates, all  that  are  now  outstanding,  as  these  new  bank  notes  are  issued. 

Under  the  first  and  second  sections  of  the  bill,  therefore,  §45,000,- 
000  of  circulating  notes  will  be  apportioned  among  the  several  States, 
in  accordance  wit1i  existing  law,  mainly  to  the  people  of  the  South,  and 


THE  CUKRENCY. 


223 


as  the  banks  are  organized  from  montli  to  month  the  Secretary  of  the 
Treasury  is  required  to  pay  otf  the  three  per  cent,  certificates. 

Each  Senator  will  be  interested  in  the  question,  how  much  his  own 
State  will  get  of  this  s4r),(i00,(J0(>,  and  Senatoi-s  have  inquired  of  me 
liow  it  will  be  divided.  There  has  been  some  criticism  as  to  whether 
or  not  the  terms  of  the  bill  were  clear  and  specific  enough  to  secure  a 
distribution  according  to  existing  law ;  and  1  have,  therefore,  caused  to 
be  prepared  by  the  ('omptroller  of  the  Currency  a  statement  showing 
what  States  will  receive  this  S45,000,<>0<».  In  answer  to  a  communica- 
tion of  mine  the  Comptroller  of  the  Currency  says : 

Treascrt  Depahtmbnt, 
Office  of  Comptrolleu  of  the  Cibkency, 
^VASIIl^•aToN,  D.  C,  January  20,  1870. 

Sir  :  I  have  tho  honor  to  afknowlcd}j;e  the  receipt  of  your  coniinunication  of  the 
17th  instant,  and  to  state  in  reply  tliat  my  construction  of  the  hist  clause  of  section 
one  of  a  bill  to  provide  a  national  currency  of  coin  notes,  and  to  ecjualize  the  dis- 
tribution of  circulatinfj;  notes  (S.  Xo.  378),  is  that  those  States  hnvinp  less  than  their 
proportion  according  to  population  would  be  entitled  to  priority  over  otiier  States 
in  the  supply  of  bank  circulation. 

I  inclose  herewith  a  statement  sliowinp  the  amount  to  which  each  of  the  South- 
ern States  would  be  entitled  umler  the  apportionment  of  the  first  $150,00(),fl00,  the 
amount  which  has  already  been  furnished  to  those  States,  and  tho  amount  neces- 
sary to  brinfj;  those  States  upon  an  equality  under  such  apportionment  with  the 
other  States  of  tho  Union,  from  which  you  will  observe  that  it  will  require  $'25,- 
289,570  to  supply  the  per  capita  apportionment  of  those  States,  leavinf;  somethiuff 
over  nineteen  million  dollars  to  be  apportioned  according  to  business,  banking  capi- 
tal, resources,  etc.,  or  to  be  retained  until  a  new  apportionment  can  be  made  under 
the  census  of  1870. 

If  it  should  seem  proper  to  the  committee  to  direct  which  of  these  courses  should 
be  pursued,  I  shall,  of  course,  acquiesce  in  their  judgment. 

Very  respectfullv, 

II.  R.  IIULRURD,  Comptroller. 
Hon.  .John  Shehmax,  Chairman  Finance  Committee  United  States  Senate. 

Statement  shoiring  the  amount  of  circulation  to  vhieh  each  of  the  Southern  States  icould  he 

entitled  under   the  apftorlionment  of  the  JicKt  |i  1. "50,000,000,  </<«  amount  vhirh  has  already 

been  furni.ihcd,  and  the  amount  necessary  to  briny  these  States  upon  an  equality  with  the 
other  States. 


STATES. 


Virginia  and  West  Virginia 

Missouri 

Kentucky 

Tennessee  

Louisiana 

Mississippi 

(leorgia 

North  Carolina 

South  Carolina 

Alabama 

Texas 

Arkansas 

Florida 

Total 


Amoant  enti- 
tled to  under 
apportion- 
ment. 

Amonnt 
received. 

Amount 

necessary  to 

equalize. 

86,032,457 

$4,129,600 

$1,902,857 

5,823,061 

4,218,630 

1,604,431 

5,076,100 

2,371,620 

2,704,486 

4,651,585 

1,265,470 

3,286,115 

2,053,338 

1,245,000 

808,338 

1,9.35,456 

66,000 

1,869,456 

3,247,39.5 

1,234,000 

2,013,395 

3,610,149 

3H3,400 

3,226,749 

1,644,205 

218,000 

1,426,205 

2,887.413 

353,025 

2,534,388 

2,300,938 

407,535 

1,893,403 

1,769,896 

179,500 

1,590,396 

420,3.'>1 

429,351 

$41,361,350 

$16,071,780 

$25,289,570 

224  SPEECHES   AND  REPORTS   OF  JOHN   SHERMAN. 

It  appears  from  the  statement  that  the  Soutliern  States,  in  order  to 
make  up  their  share  of  tlie  first  $;150,0(M»,(K»0,  will  receive  8-^"'>,2S'J,570. 
That  will  leave  $lt),(>0(),00()  of  this  additional  circulation  to  be  dis- 
tributed under  the  second  clause  of  the  apportionment ;  that  is,  to  the 
States  accordin<^  to  resources,  bankin<;  circulation,  etc.,  ^nvin<^  first  to 
those  now  having  the  least  circulation.  This  will  fjive  to  the  Western  and 
Southern  States,  under  the  rule  of  apportionment  provided  by  e.visting 
law,  some  nineteen  millictn  dollars.  I'reciselj  how  nnich  it  will  give  to 
each  State  would  be  ditticult  to  tell  at  present,  without  a  careful  ex- 
amination aTid  comparison  of  their  ivsources,  l)usiness  capital,  etc.  At 
any  rate,  s-2r),2S*.>,.57<>  of  this  amount  would  tirst  be  distributed  to  those 
States  having  no  circulation  at  all,  or  very  little  ;  and  the  remaining 
$20,000,000  would  be  distributed  to  the  Southern  and  Western  States. 

This  is  all  I  desire  to  .say  in  regard  to  the  first  branch  of  the  bill. 
The  last  three  sections  of  the  bill  relate  entirely  to  the  coin  notes. 
The  committee  were  of  the  opinion  that  it  was  better  in  this  bill  to 
establish  a  simple  general  rule  In'  which  associations  might  organize 
under  the  banlcing  system  in  any  ])art  of  the  country  to  issue  coin 
notes  without  any  limitation  as  to  circulation.  The  objection  may  be 
made  that  advantage  will  not  be  taken  of  this  privnlege  ;  but  we  are 
assured  by  the  higliest  authorities  that  banks  would  at  once  be  organ- 
ized under  this  system  in  the  States  of  California  aiid  Oregon,  and  in 
the  cities  of  Xew  York,  Charleston,  and  New  ( )rleans.  No  banks 
would  be  organized  upon  a  coin  basis  with  authority  to  issue  coin 
notes  unless  coin  or  coin  notes  were  in  general  circulation  at  the  place 
of  location  of  the  banks.  As  a  matter  of  course,  where  the  ordinary 
circulation  of  the  country  is  supplied  by  our  national  currency  notes 
or  greenbacks,  gold  notes  would  not  have  a  ready  circulation  ;  but  it  is 
to  be  remembered  that  the  whole  Pacific  coast  is  now  using  gold  and 
silver  coin,  and  is  eager  and  anxious  to  avail  itself  of  the  benefit  of 
banking  upon  a  gold  basis. 

We  have  assurances  that  banks  will  be  organized  at  once  under  this 
system  on  the  Pacific  coast,  with  a  very  large  amount  of  circulation, 
thus  unlocking,  if  you  please,  a  portion  of  the  gold  that  must  necessa- 
rily be  used  now  for  the  ordinary  purposes  of  circulation.  In  the  city 
of  New  York  there  is  now  going  on  a  commerce  of  more  than  six  hun- 
dred million  dollars,  all  of  which  is  conducted  on  the  gold  basis ;  and 
so  great  is  the  necessity  for  paper  money  to  represent  this  gold  busi- 
ness that  those  who  transact  it  actually  deposit  $50,000,000  of  gold  coin 
in  the  Treasury  of  the  United  States,  and  receive  gold  notes  without 
interest,  merely  to  facilitate  the  ordinary  transaction  of  this  great  com- 
mercial business.  I  suppose  the  transactions  between  the  first  and 
second  dealers  in  New  York  based  upon  gold  notes,  upon  gold,  and 
upon  gold  values,  amount  to  more  than  one  thousand  million  dollars 
per  annum.  The  speculative  transactions  upon  gold  and  gold  notes 
have  in  some  cases  amounted  to  three  or  four  hundred  million  dollars 
a  day  ;  but  those  are  mere  representative  operations  that  we  do  not  re- 
gard. The  actual  business  transactions  in  gold  now  being  carried  on 
in  the  city  of  New'  York  represent  an  aggregate  annual  business  of  not 
less  than  §1,000,000,000.     The  whole  foreign  commerce  in  the  city  of 


THE  CURRENCY.  225 

New  York,  exports  and  imports,  is  about  six, hundred  million  dollars; 
and  allowing  that  merchandise  exported  and  imported  passes  through 
two  hands  before  its  value  is  quoted  in  our  paper  currency,  the  amount 
of  business  transactions  is  probably  more  than  one  thousand  million 
dfjllars. 

So  in  the  cities  of  Charleston  and  New  Orleans,  where  cotton  is 
meaiJured  by  the  gold  standard,  these  coin  notes  can  be  very  readily 
used,  and  they  will  there  be  a  veiy  convenient  agency  of  exchange  for 
marketing  the  great  staple  of  cotton.  These  banks  may  be  organized 
in  these  places,  and  to  the  extent  that  they  are  organized  they  will  fur- 
nish to  tlie  ])oople  a  safe  currency  based  upon  coin,  payable  in  coin, 
and  having  all  the  (jualities  required  by  tlie  best  national  currency. 

1  take  it,  without  extending  my  argument  on  this  point — for  I  did 
not  intend  to  speak  very  long,  but  merely  to  present  these  outlines — 
that  these  coin  notes  when  issued  will  present  the  four  essential  requi- 
sites of  a  good  currency  :  first,  the  absolute  prote('ti(m  of  the  note-holder 
])y  the  United  States;  second,  the  agency  of  ])rivate  corj)orations  or 
l)aiiks  to  give  flexibility  to  the  currency,  and  to  meet  the  ebb  and  How 
of  exchanges;  third,  its  redem])tion  in  gold  coin  on  demand  ;  fourth, 
its  freedom  from  monopoly  or  restrictions,  except  such  as  are  necessary 
to  protect  the  creditors  of  the  banks. 

These  are  the  only  jioints  that  are  essential  for  the  consideration  of 
this  bill.  I  might  now  mention  a  multitude  of  other  topics  that  may 
l)e  drawn  into  this  discussion  which  are  now  ])eing  considered  by  tlie 
Committee  on  Finance.  It  seems  to  me  this  bill  ought  to  be  confined 
to  these  two  distinct  propositions.  If  you  attempt,  for  instance,  to 
regulate  the  character  of  the  bonds  that  should  be  deposited  as  security 
for  the  coin  notes  or  the  circulating  notes,  you  trespass  upon  another 
great  domain,  the  funding  system.  Therefore  we  have  j)rovided  for 
the  organization  of  these  l)anks  upon  existing  bonds ;  and  if  any  law 
should  liereafter  be  enacted  requiring  banks  now  in  o])eration  to  buy 
a  new  kind  of  Ijonds  as  the  basis  of  their  circulation,  its  provisions 
would  apply  to  them. 

So  there  are  a  multitude  of  other  questions  that  might  be  drawn 
into  this  discussion.  The  question  of  a  choice  between  greenbacks  and 
bank  notes  might  be  drawn  into  it ;  but  we  have  avoided  any  reference 
to  it  because  I  believe  the  judgment  of  the  country  is  gradually  settling 
down  to  the  conviction  that  a  note  issued  by  a  Government  can  not  be 
a  proper  agency  of  circulation.  Other  nations  as  well  as  our  own  have 
often  tried  the  experiment  of  maintaining  a  circulating  note  issued  by 
the  Government,  and  they  have  uniformly  found  it  to  fail.  It  is  im- 
possible to  give  a  currency  issued  by  a  Government  the  flexibility  ne- 
cessary to  meet  tlie  movement  of  the  exchanges ;  and  therefore  experi- 
ence has  shown  that  a  note  issued  by  a  Government,  and  maintained 
u))on  the  guarantee  of  the  Government  alone,  does  not  form  a  good 
circulating  medium  except  during  a  suspension  of  specie  payments. 
It  nmst  have  a  flexil)ility  which  will  enable  it  to  be  increased  in  certain 
periods  of  the  year,  and  to  flow  back  again  into  the  vaults  of  the  banks 
at  others.  I  am  convinced,  although  it  is  unnecessary  to  discuss  that 
point  here,  that  in  time  it  will  be  wise  to  retire  our  United  States  notes 
15 


226  SPEECHES   AND   REPORTS  OF  JOHN  SHERMAN. 

and  all  forms  of  Govermnent  circulation  and  depend  upon  notes  issued 
by  private  corporations,  ainply  secured  beyond  j)eradventure,  so  tliat  in 
no  case  can  the  note-holder  lose,  and  to  subject  the  banks  to  regula- 
tions applicable  to  all  parts  of  the  country,  making  them  free,  so  that 
the  business  of  banking  will  be  like  the  business  of  mamifacturing, 
blacksmithing,  or  any  other  ordinary  occupation  or  business  of  life, 
governed  only  by  general  law. 

I  have  thus,  I  trust,  ^Ir.  President,  directed  the  attention  of  the 
Senate  to  the  points  involved  in  this  bill.  I  will  not  prolong  tiie  dis- 
cussion any  further,  but  will  endeavor  to  answer  such  questions  and 
furnish  such  information  as  may  be  necessary  to  throw  light  on  the 
bill.  I  only  beg  of  Senatore  not  to  encumber  this  bill,  on  which  we 
desire  the  action  of  the  Senate,  so  that  we  may  have  it  out  of  our  way 
in  order  to  reach  the  nnich  more  difficult  <]uestions  involved  in  the 
funding  bill  and  the  various  ])ropositions  that  are  now  under  considera- 
tion by  the  Committee  on  Finance. 

Mr.  Siniinor  mnvcd  to  do  a\v;iy  witli  tlu-  wliule  bill,  ami  had  his  substitute  read, 
when  Mr.  ShLTinan  said: 

I  will  state  frankly  to  the  Senate  that  the  bill  which  is  now  pending 
— not  the  amendment  that  is  offered,  because  that  is  a  funding  bill, 
which  subject  is  now  under  the  considerati(»n  of  the  Committee  on 
Finance — is  confined  t^  two  sul>jects.  An  increase  of  tlic  banking 
currency  to  the  extent  of  8J:i»,0(X),000,  with  authority  to  issue  coin  notes 
to  certain  States,  for  it  can  only  be  in  certain  States,  is  a  preliminary 
measure,  and  the  Committee  on  Finance  are  very  anxious  to  have  the 
Senate  act  upon  it  before  they  proceed  to  the  consideration  of  other 
bills  now  pending.  I  hope  the  bill  Mill  not  excite  much  debate.  It 
plainly,  to  a  certain  extent  at  least,  so  far  as  it  goes,  tends  to  relieve  a 
great  inequality  in  the  distribution  of  banking  circulation.  It  does  not 
go  so  far  as  some  Senators  desire,  but  certainly  it  goes  in  the  right  di- 
rection. It  does  not  contract  the  currency,  nor  does  it  expand  the  cur- 
rency, but  leaves  mattei*s  just  as  they  are. 

The  amendment  now  offered  by  the  Senator  from  Massachusetts  in- 
troduces a  great  vaiiety  of  topics.  The  very  proposition  that  he  ofters 
as  an  amendment  is  before  the  Connnittee  on  Finance,  and  is  being 
daily  considered  in  connection  with  other  measures  of  a  similar  char- 
acter. It  has  no  relation  to  the  subject  matter  of  the  bill  under  con- 
sideration. The  first  section  of  his  amendment,  it  is  true,  does  relate 
to  the  subject  matter,  and  it  is  in  the  same  line.  He  proposes  to  in- 
crease the  limit  of  banking  circulation  to  $500,000,000  upon  a  retire- 
ment of  greenbacks.  The  committee  have  reported  this  bill  to  increase 
the  volume  of  $45,000,000  upon  the  retirement  of  the  three  per  cent, 
certificates.  If  the  Senator  from  Massachusetts  is  not  content  to  take 
the  action  of  the  committee  and  await  the  report  of  the  committee  on 
his  bill,  which  is  now  being  fairly  and  fully  considered,  and  desires  to 
precipitate  a  general  discussion  upon  the  funding  system,  upon  the  sub- 
stitution of  bank  notes  for  greenbacks,  and  upon  the  character  of  the 
bonds  to  be  the  basis  of  our  banking  system,  as  a  matter  of  course  this 
discussion  will  be  very  much  prolonged.     But  I  appeal  to  him,  and  I 


THE   CURRENCY.  227 

appeal  to  all  the  Senators  around  nie,  whether  it  is  not  better  to  pass 
this  bill  in  the  form  reported  by  the  Committee  on  Finance,  leaving  all 
the  other  questions  which  must  necessarily  come  np  to  be  provided  for 
ill  a  bill  to  be  hereafter  reported,  and  soon  to  be  reported,  I  tnist,  after 
it  has  been  fully  and  maturely  considered,  when  every  Senator  will  have 
an  opportunity  to  present  his  financial  views  in  extenm. 

The  present  bill  does  nothing  in  the  world  except  to  extend  the 
limit  of  the  present  bank  circulation  §45,000,000,  for  the  benefit  of 
the  Southern  States  mostly  and  partly  for  the  benefit  of  the  Western 
States,  without  changing  any  existing  provision  of  law,  and  in  order  to 
avoid  the  question  of  the  expansion  of  the  currency  to  retire  8-45,000,- 
<M)0  of  three  per  cent,  certificates.  It  ought  not  t()  open  any  general 
discussion,  and  therefore  I  am  very  much  surprised  to  hear  a  motion 
made  to  postpone  this  bill  and  take  up  any  other.  I  trust  we'  may  have 
the  action  of  the  Senate  on  the  pending  proposition  without  its  being 
complicated  with  the  great  variety  of  mattei-s  which  will  necessarily 
be  involved  in  a  financial  discussion.  If  the  Senate  are  disinclined  to 
pass  this  bill,  let  us  have  the  benefit  of  that  determination,  and  get  it 
out  of  the  way  entirely  and  forever,  so  that  we  may  go  on  with  the 
consideration  of  other  questions. 

I  have  heard  the  discussion  on  both  sides  of  the  chamber,  from 
l)oth  parties,  for  three  or  four  years,  and  I  believe  there  is  not  a  Senator 
here  of  any  party  or  of  any  section  who  does  not  concede  that  some 
provision  must  be  made  for  the  redistribution  of  l)ank  circulation  at 
this  session.  For  the  present  we  propose  a  partial  remedy ;  and  the 
plan  suggested  of  retiring  the  three  per  cent,  certificates  now  meets 
the  approval,  I  may  say,  of  almost  ever}'  branch  of  the  Government. 
The  Sccretai-y  of  the  Ti-easury  recommends  it  in  his  report ;  the  Presi- 
dent of  the  t'nited  States  recommends  it  in  his  annual  message.  I  do 
not  know  that  any  objection  has  been  made  to  it  even  in  the  public 
prints.  It  seems  to  be  conceded  that  this  is  the  most  iimocent  way  in 
which  this  now  pressing  necessity  of  a  partial  redistribution  of  bank 
circulation  can  be  brought  about. 

The  proposition  for  free  banking  on  a  coin  basis,  I  believe,  also  re- 
ceives the  general  assent  of  our  constituents  in  all  parts  of  our  country. 
The  only  doubt  that  has  been  suggested  in  the  C(»nsideration  of  the  sub- 
ject is  whether  such  banks  would  be  organized ;  but  that  doubt  has 
been  answered  by  the  actual  offer  of  large  corporations  and  wealthy 
individuals  on  the  Pacific  coast  and  in  Kew  York  to  organize  them 
upon  the  basis  of  existing  law.  I  tnist,  therefore,  we  shall  proceed 
with  the  consideration  of  thi.>?  bill,  adopt  such  amendments  to  it  as  the 
Senate  think  proper,  and  then  pass  it. 

I  assure  the  Senator  from  Massachusetts  that  the  friends  of  this 
measure  for  the  equalization  of  the  bank  distribution  are  not  to  be  di- 
verted from  their  purpose.  At  the  last  session  of  Congress  we  were  to 
some  extent  prevailed  upon  to  yield  a  measure  of  substantial  justice; 
but  I  tell  him  now,  candidly  and  fairly,  that  at  this  session  of  Congress 
the  gross  and  palpable  injustice  of  the  present  distribution  of  the  cur- 
rency, brought  about  by  a  violation  of  the  law  in  the  interest  of  a  few 
States,  will  "be  and  shall  be  corrected.     I  say  that  authoritatively,  be- 


228  SPEECUES  AND  REPORTS  OF  JOHN  SHERMAN. 

cause  the  representatives  of  tliree  fourtlis  of  the  States  on  this  floor  and 
i,nore  tlum  four  tittlis  of  the  nitMiihcrs  of  tlie  other  House  of  ('oui^ress 
feel  that  in  this  thuir  constituents  are  sult'erin<|^  daily  and  personally  a 
gross  injustice.  We  are  not  to  be  diverted  from  the  purpose  of  cor- 
recting this  gross  inequality  by  any  plausible  and  illusive  aniendnicnts 
or  pretexts. 

When  the  Senator  offered  tliis  anieiulnient  I  characterized  it  as  a 
funding  bill,  and  said  he  threw  into  this  discussion  a  viust  nndtitnde  of 
topics.  Why,  sir,  his  own  speech  shows  clearly  that  what  I  said  was. 
true.  AVhat  does  he  mean  by  talking  about  taxation,  reduction  of  in- 
terest on  the  public  debt,  funding  the  greenbacks,  and  a  great  variety 
of  subjects  i  The  bill  lie  introauced  yesterday  as  an  amendment  to 
this  measure  provided  for  a  new  class  of  boiuls,  four  ])er  cent,  bonds. 
^'ot  oidy  that,  it  re])udiated  the  ol>ligation  of  the  existing  bonds.  The 
amendment  offered  by  him  contains  the  most  striking  act  of  repudia- 
tion that  I  have  ever  yet  seen  offered  in  Congress  except  by  one  of  my 
colleagues  in  the  House,  and  he  had  only  a  single  vote ;  and  that  is,  a 
l)roposition  that  in  case  the  banks  will  not  take  the  new  bonds  we  shall 
hold  in  the  Treasury  the  excess  of  interest  and  deny  the  oldigation  to 
pay  the  interest  on  the  bonds  now  deposited  with  the  Government  of 
the  United  States. 

A  proposition  contained  in  the  amendment  offered  by  the  Senator 
from  Massachusetts  expressly  declares  that  if  a  bank  does  not  do  so  and 
so,  the  Treasurer  of  the  United  States  shall  retain  in  his  hands  one 
third  of  the  interest  on  its  ])onds  without  any  provision  to  give  the 
bunk  an  opportunity  to  withdraw  them.  "  You  nnist  take  this  new 
bond,  or  1  will  withhold  one  third  of  the  interest  on  your  bond.''  That 
is  the  provision.     I  will  read  it : 

And  if  any  national  bank  sliall  not  fiirnisli  to  tlio  Treasurer  of  the  United 
States  the  ne'.v  bonds,  as  required  by  this  act,  witliin  three  months  after  having 
been  notified  by  tlie  Secretary  of  the  Treasury  of  his  readiness  to  deliver  such  bonds, 
it  shall  be  the  duty  of  the  Treasurer,  so  long  as  such  delinquency  exists,  to  retain 
from  the  interest  as  may  become  due  and  payable  on  the  bonds  belonjnng  to  such 
delinciuent  banks,  on  deposit  with  him  as  security  for  circulating  notes,  so  much  of 
such  interest  as  shall  be  in  excess  of  four  ]ier  cent.  j)er  annum  on  the  amount  of 
such  bonds,  which  excess  shall  be  placed  to  the  credit  of  the  sinking  fund  of  the 
United  States. 

In  other  words,  it  confiscates  one  third  of  the  interest  on  the  bonds. 
The  amendment  proposed  by  the  Senator  from  Massachusetts  raises 
every  question  that  is  raised  by  a  funding  bill.  There  is  the  exemption 
of  the  bonds  from  taxation,  national.  State,  and  municipal ;  there  is  the 
exemption  of  the  bonds  from  even  the  in(?ome  tax  ;  there  is  every  ques- 
tion presented  in  this  amendment  that  can  be  presented  in  any  funding 
bill.  Now,  the  Senator  from  Massachusetts  need  not  be  informed  that 
no  person  on  this  floor  certainly  has  shown  himself  more  anxi(jus  than 
myself  to  reduce  the  public  debt,  to  devise  some  way  to  fund  it  at  a 
lower  rate  of  interest ;  but  it  never  occurred  to  me  that  we  had  the 
power  to  take  these  bankers  and  bond-holders  by  the  throat  and  say  to 
them,  "  You  shall  surrender  your  bonds  or  we  will  take  off  and  reserve 
in  the  Treasury  of  the  United  States  one  third  of  your  interest."  That 
never  occurred  to  me ;  and  yet  that  is  the  effect  of  the  proposition  ori- 


THE  CURRENCY.  229 

ginally  submitted  yesterday.  It  is  tnie  that  the  Senator  now  modifies 
it.  I'he  remarks  t  made  were  upon  the  proposition  then  pending  ;  but 
it  is  now  modified  ;  and  yet  it  is  a  funding  bilL 

The  Senator  now  proposes  to  withdraw  8-**0,000,000  of  greenbacks, 
the  fayorite  cireuhition  of  the  people  of  the  Ignited  States,  and  issue  in 
their  place  bank  notes.  He  knows  very  well  that  if  the  Senate  should 
be  prevailed  upon  in  an  evil  hour  to  adopt  this  amendment,  it  would 
be  the  end  of  all  measures  for  tlie  redistribution  of  the  banking  circu- 
lation. Such  a  proposition  can  not  be  adopted  in  the  House  of  Eepre- 
sentatiyes.  But  I  ask  the  Senator  how  will  he  retire  and  redeem  the 
$200,000,000  of  greenbacks  that  he  proposes  to  retire  by  the  operation 
of  his  amendment  as  now  offered  ?  He  withdraws  $200,000,000  of 
greenbacks  before  the  bank  notes  are  issued,  or  as  they  are  issued. 
Where  does  he  propose  to  get  the  money  with  which  to  pay  $200,000,- 
000  of  greenbacks  i  Out  of  surplus  reyenue  ?  Not  at  all.  He  must 
do  it  by  issuing  new  bonds,  by  increasing  the  bonded  debt.  What 
kind  of  bonds  <  What  shall  be  their  nature,  what  their  rate  of  interest, 
when  shall  they  be  payable,  and  how  taxal)le  'i  The  very  amendment 
now  offered  by  him  raises  inferentially  every  (piestion  that  is  presented 
by  a  funding  bill. 

Tlie  Senator's  proposition  is  a  proposition  to  ingraft  on  this  bill  for 
immediate  relief  a  funding  bill,  raising  a  nniltitude  of  questions  which 
will  probably  be  debated  here  for  two  or  three  days.  This  is  part  of 
the  very  bill  introduced  by  the  Senator  that  is  now  being  considered 
by  the  Committee  on  Finance,  every  section  of  which  has  been  care- 
fully gone  over  word  for  word,  together  with  a  multitude  of  other 
projects  sent  not  only  from  the  Hxecutive  Departments,  but  from  other 
members  of  the  Senate.  We  arc  now  considering  those  questions  in 
the  Finance  Committee,  and  the  Senator  seeks  to  complicate  this  bill 
by  throwing  open  all  this  wide  field  of  discussion  on  this  simple  bill  to 
provide  a  partial  remedy  for  a  great  injustice. 

Mr.  President,  we  may  as  well  talk  plainly  in  regard  to  this  proposi- 
tion. That  some  measure  for  the  distribution  of  the  banking  circula- 
tion will  pass  this  Congress  I  have  no  doubt.  The  strengtli  of  the 
votes  is  here.  The  Senator  from  Massachusetts  himself  admits  the 
necessity  of  it,  the  absolute  justice  of  it,  and  there  are  but  two  modes 
of  doing  it.  One  is  the  plan  proposed  by  the  Senator  from  Kentucky, 
to  make  the  distribution  according  to  existing  laws,  li  the  Senator 
from  Massachusetts  wants  a  thorough  measure,  one  that  is  just  and 
right  and  thorough,  going  to  the  bottom  as  he  says,  let  him  take  that. 
He  objects  to  ours  as  timid.  If  he  wants  a  thorough  measure,  one 
that  is  just  and  defensible  and  right  from  beginning  to  end,  let  us  do 
what  is  right,  and  let  the  representatives  from  the  States  which  have 
an  excess  come  forward  and  say,  "  We  will  concede  that  the  law  shall 
be  carried  out  and  that  the  advantage  which  we  hold  in  violation  of 
law,  in  disregard  of  law,  shall  not  any  longer  be  held  by  us."  If  he 
wants  what  is  called  root-and-branch  work  without  any  regard  to  the 
interest  of  his  constituents  or  the  business  relations  of  the  country,  if 
he  wants  what  is  called  a  radical  measure,  I  am  willing  to  support  it 
and  to  provide  according  to  existing  law  for  a  redistribution  of  the 


230  SPEECHES   AND   REPORTS  OF  JOHN  SHERMAN. 

bank  eirciilatinii.  That  will  draw  from  the  three  States  of  Massachu- 
setts, Connecticut,  and  Ivliode  Island  $50,000,000  of  bank  circulation, 
more  than  enough  to  su])ply  all  the  present  wants  of  the  West  and  South. 

Why  should  not  this  be  done?  Why  should  we  not  vote  for  tlie' 
propositions  of  the  honoi-able  Senator  from  Kentucky?  Here  jierliaps 
I  am  touching  upon  what  the  Senator  from  Massachusetts  calls  our 
timidity.  He  says  we  timidly  approach  tliis  (pjestion.  Why  are  we 
timid?  Simply  because  we  do  not  wisli  to  do  injustice  to  his  constitu- 
ents. We  do  not  wish  to  disturb  the  business  relations  that  have 
fi^rown  up  ou-t  of  a  practical  violation  of  law.  We  do  not  wish  to 
compel  the  banks  of  New  En<;land  to  sue  their  debtors  and  call  in  all 
their  credits.  We  timidly  a])proach  a  question  where  the  rights  and 
interests  of  liis  constituents  are  concerned.  If  the  (piestion  were  to  be 
decided  according  to  the  rights  and  interests  and  wishes  of  my  con- 
stituents, I  should  vote  for  the  proposition  of  the  Senator  from  Ken- 
tucky to  make  thorough  work  of  tliis,  and  not  l)e  arraigned  here  by 
tlie  Senator  from  Massachusetts  for  ])roposing  a  timid  mciu^ure  when 
the  only  timidity  of  our  proposition  is  that  we  have  declined  to  do 
justice,  even  against  his  own  constituents. 

Now,  Mr.  President,  let  us  go  a  little  further.  It  is  said  that  this 
measure  is  not  sufficient.  That  objection  is  well  taken.  Forty-live 
million  dollars  is  probably  not  enougli ;  but  it  is  enough  for  the  ]iresent 
])urposc  ;  it  is  enough  for  two  years.  The  Com])troller  of  the  Curren- 
cy says,  in  his  official  report,  that  S-i."), 000,000  will  jirobably  be  all  that 
can  be  absorbed  by  the  South  and  West.  My  own  impression  is  that 
the  whole  amount  of  $45,(MI(),00(J  will  not  be  absorbed  ;  that  there  will 
be  verge  enough  in  the  $45,000,000  to  supply  the  wants  of  all  the 
cotton  States  and  of  all  the  Western  States,  because  banks  can  not  now 
be  organized  so  readily  and  so  easily  as  they  could  a  few  years  ago. 
The  bonds,  %yhich  are  the  basis  of  the  bank  circulation,  are  very  higli 
in  the  market.  Men  will  tliink  a  great  many  times  before  they  will 
pay  from  ten  to  twenty  per  cent,  premium  for  bonds  in  order  to  make 
them  the  basis  of  circulation.  The  operation  of  banking  will  go  on 
with  much  more  difficulty.  During  the  war  the  profits  of  banking 
were  very  high.  IS^ow  they  are  not  so  high.  I  have  no  doubt,  there- 
fore, tliat  the  measure  proposed  by  the  committee,  while  it  may  not  be 
sufficient  for  all  time,  is  yet  sufficient  for  two  or  three  years,  during 
which  Ave  shall  be  approaching  specie  payments.  It  is  ample  for  our 
present  purpose,  and  therefore  the  amount  ought  not  to  be  increased. 
Even  if  $45,000,000  is  not  enough  for  all  time  it  is  enough  for  one 
year  at  least,  and  we  shall  be  in  session  again  next  December,  and  can 
then  provide,  if  necessary,  for  a  further  distribution. 

But  the  Senator  asks  why  withdraw  the  three  per  cent,  certificates. 
I  will  tell  him.  Because  it  is  a  currency  upon  whicli  we  are  now  pay- 
ing to  his  constituents  three  per  cent,  interest.  The  banks  of  his  sec- 
tion hold  it  in  their  vaults  as  part  of  their  reserve.  Xearly  all  those 
three  per  cent,  certificates  are  held  in  the  State  of  IS^ew  York  and  in 
IS^ew  England ;  very  few  of  them  are  held  anywhere  else.  Those 
banks  hold  them  as  part  of  their  reserve,  and  they  are  now  actually 
drawing  three  per  cent,  interest  on  United  States  currency. 


THE   CURRENCY.  231 

But  the  Senator,  while  stating  correctly  in  the  main,  has  not  stated 
M'ith  exact  accuracy  the  history  of  the  three  per  cent,  certificates.  No 
one  desired  to  issue  the  three  per  cent,  certificates.  If  he  will  look 
back  to  the  debate  on  the  subject  he  will  find  that  I,  for  one,  took  the 
ground  that  it  was  the  most  oppressive  form  of  indebtedness ;  but  we 
then  had  a  choice  only  between  the  three  per  cent,  certificates  and 
more  five-twenty  bonds. 

AVhen  the  compound-interest  notes  became  due  the  Government 
paid  off  as  many  as  it  could ;  but  there  were  some  sixty  or  seventy 
million  dollars  that  it  had  not  means  to  pay.  The  only  question  then 
was  M-hethcr  we  should  authorize  an  increase  of  the  bonded  debt  or 
the  issuing  of  these  three  per  cent,  certificates.  It  was  supposed  that 
the  three  per  cent,  certificates  would  be  a  temporary  loan,  kept  out  for 
a  short  time ;  and  rather  than  increase  the  bonded  debt  bearing  an  in- 
terest of  six  per  cent,  in  gold,  we  authorized  the  issue  temjiorarily  of 
three  per  cent,  certificates,  which  are  now  held  entirely  by  the  banks. 
Probably  no  individual  in  the  United  States  holds  a  three  per  cent, 
certificate  unless  as  the  agent  of  a  bank.  They  are  locked  up  in  the 
safes  of  the  banks.  While  they  are  there  they  perform  all  the  func- 
tions of  a  currency  except  actual  circulation  among  the  people.  They 
do  not  pass  from  hand  to  hand,  but  they  are  held  by  the  banks  in  the 
])la('e  of  greenbacks,  and  the  very  moment  they  are  paid  off,  green- 
backs must  flf»w  in  and  take  their  place. 

Now.  what  advantage  is  derived  from  calling  them  in  and  issuing 
new  bank  circulation^  The  (Tovenmient  saves  the  payment  of  three 
per  cent,  interest  on  the  certificates,  and  the  banks  are  compelled  to 
hold  greenbacks  drawing  no  interest,  so  that  we  save  by  the  substitu- 
tion of  greenbacks  in  the  bank  vaults  for  these  three  per  cent,  certifi- 
cates the  interest  we  now  pay  upon  the  latter.  But  that  is  not  all.  If 
these  certificates  are  made  the  basis  of  new  banks,  we  tax  the  new 
banks  about  three  ])er  cent.,  so  that  in  this  way  we  gain  by  increased 
taxation  on  new  banks  three  per  cent.,  and  we  also  save  three  per  cent. 
interest  on  the  certificates,  thus  making  a  gain  to  the  United  States  of 
at  least  six  per  cent. 

It  is  therefore  an  object  for  the  CTOvernment  to  retire  these  three 
per  cent,  certificates  ;  and  if  upon  that  retirement  we  can  base  a  reason- 
able increase  of  bank  circulation  in  the  Southern  and  Western  States  so 
as  to  satisfy,  at  least  for  a  time,  a  just  and  well-founded  complaint,  it 
seems  to  me  instead  of  acting  timidly  and  foolishly  we  are  acting  wisely 
and  for  the  best  interests  of  the  Govemment  and  the  people.  But  if 
the  States  we  have  been  endeavoring  to  protect,  whose  people  came  to 
us  last  winter  and  begged  us  not  to  disturb  their  business  relations, 
think  it  is  better  to  go' down  to  the  foundation  of  this  matter,  to  go 
back  to  the  old  law  and  enforce  that,  let  it  be  so,  and  let  us  adopt  the 
amendment  of  the  Senator  from  Kentucky.  I  do  not  think  it  would 
be  best.  I  think  that,  without  disturbing  any  existing  bank,  or  derang- 
ing affairs  anywhere,  we  nuiy  supply  all  the  wants  of  the  South  and 
W^cst,  for  at  'least  two  years,  by  an  increase  of  banking  circulation 
through  the  substitution^of  bank  notes  for  the  three  per  cent,  certifi- 
cates. 


232  SPEECHES  AND  REPORTS  OF  JOIIX   SHERMAN. 

In  regard  to  the  other  hraiich  of  tliis  bill,  tlie  sections  providing  for 
free  banking  upon  a  coin  ba.sis,  1  have  no  doubt  that  they  will  be  the 
basis  of  all  the  banks  of  the  United  States  within  a  very  short  time, 
indeed,  by  the  adoption  of  a  funding  bill,  and  of  measures  that  look  to 
the  reduction  of  the  interest  on  the  public  debt,  by  an  increase  of  our 
revenue,  l)y  our  improved  credit,  by  our  enlarged  jiroduction,  by  our 
growing  coninicn-e,  by  measures  that  may  be  ad(t|>trd  iVom  time  to 
time,  we  shall  gradually  ap})roach  ji})ecie  [)ayments,  antl  in  that  way  all 
banks  will  lie  upon  a  coin  basis. 

My  honorable  friend  from  Indiana,  whose  opinions  I  always  resjK'ct, 
seemed  to  think  that  banks  organized  upon  a  gold-coin  basis  under  this 
bill  cotild  not  be  maintaineil.  Why,  sir,  they  bave  always  been  main- 
tained. They  were  maintained  before  the  suspension  of  specie  ]>av- 
ments  and  can  be  maintained  now.  Xo  bank  ever  held  enough  coin  m 
its  vaults  to  j)ay  oil  its  notes  ;  and  we  have  provided  now  in  this  bill 
larger  securities  for  the  payment  of  these  coin  notes  than  were  provided 
for  bank  notes  issued  by  any  bank  that  I  ever  read  of.  AVe  have  pro- 
vided for  an  actual  reserve  of  twenty-tive  ])er  cent,  in  e(»in.  We  have 
provided  for  the  deposit  of  bontls,  payable  ]irincipal  and  interest  in 
gold,  for  twenty  per  cent,  more  than  the  amount  of  the  new  notes. 
There  is  absolute  safety  unless  the  Government  of  the  United  States 
itself  perishes. 

But  the  Senator  says  these  banks  Mill  n(»t  be  organized.  Then  what 
harm  is  done  i  "We  shall  at  least  have  given  to  the  Pacitic  coast  (where 
long  experience  has  sliown  that  they  can  not  introduce  the  legal-tender 
currency  of  the  United  States,  and  where  gold  now  circulates  and  is  the 
basis  of  all  transactions)  the  oj)portunity  of  forming  banks  upon  the 
national  banking  system.  Why  deny  them  that  privilege  i  The  Sena- 
tor from  Indiana  is  afraid  of  contraction  ;  and  yet  he  read  from  the 
report  of  the  Secretary  of  the  Treasury  that  if  we  do  not  adopt  this 
system  o;reenbacks  will  How  into  the  Pacitic  States  and  thus  create  a 
contraction  in  the  East.  Why,  sir,  if  you  let  the  ]>eople  of  California, 
Oregon,  and  Nevada  follow  the  bent  of  their  omti  inclinations,  they  will 
not  nave  paper  money  at  all  except  it  be  paper  money  based  upon  coin. 
I  know,  and  their  representatives  are  here  to  speak  for  them,  that  they 
are  anxious  to  adopt  a  system  of  l)anks  based  upon  coin.  Why  not  give 
them  the  opportunity  i  If  they  are  organized  and  supplied  with  these 
coin  notes,  as  a  matter  of  course  it  leaves  more  gi-eenbacks  to  circulate 
among  us,  and  prevents  the  very  evil  my  honorable  friend  seems  to 
contemplate  with  terror. 

But  he  made  another  great  mistake.  He  said  that  coin  notes 
were  not  in  circulation.  Why,  sir,  there  are  more  coin  notes  than 
"reenbacks  in  circulation  among  the  people  of  New  York  City  to-day. 
They  are  called  gold  certificates,  but  they  are  in  the  form  and  simili- 
tude of  bank  notes,  circulating  from  hand  to  hand ;  and  they  now 
actually  transact  a  larger  amount  of  the  business  of  the  city  of  New 
York  than  the  greenbacks.  My  honorable  friend  can  not  be  ignorant 
that  the  great  connnercial  transactions  of  this  country  are  based  upon 
gold  and  settled  in  gold,  and  that  these  coin  notes,  from  the  necessity 
of  the  case,  are  used  as  a  substitute  for  gold.     The  very  fact  that  pri- 


THE  CURRENCY.  233 

vate  persons  are  willing  to  deposit  their  gold  in  the  Treasury  of  the 
United  Stales  and  receive  therefor  a  certificate  or  a  note  without  inter- 
est, and  to  hold  that  note  from  month  to  month  and  from  year  to 
year,  shows  that  there  is  a  commercial  demand  for  this  kind  of  paper, 
and  that  tliese  coin  notes  are  equivalent  to  coin  and  have  not  the 
uncertain  liuctuating  value  of  paper  currency.  They  are  demanded 
now  at  the  great  commercial  centers  of  our  country.  They  are  de- 
manded in  (Jregon  and  California,  as  is  sufficiently  shown  in  this  de- 
bate, and  as  I  Know  from  correspondence  with  a  great  many  persons 
there.  Thev  would  also  be  a  convenient  currency  in  the  city  of  New 
York. 

IJut  my  honorable  friend  says  that  if  a  bank  on  this  basis  were 
started  in  the  city  of  New  York  it  would  break.  How  could  it 
break  i  Only  in  the  same  way  that  any  other  bank  could  l^reak  ;  but 
it  could  not  break  to  the  injury  of  the  note-holder  unless  after  ex- 
hausting the  twenty-five  per  cent,  of  gold  on  hand  the  bonds  in  the 
Treasury  were  not  sutficient  to  redeem  its  notes,  and  that  is  not  a 
supposable  case.  If  there  were  any  doubt  about  that,  the  amount  of 
notes  to  be  issuc<l  ought  to  be  restricted  still  further.  Banking  oper- 
ations are  conducted  uj)on  the  basis  of  confidence.  The  very  moment 
you  give  to  a  bank  that  confidence  whicli  alone  will  maintain  it,  its 
notes,  whether  i)ayable  in  currency  or  gold,  will  circulate  in  the  com- 
nmnity  until  a  suspicion  is  cast  upon  its  credit.  Then  they  will 
fiow  back  to  the  vaults  of  the  bank  ;  and  if  a  j)art  of  them  be  promptly 
met,  confidence  is  restored. 

Sir,  there  is  more  safety  and  security  in  this  system  of  coin  notes 
than  there  is  in  the  paper  dollar.  Last  year  the  fiuctuation  in  paper 
money  amounted  to  forty-five  per  cent.  Gold,  however,  remained  as 
stable  as  the  eternal  hilLs  because  it  was  not  only  the  product  of  labor, 
but  it  was  labor  and  value  itself.  Your  paper  money  fluctuates 
among  the  bulls  and  bears  of  New  York.  The  operations  of  three 
or  four  men  there  almost  produced  a  catastrophe,  and  nothing  set- 
tled the  matter  except  the  gold  in  the  money  market.  The  throwing 
of  a  little  gold  upon  the  market  ended  that  great  panic. 

I  believe  that  these  coin  notes,  if  banks  are  organized  under  the 
provisions  of  this  bill,  without  any  sudden  change  in  our  banking 
law,  will  gradually  take  the  place  of  greenbacks  and  also  of  the  ordi- 
nary bank  notes,  and  that  as  we  approach  specie  payments  the  l^anks 
will  ba^se  their  operations  entirely  on  gold  and  silver  coin.  But  if  the 
Senator  is  correct,  if  this  expectation  of  mine  is  delusive,  what  harm 
can  the  provision  do?  None  whatever.  It  will  at  least  give  to  the 
Pacific  coast  an  opportunity  of  having  a  stalde  and  fair  currency.  It 
can  do  no  hann  anywhere.'  It  will  give  to  the  great  commercial  cen- 
ters, where  they  propose  to  carry  on  their  operations  in  gold,  an  oppor- 
tunity to  establish  gold  banks  with  ample  security. 

Sir,  there  is  no  possible  objection  to  this  bill  except  the  one  stated 
by  the  Senator  from  Massachusetts,  and  that  is  that  the  bill  does  not 
go  to  the  root  of  the  difiicuhy.  I  confess  that  that  is  an  objection  ; 
but  if  we  have  timidly  approached  this  question  it  has  been  ont  of 
regard  for  his  constituents.     If  he  is  not  satisfied,  and  those  for  whom 


234:  SPEECHES   AND   REPORTS   OF  JOIIX   SHERMAN. 

he  speaks  are  not  satisfied,  then  let  us  go  to  the  root  of  the  matter. 
For  myself  I  do  not  desire  to  see  any  injury  inflicted  on  any  portion 
of  our  people.  I  believe  that  the  measure  proposed  by  the  cominit- 
tee,  giving  to  the  South  and  West  a  small  increase  of  tlioir  hankiiii; 
currency,  which  will  enable  tlieni  to  get  on  for  two  years  without  any 
cause  of  complaint,  is  a  sufficient  measure  for  the  present.  It  will  not 
furnish  the  e(pialization  that  is  desirable:  but  the  West  and  South  will 
have  no  reasonable  cause  to  com])lain  so  loni;-  as  banking  facilities  are 
open  to  them,  even  if  New  England  has  more  than  lu-r  share.  The 
South  can  not  complain  when  she  may  go  tt)  the  Treasury  of  the 
United  States  and  receive  banking  circulation  ui»nii  the  same  terms 
and  conditions  as  New  England. 

If  the  system  is  free  to  the  extent  provided  there  can  be  no  ground 
for  objection,  although  one  portion  of  the  country  lias  more  than 
another.  It  is  only  when  it  is  bound  round  by  an  iron  mono])oly  that 
there  is  objection  to  it.  If  Ji>4r»,0i)(),0(io  is  not  enough  for  the  «lemand, 
even  that  would  not  destroy  the  monoj)oly ;  but  from  the  best  infor- 
mation that  the  committee  had,  from  tiie  statement  of  the  Secretary 
of  the  Treasury,  from  the  statement  of  the  Comptroller  of  the  Cur- 
rency, froni  whom  Ave  have  an  official  document  that  55>4o,(io<),0(tO  or 
$3r),(H>0, 000  will  coverall  the  n])plications  made  from  the  Southern  and 
Western  States,  we  thought  this  measure  would  be  a  useful  one,  and 
concluded  not  to  propose  anything  more  radical.  Besides,  this  timid 
measure  that  my  honorable  friend  connnents  upon  is  the  one  suggested 
by  the  President  of  the  United  States,  who  is  not  a  very  timid  man  ; 
and  this  very  bill  meets  the  hearty  approval  of  the  Secretary  of  the 
Treasury,  who  is  from  his  own  State. 

It  seems  to  me  that  for  the  Senator  to  characterize  as  wrong  every- 
thing which  does  not  come  up  to  his  standard  of  what  is  right  is 
going  rather  too  far.  The  truth  is  that  my  honorable  friend  has  in- 
troduced a  bill  that  has  a  great  many  good  things  in  it.  I  have  read 
that  bill  probably  as  often  as  he  has,  and  ]u-obai)ly  know  its  origin  as 
well ;  and  most  of  it  I  can  su])port.  It  looks  in  the  right  direction. 
It  looks  to  specie  payments.  It  looks  to  the  reduction  of  the  interest 
on  the  public  debt.  It  contains  many  good  things  ;  but  it  is  not  a  spe- 
cific for  all  the  ills  of  life.  He  must  not  offer  it  as  an  amendment  to 
every  bill  that  is  proposed,  no  matter  what  its  character.  He  must 
not  llrag  the  discussion  of  that  bill  into  the  debate  upon  every  mea- 
sure that  is  proposed  here. 

When  the  Committee  on  Finance,  after  careful  consideration  and 
with  almost  entire  unanimity,  perhaps  I  may  say  with  entire  unanimity, 
present  a  measure  here  to  cure  a  palpable  evil,  to  remedy  an  injustice 
that  will  not  be  endured  any  longer,  without  inflicting  any  injury  on 
his  constituents,  which  is  only  beneficial  to  the  South  and  West  where 
this  evil  is  complained  of,  instead  of  receiving  his  denunciation,  instead 
of  having  amendments  thmst  upon  it  to  drag  in  various  other  topics, 
we  ought  to  have  met  with  his  cordial  support ;  he  ought  to  have  come 
to  us  and  said,  "  Gentlemen,  you  have  done  justice  to  the  AVest  and 
South,  at  least  for  a  year  or  two,  without  doing  injustice  to  us."  But 
if  he  is  dissatisfied  with  it,  then,  as  a  matter  of  course,  the  Senate  if 


THE   CURKENCY.  235 

they  are  moved  by  his  arguments  will  go  to  the  foundation,  tear  up  all 
the  distribution  made  in  violation  of  law,  and  give  to  each  State  and 
section  of  this  country  its  fan*  and  just  share  of  the  circulating  medium. 

My  own  opinion  is.  Senators,  that  it  is  better  to  ado])t  this  measure 
as  it  is,  imperfect  as  it  is,  timid  as  it  is,  and  leave  all  the  other  questions 
which  have  been  involved  in  this  debate — the  interest  on  the  public 
debt,  the  funding  of  the  public  debt,  the  taxing  of  the  public  debt, 
wliat  bonds  banking  shall  be  based  upon — all  the  multiplied  forms  of 
complicated  questions  growing  out  of  our  finances,  to  be  discussed  and 
decided,  on  bills  that  will  be  reported  to  you  looking  to  that  end. 
Then,  if  the  Senator  from  Massachusetts  or  any  other  Senator  has  any 
favorite  financial  theories  or  documents  that  he  wishes  to  present,  that 
will  be  time ;  but  now,  when  we  are  dealing  with  a  small  matter,  and 
yet  a  pressing  matter,  it  seems  to  me  it  is  not  the  proper  time  to  do  all 
these  things. 

I  therefore  repeat  that  I  think  this  bill  ought  to  be  confined  to  the 
objects  proposed.  If  Senators  do  not  agrt-e  with  the  committee  on  the 
measure  reported,  let  them  offer  amendments  bearing  uj)on  those  par- 
ticular questions.  The  amendment  of  the  Senator  from  Massachusetts 
is  not  of  that  kind.  It  j)roposes  to  witlidraw  the  greenbacks  and  en- 
large the  limit  oi'  banking  circulation,  without  any  provision  for  a  re- 
distribution. It  proposes  to  do  what  he  must  be  satisfied  the  House 
of  Representatives  will  not  agree  to  do,  at  least  at  this  session  of  Con- 
gress. I  know  that  the  greenbacks  are  the  great  stumbling-block  in 
the  way  of  specie  payments,  and  I  hope  that  they  will  be  gradually  re- 
tired and  funded ;  but  they  must  be  withdrawn  by  funding  them  into 
bonds  beanng  a  low  rate  of  interest. 

As  I  do  not  wish  to  occupy  the  attention  of  the  Senate  again,  I  de- 
sire now  to  reply  to  one  or  two  other  points  made  by  my  fnend  from 
Indiana.  He  says  that  there  are  a  great  many  abuses  growing  out  of 
this  system  of  national  l)anks.  I  agree  with  him  in  that  respect ;  and 
yoif  never  had  a  system  of  banking  or  a  system  of  any  other  kind  so 
extensive  as  this  that  was  not  subject  to  a])use.  All  we  can  say  is  that  ex- 
perience has  sho^vn  that  this  is  the  best  banking  system  wliich  has  yet 
been  devised.  He  says  the  baidvs  charge  too  high  a  rate  of  interest.  Ad- 
mit it;  the  law  allows  every  State  to  regulate  that  matter  to  suit  itself. 
Would  the  Senator  drag  into  this  discussion  of  a  measure  intended  to 
benefit  his  constituents  and  the  whole  South  and  West  a  controversy 
about  our  interest  laws  ?  The  general  sentiment  is  coming  to  \)e  tliat 
money,  like  every  other  commodity,  ought  to  be  left  free  to  bear  as 
high  or  as  low  a  price  as  the  parties  can  agree  upon  ;  and  experience 
in  European  countries  has  shown  that  where  the  rate  of  interest  is  left 
free  it  is  lowe>t  as  a  general  rule.  But  that  question  ought  not  to  be 
drawn  into  this  discussion,  because  by  the  banking  law  every  State  may 
fix  the  rate  of  interest  within  its  limits.  !Xo  bank  can  charge  more  than 
is  allowed  by  the  laws  of  the  State  to  the  citizens  of  the  State.  I  sup- 
posed that  in  Indiana  they  had  a  law  which  allowed  ten  per  cent,  inter- 
est on  a  contract  to  pay  ten  per  cent.  If  so,  the  banks  can  charge  no 
more;  and  if  they  do,  they  forfeit  their  charters,  they  forfeit  the  whole 
interest  on  the  debt,  and  they  are  liable  to  be  wound  up  on  complaint. 


236  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

That  is  not  all.  A  severe  provision  was  introduced  into  the  bankinoj 
law,  if  I  remember  ari<i^ht,  bv  which  the  debt(»rinay  at  anv  time  within 
two  years  sue  for  and  recover  the  unlawful  interest  char<;cd.  It  is  said 
to  be  a  dead  letter.  The  reason  is  that  no  honorable  man  having  made 
a  fair  contract  will  go  and  sue  to  recover  back  the  money  paid.  It  is 
like  the  case  of  a  man  who  is  addicted  to  gambling;  he  will  sul)mit 
to  his  loss  rather  than  a])peal  to  tiie  courts  for  redress.  That  is  not 
the  fault  of  the  law.  If  there  is  any  fault  about  it,  it  is  the  fault  of  the 
people. 

But  the  Senator  says  the  banks  pay  interest  on  deposits.  AVhy,  sir, 
at  the  last  Congress  the  Committee  on  Finance  reported  here  a  bill  to 
prohibit  the  payment  of  interest  on  deposits.  My  friend  from  Penn- 
sylvania [Mr.  Cameron]  and  most  of  the  Senators  around  him  opposed 
it  with  great  warmth,  and  it  was  defeateil.  Now  we  do  not  propose  to 
put  on  this  l)ill  a  proposition  like  that,  which  would  bring  about  inevi- 
table defeat,  although  I  agree  with  tiie  Senator  tliat  the  banks  ought 
not  to  be  allowed  to  pay  interest  on  deposits.  The  Comptroller  of  the 
Currency  has  several  times  recommended  to  ns  to  pass  a  law  prohibit- 
ing the  payment  of  interest  on  deposits,  and  the  Committee  on  Finance 
is  in  favor  of  it,  but  the  Senate  is  not.  Would  my  honorable  friend 
load  down  this  bill  with  an  amendment  that  has  already  been  voted 
down  by  the  Senate  i  You  can  not  correct  all  these  abuses  and  accom- 
plish all  the  ends  you  desire  by  a  single  measure.  If  the  aim  and  ob- 
ject of  this  measure  is  a  good  one,  if  its  tendencies  are  correct,  then  it 
ought  to  be  adopted  without  regard  to  the  multitude  of  other  questions 
that  may  be  thrust  into  this  debate. 

I  suppose  it  is  not  unreasonable  for  a  committee  of  this  body  to  ask 
that  the  order  in  which  they  present  the  various  questions  submitted  to 
them  shall  be  somewhat  regarded.  Now,  the  Committee  <tn  Finance 
on  all  these  dilHcult  questions  raised  as  to  the  condition  of  the  cuiTency, 
the  condition  of  the  banks,  etc.,  have  had  some  experience.  Last  year 
we  reported  a  bill  that  we  considered  a  very  comprehensive  one,bec";mse 
it  embodied  the  views  of  the  Committee  on  Finance  on  all  the  different 
questions  in  dispute.  I  believe  it  was  praised  liy  my  honorable  friend 
from  Massachusetts  as  a  comprehensive  bill,  and  on  the  whole  it  re- 
ceived his  approval.  He  gave  it  the  weight  of  his  support.  But  it 
was  found  when  we  came  to  debate  the  bill  that  Senators  here  and 
there  differed  as  to  particular  sections,  and  refused  to  vote  for  the  en- 
tire bill  because  certain  features  of  the  bill  disagreed  with  their  opinions. 
The  result  was  that  it  was  impossible  to  get  the  concurrence  of  the  ma- 
jority of  the  Senate  on  any  bill,  although  everybody  can  see  now  that 
it  would  have  been  much  better  and  much  wiser  to  pass  almost  any 
proposition  that  was  introduced. 

Now,  the  Committee  on  Finance,  after  the  most  careful  considera- 
tion of  these  various  questions,  intend  to  take  them  up  separately  and 
present  them  to  the  Senate  in  their  order,  keeping  them,  if  possible, 
detached  from  each  other.  What  is  the  first  and  most  obvious  and  most 
necessary  measure?  Here  is  a  measure  for  the  equalization  of  cur- 
rency. The  inequality  of  the  distribution  of  circulation  creates  fierce 
and  bitter  sectional  feeling,  and  has  been  complained  of  for  years.     We 


THE  CUERENCY.  237 

undertook  to  rectify  that ;  but  tliere  was  one  fundamental  piinciple 
whicli  guided  us,  and  that  was  that  we  wcjuld  in  no  event  increase 
tlie  amount  of  paper  money  issued  in  this  country.  How,  then,  could 
this  distribution  take  place '.  We  had  various  modes  proposed  to  us, 
and  finally  we  settled  upon  a  plan  to  retire  a  form  of  indebtedness 
called  the  three  per  cent,  certificates,  which  the  Government  was  pre- 
pared to  redeem,  and  we  proposed  to  fill  that  vacuum  by  issuing  cur- 
rency to  the  various  Western  and  Southern  States.  Here  was  a  simple 
proposition  that  we  thought  would  meet  with  no  practical  objection. 
The  Govermnent  of  the  L  nited  States  had  the  means  from  surplus 
revenue,  according  to  information  given  to  us  by  the  Secretary  of  the 
Treasury,  to  retire  these  three  per  cent,  certificates.  All  classes  of  peo- 
ple except  those  who  hold  them  desire  to  have  them  retired.  They 
were  in  the  way  of  s])c*cie  payments.  Until  they  were  redeemed  we 
could  not  move  toward  specie  payments ;  and  therefore  it  was  an  ob- 
ject to  get  them  out  of  the  way  ;  and  if  in  doing  that  Ave  could  fill  up 
the  vacuum  in  the  South  and  the  West  so  as  in  time  to  supj)ly  the  sec- 
tional demand  upon  us — a  demand  admitted  on  all  hands  to  be  founded 
in  justice — we  thought  that  was  a  simple  proposition  that  would  re- 
ceive the  assent  of  every  one. 

Ihit  it  was  claimed,  on  the  other  hand,  that  on  the  Pacific  coast, 
after  long  experience,  they  could  not  get  their  people  to  take  our  pres- 
ent paper  money.  They  therefore  wanted  some  form  of  paper  money 
to  aid  them  in  the  ordinary  operations  of  business.  AV^e  couhl  see  no 
objection  to  banks  being  organized  on  the  basis  of  the  nationaNbanking 
law  with  a  provision  for  the  i.-sue  <jf  coin  notes.  So  in  tlie  same  bill 
we  provided  another  mea.-ure  to  relieve  the  Pacific  coast,  whicli  tended 
also  to  cipialize  the  distribution  of  banking  circulation,  because  if  the 
Pacific  coast  should  not  use  the  present  paper  circulation  of  the  country, 
and  we  could  supply  the  vacuum  there  by  coin  notes,  then  more  was 
reserved  for  the  South  and  West.  Tliese  two  simple  propositions, 
which  must  conmiend  themselves  to  the  good  sense  of  every  Senator, 
were  considered  by  themselves  and  reported. 

Now,  what  is  the  condition  of  affairs  {  After  a  long  and  wearisome 
discussion  my  honora])le  friend  from  Michigan  endeavors  to  throw  into 
this  debate  the  funding  bill.  So  my  friend  from  Massachusetts  en- 
deavors to  thrust  in  a  very  comprehensive  proposition  embracing  a 
great  variety  of  subjects.  Why  do  I  say  they  wish  to  thi-ust  the  fund- 
ing bill  into  this  discussion  \  For  this  simple  reason  :  if  we  attempt  to 
retire  the  gi'cenbacks,  we  can  retire  them  only  by  issuing  new  bonds. 
There  is  no  sui-plus  revenue  with  which  we  can  pay  thein.  We  have 
enough,  or  probably  shall  have  in  the  course  of  the  next  six  months,  to 
retire  the  three  per  cent,  certificates  ;  but  no  one  contends  that  we  shall 
have  enough  to  retire  the  greenbacks.  My  honorable  friend  from 
Michigaiiproposes  to  retire  ^5.5,000,(100  of  greenbacks  by  issuing 
bonds'.  What  kind  of  bonds  shall  they  be  ?  Shall  they  bear  four,  five, 
or  six  per  cent,  interest  {  Shall  they  be  taxable  or  not  ?  Thus  every 
question  involved  in  the  funding  bill  is  brought  at  once  into  this  con- 
troversy upon  a  bill  for  the  redistribution  of  bank  circulation. 

It  is  manifest  that,  with  the  diversity  of  Ojiinion  that  would  at  once 


238  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

appear  on  his  next  amendinoiit  to  provide  for  a  mode  of  retiriiif]^  the 
greenbacks,  we  should  embark  uj^on  a  wide  sea  of  debate,  and  wesliould 
have  a  proposition  l)efore  us  that  liad  never  been  considered  by  a  com- 
mittee. On  the  other  hand,  if  the  Senate  will  take  this  bill  and  make 
such  amendments  to  it  as  they  may  deem  proper,  they  have  the  assur- 
ance that  in  a  short  time  a  bill  comprehensive  in  its  character,  so  far  as 
the  funding  of  the  public  debt  and  of  the  greenbacks  is  concerned,  will 
be  reported,  and  tliey  will  have  ample  ground  for  debate.  I  Jisk  Sena- 
tors, if  possible,  to  keep  that  (piestion  of  funding  the  ])ublic  debt,  both 
the  greenbacks  and  the  bonds,  separate,  so  that  they  may  consider  that 
subject  and  let  the  Senate  arrive  at  a  conclusion  on  it  alone.  Then,  in 
due  time,  it  will  be  followed  by  other  provisions  in  regard  to  all  of  the 
existing  banks,  old  and  new,  and  measures  of  revenue,  tariff,  and  taxes. 
I  appeal  to  Senators  whether  it  is  not  wiser  to  keep  these  questions 
separate,  to  decide  them  one  by  one  in  the  order  of  their  coming  rather 
than  to  mingle  them  into  a  hotch-potch  and  then  finally  lose  them  all. 

There  i.s  another  proposition  offered  by  the  Senator  from  Indiana 
[Mr.  Morton],  and  I  wish  to  say  what  I  have  to  say  in  regard  to  it 
now,  so  that  I  may  not  trespass  on  the  time  of  the  Senate  further,  as  I 
am  anxious  to  have  a  vote,  lie  proposes  to  increase  the  amount  from 
$-l:5,0i)0,()i»()  to  §52,000,000.  That  is  inflation  of  the  currency  pure 
and  simple  to  the  extent  of  ST,000,<»0(>.  I  will  not  vote  for  any  propo- 
sition that  will  inflate  the  currency.  We  must  get  back  to  specie  pay- 
ments, and  yet  the  proposition  of  my  friend  from  Indiana,  upon  a 
false  theory!  think,  ])roi>oses  to  retire  $45,000,000 of  one  kind  of  paper 
currency  and  to  issue  >n52, 000,000  of  another  kind. 

This  is  inflation  to  the  amount  of  §T,<>(M»,Oiio.  It  is  true  it  is  not 
one  of  those  terrible  calamities  that  will  be  so  very  in jui-ious ;  but  it 
does  inflate  the  currency.  My  honorable  friend  makes  his  proposition 
upon  what  I  consider  a  delusive  idea ;  that  is,  he  says  the  retirement  of 
$45,000,000  of  three  per  cent,  certificates  would  contract  the  currency 
as  much  as  the  issue  of  852,000,<»O0  of  bank  circulation  would  expand 
it;  that  on  account  of  the  reserves  which  these  banks  would  be  com- 
pelled to  hold  in  their  vaults  the  retirement  of  $-45,oOO,(>00  of  three 
per  cent,  certificates  is  fully  equivalent  to  the  issue  of  $52,000,000  of 
bank  circulation. 

The  delusion  of  that  idea  is  proved  bythis :  when  a  bank  is  organ- 
ized there  is  a  circulation  springing  out  of  the  very  organization  of  the 
bank  which  more  than  counteracts  all  the  amount  of  the  reserve.  My 
friend  from  Pennsylvania  [Mr.  Cameron],  who  is  a  banker,  knows  that 
the  organization  of  a  bank  in  any  community  draws  from  the  pockets 
of  the  people,  in  the  form  of  deposits,  idle  capital  which  may  be  idle 
but  for  a  few  days,  which  is  usually,  on  the  average,  equal  to  the  amount 
of  capital  of  the  bank.  These  deposits  in  the  bank  are  made  the 
basis  of  circulation,  not,  it  is  tnie,  of  paper  money,  but  of  drafts,  loans, 
certificates  of  deposit,  and  various  forms  of  circulation ;  so  that  the 
establishment  of  banks  to  the  amount  of  $40,000,000,  in  my  judg- 
ment, will  create  more  circulation  than  the  retirement  of  845,000,000 
of  three  per  cent,  certificates.  The  argument  would  be  rather  the' 
other  way. 


FUNDING  BILL.  239 

I  have  no  donbt  that  if  banks  are  established  in  the  South  and 
West  \vith  circulation  to  the  amount  of  $45,000,000,  the  actual  increase 
of  circulation,  that  which  transacts  business  and  pays  debts,  will  be 
much  larger  than  $45,000,000.  By  absorbing  the  little  deposits  of 
merchants  and  business  men,  and  even  of  the  freedmen  of  tlie  South, 
they  will  largely  increase  the  currency  and  give  facilities  for  transacting 
business.  But  it  is  a  delusion,  as  every  practical  banker  must  know,  to 
say  that  $45,000,000  of  three  per  cent,  certiticatcs  is  only  equivalent  to 
$52,00(>,000  of  new  banking  circulation. 

The  whole  theory  of  the  honorable  Senator  from  Indiana  is  based 
on  the  idea  that  the  deposits  of  a  bank  will  not  exceed  its  reserve.  It 
would  be  a  very  poor  bank,  indeed,  the  deposits  in  which  were  not 
three  or  four  times  the  amount  of  the  reserve.  The  idea  of  banks 
being  organized  in  a  community  where  the  deposits,  which  are  circula- 
tion, do  not  largely  exceed  the  reserve,  is  a  delusion. 

Therefore  I  say  we  ought  to  coniine  tl^p  operation  of  this  bill  to  the 
identical  sum  that  we  propose  to  retire  and  cancel ;  and  when  we  pay 
off  $45,(>0(»,U(»0  of  indebtedness,  which  we  are  now  prepared  to  pay, 
and  which  ought  to  be  got  out  of  the  road  in  order  to  ])rej)are  for  specie 
payments,  let  us  also  ])rovide  for  the  other  (litliculty  in  the  South  and 
West  by  giving  them  the  same  amount,  and  not  a  dollar  more,  of  cur- 
rency in  the  form  of  bank  notes,  and  in  that  way  confine  our  measure 
to  its  tme  purpose,  the  equalization  of  the  circulation  of  the  countiy, 
and  the  provision  of  temporary  facilities  for  the  Pacific  coast  in  the 
form  of  coin  notes. 

Mr.  President,  I  am  sorry  that  I  have  occupied  so  much  time  ;  but 
1  again  express  the  hope  that  this  bill,  which  certainly  in  its  present 
form  is  a  simple  one,  confined  to  the  questions  I  have  stated,  may  be 
brought  to  a  vote  to-night,  and  thus  give  way  for  other  important  bills 
which  are  now  pressing  upon  the  attention  of  Congress. 


FUNDING  BILL. 
AV  THE  SENATE,  FEBRUARY  28,  1870. 

The  Senate  having  under  consideration  the  bill  to  autluirizo  the  refunding  and 
consolidation  of  the  national  debt,  to  extend  banking  facilities,  and  to  establish  specie 
payments,  Mr.  Sherman  said: 

Mr.  President  :  I  do  not  deem  it  necessary,  in  opening  this  de- 
bate, to  invoke  the  attention  of  the  Senate  to  the  importance  of  the 
subject  embraced  in  this  bill.  It  is  unnecessary  to  discuss  the  public 
policy  of  reducing  the  interest  of  the  national  debt  and  returning  to 
specie  payments."  These  subjects  I  have  had  occasion  frequently  to 
discuss  in  the  Senate,  and  I  could  add  nothing  to  what  has  been  already 
said.  The  question  is  whether  the  public  debt  is  in  such  a  condition 
as  to  justify  us  in  undertaking  the  task  of  reducing  the  interest  upon 
it,  and  whether  our  financial  condition  is  such  as  to  enable  us  to  take 


240  SPEECHES  AJ^D  REPORTS  OF  JOHN   SHERMAN. 

another  step  toward  specie  payments.  These  questions,  and  the  practi- 
cal one  whether  this  hill  will  tend  to  accomplish  the  ohject  proposed,  are 
the  only  questions  which  I  mean  to  discuss  at  this  stage  of  thedehate. 

The  first  six  sections  of  the  bill  that  has  been  read  i)rescrihe  the 
form  of  bonds  into  wiiich  it  is  pr«»posed  to  fund  the  entire  debt  of  tlie 
United  States,  and  the  necessary  agencies  by  which  they  may  be  dis- 
posed of.  The  seventh  section  ])rovides  for  the  reduction  and  the  ulti- 
mate payment  of  the  public  debt,  not  only  of  the  old  debt,  but  of  the 
new  one  created  under  this  act.  The  remaining  sections  of  the  bill, 
three  in  number,  contain  inq)ortant  changes  in  our  banking  laws,  by 
whicli  the  national  l)anksare  retpiired  to  aid  in  funding  tlie  i)ublic  debt, 
and  by  which  tlie  banking  system  will  become  free  and  s])ecie  pay- 
ments will  be  resumed. 

In  order  to  nndei-stand  the  effect  of  this  bill,  it  is  necessary  to  recall 
the  history  of  the  jniblic  debt  and  the  precise  condition  of  the  existing 
laws;  and  I  shall  perhai)s  weary  the  patience  of  the  Senate  by  a  recital 
of  necessary  facts  in  order  to  present  the  ([uestion  fairly  for  this  debate. 

Under  the  loan  laws  of  July  17  and  August  5,  18(>1,  gold  was  bor- 
rowed in  the  same  mode  and  on  the  same  principles  that  had  been  usual 
in  the  loans  of  the  United  States  from  the  time  of  the  formation  of  the 
Constitution  to  that  time.  Bonds  running  twenty  years,  principal  and 
interest  payaljle  in  gold,  were  sold  in  the  money  markets  of  the  world 
for  what  they  would  bring.  In  addition  to  such  Ixnids  there  were  issued 
Treasury  notes  bearing  seven  and  three  tenths  ]>er  cent,  interest,  and 
also  deinand  notes  not  bearing  interest,  payable  in  coin  and  receivable 
for  all  classes  of  puldic  dues.  The  whole  were  on  a  specie  basis,  and 
the  discount  on  the  bonds  sold  represented  the  depreciation  of  the  pub- 
lic credit.  After  the  sudden  suspension  of  specie  payments,  however, 
in  the  fall  of  1801,  at  a  time  when  the  Government  was  ndsing  from 
two  to  three  hundred  thousand  men,  when  its  daily  wants  were  from 
one  to  two  million  dollars,  when  the  people  for  the  iii-st  time  began  to 
see  that  they  were  involved  in  a  great  war  that  would  task  the  ntmost 
resources  of  the  country,  when  specie  had  disaj^peared  from  circulation, 
the  Congress  of  the  United  States  was  compelled  to  adopt  a  new  finan- 
cial policy. 

After  a  long  and  memorable  debate  of  over  two  months  in  both 
Houses  of  Congress,  the  act  of  February  25,  1862,  was  adopted.  _  That 
was  a  revolutionary  act.  It  was  a  departure  from  every  principle  of 
the  financial  policy  of  this  (yoverament  from  its  foundation.  It  over- 
threw not  only  the  mode  of  borrowing  money,  but  the  character  of  our 
public  securities,  and  was  the  beginning  of  a  new  financial  system  un- 
like anything  that  had  been  ventured  upon  by  any  people  in  the  world 
before."^  Tin's  new  policy  was  adopted  under  the  pressure  of  the  severest 
necessities,  and  was  intended  to  meet  a  state  of  affairs  never  foreseen 
by  the  framers  of  the  Constitution. 

'Now,  sir,  it  is  important  to  understand  the  principles  of  this  act ; 
for  it  was  the  foundation  of  all  the  financial  measures  adopted  during 
the  war.  It  was  upon  the  basis  of  this  act,  enlarged  and  modified  from 
time  to  time,  that  we  were  enabled  to  borrow  $3,000,000,000  in  three 
years,  and  to  put  do^vn  the  most  formidable  rebellion  in  modern  his- 


FUNDING  BILL.  24:1 

tory.  This  act  was  based  upon  three  distinct  provisions  or  fundamental 
conditions. 

Yirst,  extraordinary  power  was  conferred  upon  tlie  Secretary  of  the 
Treasury  to  boiTOW  money  in  ahnost  any  form,  at  home  or  abroad, 
practically  without  limitation  as  to  amount,  or  with  limits  repeatedly 
enlarged.  Every  form  of  security  whicli  the  ingenuity  of  man  could 
devise  was  provided  for  by  this  act  or  the  acts  amending  it.  Under 
these  acts  bonds  were  issued  payable  in  twenty  years,  Treasury  notes 
were  issued,  certificates  of  indebtedness,  compound-interest  notes,  and 
other  forms  of  indebtedness,  with  varying  rates  of  interest. 

There  were,  however,  distinct  limitations  upon  the  nature  and 
character  of  these  loans.  It  was  stipulated,  first,  that  more  than  six 
l^er  cent,  interest  in  gold  ph(ndd  not  be  paid  on  the  bonds  issued,  nor 
more  than  seven  and  three  tenths  interest  in  currency  on  the  notes  is- 
sued ;  and  second,  that  all  the  loans  should  be  short  loans,  redeemable 
within  a  short  period  of  time  at  the  pleasure  of  the  United  States. 
Thus  the  gold  bonds  were  redeemal)le  after  five  years,  the  Treasury 
notes  after  three  years,  and  all  the  securities  were  within  the  power  of 
the  United  States  to  redeem  at  the  end  of  five  years  at  furthest.  And 
third,  no  securities  were  to  be  sold  at  k-ss  than  ])ar.  Their  unavoidable 
depreciation  was  measured,  not  by  the  rate  of  their  discount,  but  by 
the  depreciation  of  the  currency.  We  held  our  bonds  at  par  in  paper 
money,  though  at  times  tliey  were  worth  only  forty  per  cent,  of  gold. 

Tiie  second  leading  feature  of  the  act  of  February  25,  1S02,  was 
the  pledge  of  our  customs  revenue,  collected  in  gold,  for  the  payment 
of  the  interest,  and  not  less  than  one  per  cent,  annually  of  tlie  prin- 
cipal of  the  public  debt.  The  third  and  most  important  provision  of 
that  act  was  tlie  clause  making  a  legal-tender  currency  of  United  States 
notes,  convertible  at  the  pleasure  of  the  holder  into  bonds  bearing  gold 
interest.  T^pon  these  three  fundamental  conditions  the  act  of  February 
25,  18<)2,  and  all  the  subs('(|uent  acts  were  founded.  They  provided 
for  short  loans,  payment  of  interest  in  coin,  and  legal  tenders. 

Now,  Mr.  President,  it  may  be  proper  to  state  the  reasons  for  this 
policy.  "We  recognized  the  existence  of  a  great  pressing  necessity  that 
would  tend  to  depreciate  the  pu])lic  credit ;  and  we  took  care,  there- 
fore, not  to  make  loans  for  a  long  period,  so  as  not  to  bind  the  future 
to  the  payment  of  such  usui'ious  rates  as  we  were  then  compelled  to 
pay. 

We  provided  for  gold  interest  and  gold  revenue,  to  avoid  the  ex- 
treme inflations  of  an"  irredeemal)le  currency.  AVe  wished  to  rest  our 
paper  fabric  on  a  coin  basis,  and  to  keep  constantly  in  view  ultimate 
specie  payments.  I  believe  that  but  for  that  provision  in  the  loan  act 
of  February  25,  1SG2,  in  1864:  our  financial  svstem  would  have  been 
utterly  overthrown.  There  was  nothing  to  anchor  it  to  the  earth  ex- 
cept the  collection  of  duties  in  coin  and  the  payment  of  the  interest  on 
our  bonds  in  coin. 

If  the  interest  on  our  bonds  had  not  been  payable  in  coin  during 
the  war,  it  is  prol)able  that  in  the  terrible  depreciation  of  1864:  our 
paper  money  would  have  disappeared,  and  the  people  would  have  re- 
sorted again  to  barter  in  gold,  in  disregard  of  our  legal-tender  curren- 
16 


242  SPEECHES   AND   REPORTS   OF  JOIIX  SIIERMAX. 

cy.  As  it  was,  the  depreciation  at  one  time  was  such  that  ^280  of  our 
paper  money  was  required  to  purchase  $»100  in  coin.  This  simple  pro- 
vision for  the  collection  of  duties  on  imports  in  gold  and  the  payment 
of  interest  in  coin  was  the  only  conservative  security  of  our  ])aper  sys- 
tem. AVlthout  tliat,  the  paper  halloon  might  have  expio  k-d,  as  it  aid 
in  the  revohitiouary  war  in  tlie  time  of  our  fathers,  as  it  did  in  the 
French  revohition  by  the  issue  of  assi^^nats  and  mandats,  and  as  it  did 
in  the  Soutlicrn  Confederacy,  where  it  ended  in  the  entire  destruction 
of  the  public  credit  of  tlic  Confederacy,  at  one  time  hi<^her  in  the 
money  market  of  Cireat  Britain  than  our  own. 

But,  sir,  the  most  important  and  the  most  revolutionary  j)rinciple 
of  the  act  of  February  25,  18(12,  was  the  Icj^al-tendi-r  clause.  This 
was  a  measure  of  imperious  and  ])ressinor  necessit}'.  1  can  recall  very 
well  the  debates  in  the  Senate  and  in  the  J  louse  of  Representatives 
upon  the  legal-tender  clause.  AVe  were  then  standing  in  tne  face  of  a 
deficit  of  some  1^70,000,000  of  unpaid  requisitions  to  our  soldiers. 
Creditors  in  all  parts  of  the  country,  among  them  the  most  powerful 
corporations  of  tliis  country,  had  refused  our  demand  notes,  then  very 
sliglitly  depreciated.  AV'e  were  under  the  necessity  of  raising  two  or 
three  million  dollars  per  day.  We  were  then  organizing  armies  un- 
heard of  before.  We  stood  also  in  the  presence  of  defeat,  constant 
and  imminent,  which  fell  upon  our  armies  in  all  parts  of  the  country. 
It  was  before  daylight  was  shed  upon  any  part  of  our  military  opera- 
tions. We  adopted  the  legal-tender  clause  then  as  an  absolute  i;xpedi- 
ent.  Ilemembenng  the  debate,  I  know  with  what  slow  steps  the 
majority  of  the  Senate  came  to  the  necessity  of  adopting  legal  tenders. 
A  majority  of  the  Committee  on  Finance,  as  then  organized,  was  oi> 
posed  to  the  legal-tender  clause,  the  Committee  standing  four  against 
to  three  for.  llowcver,  the  bill  was  reported  without  striking  it  out, 
and  then  a  proposition  was  nuide  to  strike  out  the  legal-tender  clause. 
After  a  long  debate  this  motion  was  voted  down  by  a  very  small  vote 
indeed,  and  thus  the  legal-tender  clause  was  retained  in  the  bill  Jind 
finally  passed.  If  the  legal-tender  clause  had  been  stricken  out,  what 
would  have  "been  the  result  God  only  knows. 

lit  that  time  Mr.  Chase  was  Secretary  of  the  Treasury.  I  remem- 
ber the  constant,  urgent,  and  repeated  requests  made  by  this  distin- 
guished citizen,  who  was  certainly  one  of  the  ablest  financial  ministers 
that  any  country  ever  enjoyed  in  time  of  trouble,  upon  this  very  ques- 
tion of  the  legal-tender  clause,  '"  in  season  and  out  of  season."  I  find, 
upon  referring  to  a  book  recently  published  by  Mr.  Spalding,  then  a 
member  of  the  House  of  Representatives,  that  when  the  bill  M'as  pend- 
ing on  the  5th  of  February,  18r)2,  Mr.  Chase  wrote  this  letter  to  him 
in  reference  to  the  legal-tender  clause : 

"  Such  men  as  Nathaniel  Thayer  of  Boston,  Alexander  Duncan  of  Duncan,  Sher- 
man &  Co.,  Shepard  Knapp,  and  John  D.  Wolf,  and  numerous  able  and  leading 
financial  paen,  have  told  me  within  two  days  that  you  were  perfectly  rifrht,  and  they 
are  deeply  anxious  that  the  legal-tender  clause  should  stand  in  the  bill.  They  say 
that  the  country  is  lost  without  it." 

TREAsrKT  Department,  February  5, 1862. 
My  Dear  Sir  :  I  make  the  above  extract  from  a  letter  received  from  the  Collectoi 


FUNDING  BILL.  243 

of  New  York  this  morning.     It  is  very  important  the  bill  should  go  through  to-day, 
and  through  the  Senate  this  week.     The  public  exigencies  do  not  admit  of  delay. 

Yours  truly,  S.  P.  CHASE, 

lion.  E.  G.  Spalding,  Iloitse  of  Representatives. 

Still  earlier,  on  the  3d  of  February,  1862,  there  is  this  letter,  seut 
by  Mr.  Chase  to  a  member  of  the  House  of  Representatives ;  and  these 
are  private  letters : 

My  Dear  Sir:  Mr.  Seward  said  to  me  on  yesterday  that  you  observed  to  him 
that  my  hesitation  in  coming  up  to  the  legal-tender  proposition  embarrassed  you. 
I  am  very  sorry  to  observe  it,  fur  my  anxious  wish  is  to  support  you  in  all  respects. 
It  is  true  that  I  came  with  reluctance  to  the  conclusion  that  the  legal-tender  clause 
is  a  necessity,  but  I  came  to  it  decidedly.  I  support  it  earnestly.  I  do  not  hesitate 
when  I  have  made  up  my  mind,  however  much  regret  I  luight  feel  over  the  neces- 
sity of  the  conclusion  to  which  I  have  come. 

Then  he  goes  on  in  regard  to  the  details  of  the  bill.  But,  sir,  that 
is  not  all.  In  the  debate  on  tlie  legal-tender  clause  in  the  Senate  I 
supported  it  warmly  and  earnestly  ;  and  in  opening  my  remarks  on  that 
occasion  I  referred  to  the  Secretary  of  the  Treasury,  and  the  words 
uttered  by  me  then  were  fresh  from  personal  and  official  interviews 
with  him,     I  said,  speaking  of  the  necessity  of  the  measure : 

In  the  first  place,  I  will  say,  every  organ  of  financial  opinion — if  that  is  a  correct 
expression— in  this  country  atcrees  that  there  is  such  a  necessity,  in  case  we  authorize 
the  issue  of  demand  notes.  You  commence  with  the  Secretary  of  the  Treasury,  who 
has  given  this  subject  the  most  ample  consideration.  He  declares  not  only  in  his 
ofticial  communications  here,  but  in  his  private  intercourse  witli  the  inemliers  of  the 
Committee,  that  this  clause  is  indispensably  necessary  to  the  security  and  negotia- 
bility of  these  demand  notes.  "We  all  know  from  his  antecedents,  from  his  peculiar 
opinions,  that  he  would  be  probably  the  last  man  among  the  leading  politicians  of 
our  country  to  yield  to  the  necessity  <.f  substituting  paper  money  for  coin.  Ho  has 
examined  this  question  in  all  its  length  and  breadth.  He  is  in  a  position  where  be 
feeb  the  necessity.  He  is  a  statesman  of  admitted  ability,  and  distinguished  in  his 
high  position.  He  informs  us  that  without  this  clause  to  attempt  to  circulate  as 
money  the  proposed  amount  of  demand  notes  of  the  United  States  will  prove  a  fatal 
experiment. 

'^  And  then  I  went  on  to  speak  at  some  length  as  to  the  necessity  of 
the  legal-tender  clause,  and  as  to  the  concurring  opinions  of  miblic  men 
and  private  citizens  throughout  the  country  on  that  point.  Finally,  by 
tlie  close  vote  I  have  mentioned,  the  clause  was  carried.  I  repeat  and 
read  these  declarations  to  show  that,  at  the  time  the  legal-tender  clause 
was  adopted,  it  was  adopted  as  a  pressing  military  necessity,  to  which 
we  were  compelled  to  resort  in  order  to  save  our  country  in  the  most 
teiTible  of  exigencies.  And,  sir,  I  never  have  seen  the  day  from  that 
hour  to  this  when  I  regi'etted  yielding  to  that  necessity,  and,  by  that 
extraordinary  proceeding,  mortgaging  to  the  cause  in  which  we  were 
engacjed  all  the  property  of  our  people  and  all  the  existing  debts  within 
the  United  States.  * 

There  has  since  been  a  question  whether  the  legal-tender  clanse 
applied  to  preexisting  debts ;  but  there  can  be  no  doubt  of  the  intention 
of  Congress,  because  there  were  no  other  debts  to  which  it  could  apply. 
Unless  it  had  been  made  to  apply  to  preexisting  debts,  it  would  have 
utterly  failed  of  its  object;  and  the  debate  shows  that  the  reason  why 

it  was  pressed  was  because  certain  corporations  and  leading  citizens 


244  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

were  tlien  refusing  to  take  in  pa^Tnent  of  their  debts  the  demand  notes 
of  the  United  States,  receivable  even  for  customs  dues,  and  we  felt  that 
it  was  necessary  by  a  legal-tender  clause  to  mortgage  all  the  credits  of 
the  United  States,  in  order  to  secure  the  free  and  undisputed  circulation 
of  our  notes.  When  a  proposal  was  made  to  make  the  legal-tender  clause 
applicable  only  to  subsequent  debts,  it  was  voted  down  by  an  almost 
unanimous  vote  and  with*  »ut  a  division.  Sir,  the  legal-tender  clause  was 
only  useful  as  a  means  of  compelling  the  creditoi-s  to  the  extent  of  the 
depreciation  to  suffer  the  loss.  It  was  only  done  as  a  measure  of  war, 
and  it  ought  and  could  only  have  been  resorted  to  in  dire  necessity. 

Mr.  President,  it  is  true  that  the  Supreme  Court  has  this  winter 
decided  that  clause  to  be  unconstitutional.  I  do  not  believe  it  uncon- 
stitutional. I  believe  that  this  Congress  or  any  Congress  representing 
the  people  of  the  United  States  should,  under  similar  circumstances, 
adopt  the  same  policy ;  and  it  is  very  strange  indeed  that  the  able 
Judge  who  pronounced  the  opinion  concurred  as  Secretary  of  the 
Treasury  in  passing  the  law,  and  uttered  his  opinion  in  its  favor  in  the 
strong  language  I  have  read  you. 

Sir,  it  is  not  for  the  Supreme  Court  of  the  United  States  to  pass 
upon  the  necessity  of  any  measure.  I  have  the  decision  in  the  case  of 
Ilepburn  ?'«.  (Iriswold  before  me,  and  lind  that  the  whole  basis  of  the 
decision  is,  that  this  clause  was  not  a  necessary  or  appntpriate  means 
to  carry  out  an  express  grant  of  jwwer. 

Why,  sir,  if  the  Congress  of  the  United  States  has  not  the  power 
to  pass  upon  the  necessary  means  to  carry  out  its  plainly  granted  powers, 
■who  has^  Are  not  we  under  oath,  under  the  same  im])ressive  obliga- 
tions that  rest  upon  the  Supreme  Court  ?  I  do  not  l^elieve  in  the 
theory  of  this  decision.  I  believe  that  when  this  legal-tender  clause 
was  adopted  we  were  in  such  a  condition  of  alfairs  as  justified  it,  and 
that  Congress  would  have  been  derelict  .in  its  duty  if  it  had  failed  to 
exercise  that  power  at  that  time.  Such  was  the  opinion  of  almost 
every  business  man  in  private  life,  and  without  it  we  should  have  been 
driven  to  insolvency  before  victoiy  could  lend  us  more  paper  and 
credit.  It  was  only  the  vitalizing  power  given  to  the  notes  of  the 
United  States,  by  making  them  the  basis  of  our  financial  system,  and 
the  right  to  present  them  in  payment  of  every  debt  or  obligation,  that 
gave  us  ability  to  borrow  money  during  the  dark  days  of  the  war. 
Therefore,  I  do  not,  for  one,  like  to  see  another  department  of  the 
Government  endanger  this  power,  which,  if  we  are  again  involved  in  a 
war  under  similar  circumstances,  ought  to  be  and  will  be  resorted  to 
by  Congress. 

But  it  must  be  remembered  that  this  clause  was  justified  only  by 
the  exigencies  of  war.  It  was  not  intended  as  a  measure  of  peace. 
The  legal  tenders  were  only  the  instniments  of  battle  ;  they  were 
musketry  and  cannon ;  and  when  peace  came,  they  should  have  been 
rapidly  retired. 

There  was  another  provision  incorporated  in  the  act  of  Febniaiy 
25,  1S62,  that  gave  to  the  legal-tender  notes  their  chief  value.  That 
was  the  right  to  fund  them  at  any  time  into  a  bond  of  the  United 
States  bearing  interest  in  gold ;  and  this  was  upon  the  principle  that 


FUNDING  BILL.  245 

wliile  we  could  not  redeem  these  notes  in  coin,  we  would  redeem  them 
in  the  verj  best  thins^  we  could  offer — our  bonded  debt,  secured  by  a 
pledge  of  all  the  public  revenue.  This  right  to  fund  was  afterwaVd, 
as  I  will  show,  repealed  ;  and  the  great  error  of  our  financial  legislation 
was  that  this  right  was  not  prom]itl_v  restored  the  moment  the  war  was 
over,  and  then  we  would  have  liad  what  was  provided  by  the  act  of 
February  25,  1862,  a  self-adjusting  currency,  always  redeemable  in 
bonds,  until  bonds  were  at  par  in  gold.  That  at  least  would  have  been 
honest;  that  at  least  would  have  made  good  the  obligations  printed 
upon  the  back  of  those  notes  when  we  issued  them  an(i  compelled  all 
the  people  of  the  United  States  to  take  them  in  the  payment  of  private 
debts. 

Mr.  President,  some  important  changes  were  made  in  the  act  of 
February  25,  1862,  to  which  it  is  necessary  for  me  now  to  refer  in 
order  to  present  the  question  clearly.  By  the  original  act  the  amount 
of  legal  tenders  was  limited  to  ^150,0(»(i,iHlO.  \]y  the  act  of  July  11, 
1862,  the  limit  was  enlarged  to  $^.SOO,000,0(iO,  and  $150,000,000  more 
legal  tendei-s  of  the  same  character  as  under  the  act  of  February  25, 
1862,  were  issued.  By  the  act  of  March  3,  1863,  there  was  a  still 
greater  enlargement  of  the  legal-tender  notes  ;  $150,000,000  more  were 
authorized,  S5(>,000,<iO()  of  wliich,  however,  were  to  be  kept  for  a  speci- 
lic  purpose,  to  pay  maturing  obligati(»ns,  making  an  aggregate  of  i<45(»,- 
ooOjOOo  of  legal-tender  notes  authorized  up  to  that  time.  Then,  by 
the  act  of  June  30,  1864,  when  the  paper  money  of  the  country  had 
become  alarmingly  redundant  and  was  Hooding  all  channels  of  business, 
the  United  States  entered  into  a  solemn  pledge,  which  I  will  now  read  : 

Nor  shall  the  total  amount  of  T'nited  States  notes  issued  or  to  be  issued  ever 
exceed  $400,000,000,  and  such  additional  sum,  not  exceeding  $50,000,000,  as  may 
be  temporarily  required  lor  the  redemption  of  temporary  loan ;  nor  shall  any 
Treasury  note  hearing  interest,  issued  under  this  act,  be  a  legal  tender  in  payment 
or  redt-mptiun  of  any  notes  issued  by  any  bank,  hanking  association,  or  banker, 
calculated  or  intended  to  circulate  as  money. 

But  there  was  another  chanoje,  a  much  more  important  modifica- 
tion, made  of  the  currency  provided  by  the  original  act.  By  the  act 
of  March  3,  1863,  the  right  to  convert  into  bonds  was  taken  away  by 
this  clause  : 

And  the  holders  of  United  States  notes  issued  nnder  and  by  virtue  of  said  acts 
shall  present  the  same  for  the  purpose  of  exchanging  the  same  for  bonds,  as  therein 
provided,  on  or  before  the  Lst  day  of  July,  1863,  and  thereafter  the  right  so  to  ex- 
change the  same  shall  cease  and  determine. 

At  the  date  of  this  act  8300,000,000  of  United  States  notes  M-ere 
outstanding,  with  the  distinct  right  printed  on  the  face  of  them  that 
they  might  be  converted  into  bonds  bearing  six  per  cent,  interest  in 
gold.  Why  was  this  right  taken  away  from  them  ?  Was  it  because 
we  did  not  wish  them  converted  into  bonds  ?  On  the  contrary,  this 
provision  was  adopted  to  induce  their  conversion.  All  our  bonds,  even 
six  per  cent,  gold  bonds,  were  then  below  the  par  of  United  States 
notes;  and  in  order  to  aid  and  expedite  the  conversion  of  the  notes  into 
bonds,  we  depreciated  the  notes.  It  is  a  grave  question  whether  this 
measure  was  not  a  breach  of  public  faith.     It  was  clearly  so,  unless  we 


24G  SPEECHES  AND   REPORTS  OF  JOHN  SHERMAN. 

regard  it  as  simply  a  limitation  of  the  time  within  which  the  right  to 
convert  should  be  exercised.  It  was  inserted  in  the  Senate  with  grave 
doubts,  and  the  error  was,  that  it  wa.s  not  so  framed  as  to  be  a  mere  tem- 
porary suspension  of  a  ri^^ht,  and  not  a  permanent  denial ;  a  stay  law,  and 
not  an  absolute  rei)udiution  under  pretense  of  a  short  act  of  limitation. 

But  although  the  provision  was  adopted,  and  accomjjlished  the  ol)- 
ject  designed,  there  never  was  an  hour  uj)  to  the  close  of  the  war  when 
these  notes  were  not  receive<l  at  ])ar  for  the  bonds  then  in  the  market 
of  the  United  States.  This  clause  w;us  deemed  to  be  necessary  in  order 
to  depreciate  the  notes  and  draw  them  back  into  the  Treasury;  but 
until  after  the  war  wius  over,  practically  they  were  received  at  par  in 
payment  of  the  live-twenty,  ten-forty,  and  seven-thirty  loan.s,  and  for 
every  form  of  indebtedness  contracted  during  the  war. 

I  have  thus  stated  our  general  financial  history  during  the  war.  I 
will  not  go  into  details.  I  oidy  wish  to  bring  these  matters,  that  per- 
haps have  passed  from  the  attention  of  Senators,  back  to  their  recol- 
lection. After  all,  our  iinancial  operations  during  the  war  were  a 
wonderful  success.  We  borrowed  from  our  own  people  a  larfjjer  sum 
of  money  than  ever  was  borrowed  in  the  world  before  in  the  same 
length  of  time.  We  levied  larger  taxes  than  were  ever  collected  from 
any  people  before.  We  submitted  willingly  to  sacritices  without  a  par- 
allel in  history.  Taking  them  altogether,  when  we  come  to  review  our 
iinancial  measures,  I  must  say  that  their  success  is  as  wonderful  as 
were  our  military  operations.  Providence  seems  to  have  been  on  our 
side.  After  the  legal-tender  clause  was  passed  we  never  needed  money 
to  pay  our  soldiers  that  was  not  forthcoming.  Xo  soldier  ever  begged 
for  his  pay  when  it  was  justly  due  to  him  after  these  measures  had 
been  matured  and  ado)>ted,  and  the  enormous  sum  of  s;3,5<)0,0O0,{.)(jo 
was  expended  by  the  United  States  in  a  war  of  four  years  ;  and  at  the 
end  of  the  war  the  country  was  stronger,  greater,  and  more  powerful 
in  physical  resources  and  in  moneyed  means  than  ever  before.  The 
contribution  by  foreign  nations  to  our  population,  and  the  enormous 
wealth  accumulated  by  the  activity  given  to  all  business  operations 
during  the  war,  more  than  repaired  the  immense  sacritices  involved  in 
the  operations  of  the  war.  Thus  we  may  safely  say  that  our  financial 
operations  during  that  time  were  a  success. 

The  organization  of  the  national  banks,  although  subsidiary,  yet 
performed  a  useful  function  iii  our  financial  operations.  They  ab- 
sorbed the  State-bank  paper,  which  at  the  beginning  of  the  war  was  a 
dangerous  currency  of  local  circulation,  excluding  the  national  cur- 
rency. They  fm-nished  a  market  for  our  bonds,  and  now  hold  three 
hundred  and  forty-odd  million  dollars  of  Government  bonds.  They 
were  useful  financial  agents  in  tlie  negotiation  of  loans,  and  rendered 
a  vast  amount  of  senice  during  the  war  in  collecting  our  revenues 
and  in  selling  our  bonds.  They  are  to  be  the  ultimate  means  of  re- 
suming specie  papnents.  By  the  agency  of  the  banking  system  alone 
we  can,  without  retiring  our  entire  amount  of  greenbacks,  come  back 
to  specie  payments.  The  national  banks  were  merely  subsidiary  to 
these  great  measures.  The  financial  policy  of  the  war  was  contained 
in  the  act  of  February  25,  1S62,  and  tlie  acts  amendatory  thereof. 


FUNDING  BILL.  217 

Now,  Mr.  President,  there  is  no  doubt  that  durin<,'  and  since  the 
war  we  made  some  errors,  and  were  guilty  of  some  departures  from 
true  tinaneiid  princi])les.  I  say  tliis  in  all  kindness,  because  I  do  not 
mean  to  evade  my  share  of  the  responsibility;  and  I  uowAvish  to  point 
out  some  of  those  errors. 

In  the  fall  of  ISO-i  a  security  of  new  character  was  issued  that  I 
think  was  not  authorized  by  law.  I  refer  to  the  seven-thirty  bonds, 
which  were  issued  ninning  three  years,  with  the  right  on  the  part  of 
tlie  holder  at  the  end  of  three  years  to  convert  them  into  five-twenty 
bonds,  payable,  ]irincij)al  and  interest,  in  gold.  At  the  time  I  tliought, 
and  1  still  tliink,  that  by  a  fair  construction  of  the  law  as  it  tlien  stood 
there  was  no  power  in  the  Secretary  of  tlie  Treasury  to  give  the  hold- 
ers of  those  seven-thirties  the  right  to  fund  them  into  five-twenty 
bonds.  It  was  a  departure  from  the  financial  policy  of  the  Govern- 
ment to  provide  only  for  sliort  loans.  The  result  was,  at  the  close  of 
the  war,  to  continue  a  loan  l)earing  six  ])cr  cent,  in  gold  for  a  longer 
period  than  was  autliori/.cd  In*  law.  V>y  refernng  to  tlie  act  of  June 
30,  1SH4-,  under  which  this  loan  was  jnade,  you  will  see  that  the  option 
was  given  to  the  Secretary  of  tlie  Treasury  to  issue  either  five-twenty 
bonds  or  seven-thirty  Treasury  notes.  Either  of  those  securities  might 
be  issued  at  his  option,  l)ut  there  is  no  authority  in  the  law  of  June 
30,  l.sr»4,  allowing  their  exchanire  by  holders  *of  the  notes.  The 
amount  of  notes  issued  in  the  fall  of'  1S(!4  was  SL>n4,Of>o,000.  The 
aggregate  amount  of  gold  bonds ^aitstanding  on  the  1st  of  July,  l.st)4, 
was  only  $7o0,7MO,2r)O  ;  all  the  rest  of  our  indebtedness  at  tliat  time 
was  in  currency  securities. 

The  next  error  which  affected  our  financial  operations,  and  which 
affects  them  now,  is  the  error  made  after  the  war  was  over  by  the 
Secretary  of  the  Treasury,  of  continuing  tliis  form  of  oppressive  se- 
curities. After  the  war\vas  over,  and  after  the  last  rebel  had  laid 
down  his  arms,  there  were  issued  al)OUt  six  hundred  million  dollars  of 
Beven-thirty  notes,  convertible  at  the  pleasure  of  the  holder  into  five- 
twenty  bonds.  There  is  now  no  doubt  that  if  immediately  after  the 
war  was  over  a  loan  bearing  a  smaller  rate  of  interest  payable  in  gold 
— a  five  per  cent,  ten-fortv  bond,  for  instance — had  l)een  put  on  the 
market,  all  the  floating  debt  of  the  United  States  might  have  been  con- 
verted into  it.  On  the  1st  of  ^March,  1805,  wlien  the  war  was  practi- 
cally at  an  end,  the  amount  of  gold-bearing  bonds  did  not  much  exceed 
$1,000,000,000,  and  all  the  rest  of  our  indebtedness  was  in  currency 
securities;  l)ut  l)y  this  mistaken  action  the  currency  securities  were 
converted  into  a  s'ix  per  cent,  five-twenty  bond,  and  the  period  of  pay- 
ment was  postponed  eight  years  by  allowing  tlicir  conversion  at  the 
end  of  tliree  vears. 

But,  Mr.  President,  Congress  itself  was  guilty  of  some  errors,  and 
one  or  two  very  great  omissions  in  financial  legislation,  after  the  war 
was  over.  The  most  unfortunate  one  was  the  act  of  April  12,  1860. 
Pv  this  act  Congress  authorized  the  Secretary  of  the  Treasury  to  fund 
all  the  floating  indebtedness  of  the  T^nited  States,  the  compound-inter- 
est notes,  the  five  per  cent,  notes,  tlie  temporaiy  loan  certificates,  and 
all  the  then  floating  debt,  into  six  per  cent,  gold  bonds,  or  into  any 


248  SPEECHES  AND   REPORTS   OF  JOIIX   SHERMAN. 

form  of  bond  authorized  by  previous  acts,  which  covered,  as  a  matter 
of  course,  the  six  per  cent,  hve-twenty  bi^nds. 

Thus  by  ;i  tjeneral  swee])in^  provision  contained  in  this  act  we  legal- 
ized and  authorized  the  convei-sion  <»f  the  wh«»le  currency  debt,  except 
United  States  notes,  int(»  tive-twenty  bonds,  thus  swL'llin«;  hir«;cly  the 
volume  of  live-twenties.  Whatever  opinion  may  have  been  entertained 
as  to  the  state  of  our  finances  in  the  year  18G5,  there  can  ])e  no  doubt 
that  on  tlie  12tli  of  April,  lS(!f),  it  was  not  wise  or  ])olitic  to  fund  the 
debt  into  a  six  ])er  cent.  bond.  The  etfect  of  this  le<;islation  w;is  at 
once  to  sever  tiie  bond  from  the  note.  AH  forms  of  indebtedness 
excei)t  the  notes  were  allowed  to  be  funded  into  bonds.  Thii  at  once 
checked  the  appreciation  of  the  notes.  Ciold  hail  «;reatly  lowered  in 
price,  till  in  April,  1S0<),  when  this  act  was  passed,  it  was  only  worth 
twenty-live  and  one  half  ]>er  cent,  premium  ;  but  from  the  pa.ssage  of 
this  act  it  immediately  r(».-c,  and  in  July  averair»'d  tifty  per  cent.  For 
years  afterward  <;()1<1  never  reached  the  minimum  of  twenty-live  per 
cent.,  but  advanced,  tiuctuatint;  backward  and  forward.  Paner  money 
was  then  entirely  detaciied  from  the  rest  of  the  debt  of  the  United 
States,  and  became  of  less  market  value  than  any  other  form  of  our 
securities.  Uuriuii^  tlie  i)ast  year,  under  a  ditferent  policy,  the  currency 
has  reached  nnich  nearer  the  par  of  p>ld  than  l»efore.  For  three  years 
after  tlie  passa^'c  of  the  act  of  April  12,  Istlil,  ^old,  or  rather  t)ur  ])aper 
money,  was  subject  to  daily  fluctuations  and  deraufjements,  the  inevi- 
table effect  of  its  passai!:e.  This  act  i^nd  the  failure  of  Congress  to  ])ro- 
vide  any  mode  for  redeeming  or  retiring  the  greenbacks,  and  afterward 
the  repeal  of  even  the  linuted  authority  granted  to  the  Secretary  of  the 
Treasury  to  retire  greenbacks,  undoui»tedly  kept  our  notes  depreciated 
from  dav  to  day,  fluctuating  in  value. 

Mr.  I'resident,  another  great  error  which  I  think  we  must  all  admit 
Congress  has  been  guilty  of  is  the  long  delay  in  passing  a  bill  to  pro- 
vide for  the  funding  of  the  public  debt.  There  has  been  no  time 
during  the  past  three  years  when  large  masses  of  the  existing  debt 
could  not  have  been  funded  into  a  live  per  cent.  Ixnid,  and  the  actual 
saving  by  this  operation  for  several  years  would  have  been  very  large 
indeed.  But,  sir,  it  was  one  of  the  misfortunes  of  the  administration 
of  Mr.  Johnson  that,  when  he  abandoned  the  licpublican  party  and 
joined  our  adversaries,  he  created  such  a  state  of  feeling  between  the 
executive  and  legislative  branches  of  the  Goveniment  that  it  was  im- 
possible to  secure  tlie  public  attention  or  the  attention  of  Congress  to 
important  financial  matters. 

The  first  funding  bill  was  introduced  in  the  Senate  in  April,  1866. 
It  proposed  to  fund  the  debt  in  a  five  per  cent,  ten-forty  bond.  It  was 
debated  here  at  considerable  length,  and  was  practically  defeated  by 
amendments. 

The  second  funding  bill  was  introduced  in  Decemljer,  1S6T.  It 
ju'ovided  for  a  domestic  loan  at  five  per  cent.,  and  a  foreign  loan  at 
four  and  a  half  per  cent.  It  provided  for  funding  United  States  notes 
and  for  a  sinking  fund.  This  was  debated  and  somewhat  mutilated  in 
the  Senate,  but  passed  the  Senate  in  an  amended  shape,  passed  the 


FUNDING  BILL.  240 

House  of  Representatives,  and  was  finally  defeated  by  the  pocket  veto 
of  President  Johnson. 

The  history  of  the  fundini;  bill  of  the  last  session,  which  proposed 
a  ten-forty  loan,  is  sutticiently  known,  and  I  need  not  refer  to  it.  It  is 
guflicient  to  say  that  at  the  chjse  of  an  old  Administration,  before  the 
new  Adniinistrati(jn  came  into  power,  there  was  so  great  a  diversity  of 
opinion,  among  the  friends  of  the  bill,  that  it  was  impossible  to  agree 
on  anything. 

The  time  now  is  more  favorable.  The  executive  and  legislative 
l)ranches  of  the  (xovernment  are  in  harmony.  There  are  no  political 
ol)jections  to  trusting  the  Secretary  of  the  Treasury  with  suliicient 
power.  No  doubt  exists  now  as  to  the  ]>ayment  of  our  bonds  in  gold. 
U  liatever  doid>t  there  was  has  been  removed  by  the  '"act  to  strengthen 
the  public  credit,"  passed  on  the  18th  of  March,  IsOO.  The  difference 
between  United  States  notes  and  cf)in  is  now  reduced  to  frf>m  fifteen 
to  twenty  per  cent.,  fluctuating  slightly  from  day  to  day.  (iold  is  lower 
now  than  it  has  been  at  any  tijne  since  the  close  of  the  war.  The  dif- 
ference between  our  bonds  and  coin  is  now  very  snuill.  To-day,  while 
I  speak,  the  Ixjnds  of  18S1  are  above,  the  five-twenty  bonds  are  very 
near,  and  the  ten-forty  iKtnds  are  not  more  than  four  per  cent,  below, 
par  in  goM  ;  so  that  tiiere  can  scarcely  be  a  doubt  that  under  a  favor- 
able state  of  the  money  market  the  existing  bonds  may  be  paid  off  with 
the  proceeds  of  bonds  bearing  a  lower  nite  of  interest. 

Again,  sir,  more  of  the  (Ulit  is  now  re<k'emal)le.  During  the  cur- 
rent year  over  eleven  hundred  million  dollars  of  the  public  debt,  more 
than  half  of  that  which  bears  coin  interest,  is  redeemable  at  the  plea- 
sure of  the  United  States.  It  is  within  the  power  of  the  Secretary  of 
the  Treasury  to  pay  them  off  at  par  in  gold,  if  he  can  sell  at  par  an- 
other l)ond  bearing  a  lower  rate  of  interest. 

Under  these  favorable  cirenmstances  the  Committee  on  Finance  liad 
before  them  several  ])lans.  They  had  the  several  bills  rc])orted  from 
that  Committee  previously.  They  had  the  plan  submitted  by  the  Sen- 
ator from  Massachusetts  [Mr.  Sunmer],  a  carefully  considered  ])lan, 
looking  to  the  rapid  resum})tion  of  s])ecie  iiayments.  They  had  also  a 
plan  submitted  by  the  Secretary  of  the  Treasury,  and  were  aided  ])y 
consultation  with  him  and  by  such  information  from  time  to  time  as  he 
could  give  them,  and  the  result  of  the  whole,  after  the  nutst  careful 
analysis  of  these  various  propositions,  and  after  patient  consideration  of 
all  the  objections  made,  is  the  bill  that  has  been  read  at  the  table  of  the 
Secretary. 

^[r.  President,  I  am  here  liound  to  say  at  the  outset  that  it  docs  not 
meet  my  views  in  all  particulars.  I  could,  as  every  Senator  who  hears 
me  could,  propose  vanous  amendments,  and  support  them,  I  think,  Mith 
plausible  reasons ;  but  in  a  measure  of  this  kind,  where  there  is  a  gi-eat 
diversity  of  opinion,  all  of  us  must  yield  somewhat.  This  bill  substan- 
tially meets  my  views.  It  is  reported  by  the  unanimous  vote  of  the 
Committee  on  Finance,  with  oidy  one  exception,  and  meets  the  ap- 
proval of  the  Secretary  of  the  Treasury.  It  is  only  necessarv'  for  me 
now  briefly  to  look  at  its  lea<ling  provisions. 

The  first  point  is  in  regard  to  the  duration  of  the  bonds :  how  long 


250  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

shall  they  run  ?  We  have  provided  for  three  classes  of  bonds,  all  pay- 
able within  forty  yeai's  and  redeemable  within  ten,  fifteen,  and  twenty 
years  respectively.  We  had  to  look  at  the  established  policy  of  our 
Government  never  to  issue  a  very  long  bond.  Our  Government  has 
reversed  the  financial  policy  of  European  governments,  and  especially 
of  the  Government  of  Great  Britain.  In  England  securities  are  in  the 
form  of  annuities,  where  the  amount  of  interest  is  specified,  and  no 
time  is  fixed  for  tlie  payment  of  the  prinoijxil.  Ever  since  the  foun- 
dation of  our  Government  under  the  lead  of  Alexander  Hamilton  we 
have  followed  a  different  policy,  looking  always  to  the  payniL'Ut  of  the 
principal  of  the  bond  within  the  generation  that  created  the  debt. 
This  is  the  established  policy  of  our  country,  and  I  tnist  it  will  never 
be  departed  from. 

It  may  be  that  a  bond  running  an  indefinite  period  of  time,  a  per- 
petual annuity,  might  bear  a  higher  ]u-ice  in  the  moni-y  markets  of  the 
world  than  a  l)ond  payable  at  a  fixed  time ;  and  yet  it  seems  to  me  it  is 
more  important  to  reserve  the  right  to  pav  the  principal  without  paying 
a  premium  than  it  is  to  avail  ourselves  oi  a  lower  rate  of  interest  on  a 
bond  interminable  in  time.  AVe  have  several  times  paid  off  our  na- 
tional debt.  AV'e  paid  off  the  debt  of  the  llevolution ;  we  paid  off  the 
debt  of  the  war  of  1812,  We  have  always  paid  our  debts  before  we 
agreed  to  pay  them;  and,  whenever  we  entered  the  money  markets  of 
the  world  to  buy  our  bonds,  we  were  always  compelled  to  pay  a  large 
premium.  I  have  before  me  a  table  showing  the  amount  of  premium 
we  have  paid  for  debts  that  have  been  redeemed  from  time  to  time. 
Take  the  loan  of  1842.  We  desired  to  redeem  it  before  it  became 
due,  and  we  paid  fourteen  and  fifty-four  hundredths  percent,  premium. 
On  the  bonds  of  1847  we  paid  eighteen  and  eighty-five  hundredths  per 
cent,  premium,  and  they  only  ran  a  few  years ;  but  money  was  lying  idle 
in  the  Treasury,  and  it  was  deemed  best  by  those  having  charge  of  our 
finances  to  pay  them  off,  even  at  this  high  rate.  The  loan  of  1848 
was  paid  off  at  twenty  per  cent,  premium.  The  loan  of  1850,  called 
the  Texas  indemnity,  was  paid  off  at  a  premium  of  nineteen  and  nine- 
ty-five hundredths  per  cent.  So  with  other  loans  paid  off  at  different 
times  at  a  premium  of  from  fourteen  to  twenty  per  cent.  Many  of 
the  bonds  I  speak  of,  which  were  redeemed  at  this  nigh  premium,  were 
sold  originally  below  par. 

I  have  shown,  therefore,  that  it  is  important  to  ns  to  reserve  the 
right  to  redeem  these  bonds  within  a  limited  period  of  time,  so  that 
we  may  not  in  the  future  be  compelled  to  pay  high  rates  of  premium. 

The  next  question,  on  which  there  was  a  great  deal  of  practical 
difficulty  and  great  diversity  of  opinion,  was  the  rate  of  interest.  As 
a  matter  of  course,  we  desire  to  have  these  bonds  bear  as  low  a  rate  of 
interest  as  is  possible,  but  not  to  put  them  so  low  as  to  prevent  their  ne- 
gotiation ;  and  here  an  erroneous  opinion  prevails  from  a  mistake  of 
the  facts  as  to  the  rate  of  interest  paid  by  other  governments.  We  are 
constantly  told  that  Great  Britain  pays  but  three  per  cent,  interest,  and 
that  her  three  per  cents  are  worth  eighty -five  cents  on  the  dollar.  So 
they  are ;  but  what  did  Great  Britain  get  for  these  three  per  cents  ? 
The  average  rate  of  depreciation  when  the  three  per  cents  were  sold 


FUNDING  BILL.  251 

was  some  thirty  or  forty  per  cent. ;  and,  if  tlie  interest  was  now  com- 
puted upon  the  amount  received  by  Great  Britain  for  these  bonds,  the 
rate  of  interest  would  be  found  to  Ije  betAveen  five  and  six  per  cent. 
ISo  with  other  nations. 

The  rate  of  interest  now  paid  by  European  powers  is,  on  tlic  aver- 
age, about  five  per  cent.  I  have  tables  here,  and  I  might  go  into  elab- 
orate exphmati(jns  of  the  various  loans  now  in  the  money  markets  of 
the  world  ;  but  it  is  sufficient  to  say  that  some  of  the  strongest  govern- 
ments in  the  world  are  now  selling  their  five  per  cent,  bonds  at  a  dis- 
count. We  by  this  bill  limit  the  Secretary  of  the  Treasury  to  selling 
these  bonds  at  par ;  he  must  get  dolhir  for  doHar  in  gold.  All  other 
governments  in  the  world,  in  negotiating  l)onds,  sell  their  bonds  at  a 
fixed  limit  of  discount.  Many  of  the  English  three  per  cents  were 
sold  as  low  as  G5,  and  premiums  were  given  besides  in  the  nature  of 
gratuities,  lottery  tickets,  exchequer  bills,  and  in  various  other  forms  ; 
but  we  sell  our  bonds  at  par  in  gold,  and  therefore  can  not  undertake 
to  fix  the  rate  of  interest  so  low  as  gentlemen  think  we  should.  It  is 
said  we  ought  to  borrow  money  at  four  per  cent.  I  wish  we  could  ;  but 
we  ktKjw  that  practically  it  would  be  unavailing,  futile,  to  enter  the 
markets  of  the  world  iu  competition  with  all  the  enterprises  of  our 
time,  attempting  to  bon'ow  money  at  any  such  rate  of  interest. 

Wliy,  sir,  altliough  money  lias  largely  increa.sed  in  quantity  of  late, 
although  the  gold  of  the  world  is  })erha])s  double  or  treble  what  it  was 
only  a  few  yeai*s  ago,  the  rate  of  interest  lias  been  constantly  advanc- 
ing. It  is  because  modern  nations  are  engaged  in  vast  enteqirises, 
creating  more  demands  for  cajutal.  The  railroads,  telegraphs,  and  steam- 
boats of  this  land  of  ours  now  absorb  more  capital  than  the  business 
of  the  whole  country  did  in  1820,  the  railroads  alone  absorbing  over 
sixteen  hundred  million  dollars.  There  are  demands  for  "loney  in 
this  day  and  generation  that  our  forefathers  never  conceived  of.  Tinrc 
and  space  have  been  annihilated.  All  these  circumstances  tend  to  ad- 
vance the  rate  of  interest.  When  a  merchant  can  send  to  Calcutta  or 
to  China  and  witliin  a  few  days  receive  goods,  he  can  afford  to  pay  on 
his  enterprises  or  his  business  a  higlier  rate  of  interest  than  M'hen  he 
had  to  wait  months  for  his  orders  to  be  executed.  The  railroads  of  the 
country  are  now  selling  their  seven  per  cent,  bonds  payable  in  gold — 
among  the  best  securities  in  tlie  country — at  a  discount. 

We  must  not  forget  these  facts  when  we  undertake  to  fix  the  rate 
of  interest  on  our  public  securities.  Tlie  only  fear  I  have  as  to  the 
success  of  this  measure  is  on  account  of  the  rate  of  interest  fixed.  I 
should  be  very  glad  indeed  to  see  our  whole  debt  funded  at  five  per 
cent.  The  Secretary  of  the  Treasury  was  of  the  opinion  that  he  could 
negotiate  bonds  bearing  a  less  rate  of  interest  for  a  portion  of  the  pub- 
he  debt ;  but  he  is  satisfied  now  that  he  can  not  negotiate  a  loan  at  less 
rates  than  those  fixed  in  the  bill.  Any  one  who  examines  tliis  question 
in  the  light  of  experience,  in  the  light  of  modern  facts,  must  be  satis- 
fied that  a  reduction  of  the  rate  of  interest  proposed  in  this  bill  is  prac- 
tically to  defeat  it,  and  we  would  better  defeat  it  at  once  ratlier  than 
undertake  so  futile  a  task. 

The  purpose  for  which  these  bonds  are  negotiated  is  coextensive 


252  SPEECnES   AND   REPORTS   OF  JOHN   SIIEKMAX. 

witli  tlic  whole  debt  of  the  United  States.  Although  the  amount  is 
lixed  at  $l,iJUU,00<>,<»00,  yet  there  is  autliority  to  issue  four  ])er  cent, 
bonds  to  an  amount  e(|ual  to  the  whole  amount  of  the  public  debt, 
with  no  limitation  whatever,  except  that  the  public  debt  shall  not  be 
increased.  The  proposition  of  the  Senator  Irom  Ma.-^sachu setts  con- 
lined  the  operation  of  his  bill  to  the  first  five-twenty  bonds.  Jiut  those 
five-twenty  bonds  have  no  claim  upon  us  stronger  than  any  other  live- 
twenty  bonds.  It  is  true  that  thev  were  the  first  issued,  but  they  are 
no  more  burdensome  upon  us.  AV'e  pay  upon  them  six  per  cent,  inter- 
est, and  so  do  we  upon  the  others.  There  is  tiierefore  no  necessity,  no 
object  in  discriminiting  in  favor  of  these  bonds,  except  to  give  the 
holders  of  them  a  monop  )ly  of  the  new  live  per  cent,  bonds.  This  we 
did  not  think  was  wise,  and  hence  we  have  proposed  to  put  them  all 
on  tin;  same  footing. 

We  allow  the  (Jnited  States  notes  to  be  converted  into  four  per 
cent,  bonds  ;  and  here  is  a  question  that  no  doultt  will  give  rise  to 
much  contrariety  of  opinion.  My  own  opinion  wcnild  be  that  in  jus- 
tice and  equity  the  Ignited  States  notes  ought  to  be  converted  into  any 
of  these  bonds.  Why  i  Because  the  notes  are  a  debt  of  the  highest 
obligation.  They  are  due,  they  are  payable,  and  no  discrimination 
ought  to  b3  mide  against  them.  I  can  give  no  reason  why  the  holder 
of  a  note  should  not  have  just  as  much  for  his  note  as  the  holder  of  a 
bond  for  his  bond.  But  the  result  of  such  a  provision  would  be  rapid- 
ly to  contract  the  currency,  to  withdraw  the  notes  'as  a  circulating  me- 
dium, to  derange  business,  to  disorder  the  relations  between  debtor  and 
creditor.  Therefore,  to  avoid  any  contraction  of  that  kind,  we  have 
jDrovided  that  the  notes  may  be  funded  into  four  per  cent,  bonds,  and 
may  be  j^aid  out  again  by  the  Secretary  of  the  Treasury  in  the  ordi- 
nary operations  of  the  Government.  To  avoid  even  a  possible  but  not 
probable  undue  and  hasty  contraction  of  the  currency,  we  authorize 
him  only  to  allow  this  conversion  when  in  his  judgment  the  public 
interest  may  be  promoted  by  it.  I  have  no  doubt  that  it  would  be 
wiser  to  make  it  arbitrary,  and  give  to  the  holder  of  the  note  the  right 
at  any  time  to  demand  a  bond  ;  but  we  have  in  that  respect  yielded  to 
the  Secretary's  desire,  that  he  may  not  be  embarrassed  by  notes  accu- 
mulating in  the  Treasury,  or  by  any  question  or  fear  of  the  contraction 
of  the  currency. 

Paeitic  Railroad  bonds  are  excluded  from  the  operation  of  this  bill 
simply  because  they  are  not  the  bonds  of  the  United  States  in  one 
sense.  We  guarantee  them,  but  we  have  no  right  to  redeem  them 
until  the  railroad  company  itself  is  a  defaulter  in  paying  not  only  the 
interest,  but  the  principal  of  the  bonds.  They  are  left  to  stand  on  the 
basis  of  existing  laws.  AYe  have  no  right  to  fund  them,  nor  can  they 
be  embraced  in  this  funding  scheme. 

The  bonds  of  1881  and  the  ten-forty  bonds  may  be  converted  into 
these  bonds  at  the  discretion  of  the  Secretary  of  the  Treasury,  As  a 
matter  of  course,  it  will  be  for  the  interest  of  the  United  States  to 
convert  them.  It  is  not  likely  that  they  will  be  funded  into  these  new 
securities,  but  they  will  probably  be  paid  off  by  the  operations  of  the 
sinking  fund  when  they  mature.'   The  only  limitation  upon  the  amount 


FUNDING  BILL.  253 

authorized  in  this  bill  is  the  present  debt  of  the  United  States.  That 
can  not  in  any  event  be  exceeded. 

Mr.  President,  there  is  another  question  of  great  difficulty,  the 
question  of  taxation.  The  exemption  of  these  bonds  from  State  taxa- 
tion is  not  a  legislative  question.  If  there  was  no  provision  in  this 
bill  about  State  taxation,  they  would  not  be  taxable  by  the  States,  be- 
cause by  the  Constitution  of  the  United  States  itself,  according  to  the 
decisions  of  the  Supreme  Court  in  many  cases,  no  State  can  tax  a 
Government  security.  This  has  been  settled  from  1819  down  to  this 
time  by  the  concurrence  of  every  judge  who  has  sat  upon  the  Supreme 
bench,  in  a  series  of  decisions  all  speaking  to  the  same  effect,  that 
under  no  possible  circumstances  can  a  State  ](j\'\  anv  tax  upon  a  secu- 
rity of  the  (Tovernmeut  of  the  I'nited  States.  A\  hy  (  Sim])ly  be- 
cause the  power  to  borrow  money  is  necessary  to  our  national  exist- 
ence, and  if  a  State  could  tax  the  power  of  the  United  States  to  bor- 
row money,  it  might  just  as  well  tax  the  soldiers  of  our  amiy,  our 
guns,  and  our  gunj^owder.  It  is  a  principle  of  constitutional  law  that  no 
State  can  tax  an  agency  of  the  Government  necessary  for  its  existence. 

I  know  that  in  modern  times,  and  within  the  last  three  or  four 
years,  demagogues  have  endeavored  to  make  cai>itid  out  of  the  exenipn 
tion  of  our  bonds  from  State  taxation.  But  the  fact  is  that  they  have 
always  been  so  exempt,  from  the  foundation  of  the  Government  to 
this  hour.  No  State  has  ever  bean  allowed  to  tax  a  Government  se- 
curity ;  and  yet  there  was  never  any  provision  in  any  loan  law  prior 
to  the  war  exemj)ting  them.  They  are  exempted  from  the  nature  of 
things;  and  the  tii-st  provision  expressly  exempting  them  was  put 
into  the  act  of  ls&2  merely  as  a  uotice,  and  not  as  the  enunciation 
of  a  new  principle.  There  is,  therefore,  no  (piestion  upon  the  ex- 
emption of  the  bonds  from  State  taxation. 

AVhetlier  they  should  be  exenqit  from  national  taxes  is  a  much 
more  difficult  (juestion.  In  e<piity  there  is  no  reason  why  the  holder 
of  a  Ijond,  enjoying  in  this  country  the  interest  derived  from  it, 
should  not  pay  the  income  tax  of  tlie  United  States  ;  and  the  only 
question  was  whether  we  could  make  more  for  the  United  States  by 
discounting  in  advance  this  right  to  tax  the  income  than  we  could 
by  reser\ing  the  power  to  tax.  I  think  it  can  ]>e  demonstrated  as 
clearly  as  any  proposition  in  arithmetic  can  be,  that  it  is  largely  for 
the  interest  of  the  I'nited  States  to  make  these  bonds  free  and  clear 
of  all  taxes,  both  State  and  national.  Wliy  i  The  bonds  of  the 
United  States  can  not  be  subjected  to  national  taxation  except  in 
one  form,  and  that  is  the  tax  on  income.  Xo  discrimiiuiting  tax  can 
1)6  levied  on  United  States  bonds  that  would  not  be  equally  ap])licable 
to  all  other  bonds  in  the  country,  because  all  taxes  must  ha  uniform 
throughout  the  United  States;  and  it  is  impossible  to  tax  a  Govern- 
ment bond  unless  you  tax  also  tiie  bonds  of  railroad  companies,  of 
States,  of  all  sorts  of  corporations,  and  all  the  various  forms  of  in- 
debtedness. Besides,  there  may  be  some  question  whether  any  tax  upon 
]>roperty  of  this  kind,  fixed  and  acquircfl.  is  not  a  direct  tax  within  the 
meaning  of  the  Constitution;  but  I  will  not  debate  that  question. 

It  is  certain  that  no  tax  can  be  levied  on  these  national  securities 


254  SPEECHES   AND   REPORTS  OF  JOHN  SHERMAN. 

except  the  income  tax,  wlilcli  is  an  indirect  tax  upon  the  income  derived 
from  (Jovernment  securities,  Now,  if  we  reserve  the  power  to  tax 
the  incomes  on  these  ,S  1,-^00,000,000  of  bonds,  what  do  we  ^^lin  hy  it'i 
In  the  first  phice,  all  tliose  that  are  held  abroad  in  foreign  countries  are 
free  from  the  operation  of  the  tax.  Not  only  that,  but  by  our  general 
hiw  we  exem])t  the  income  of  all  persons  whose  incomes  are  less  than 
$1,000  from  taxation,  whether  they  are  derived  from  national  securi- 
ties or  from  any  other  source.  All  the  bonds  that  are  held  by  the 
national  banks  as  the  basis  of  their  bankiui^  o})erations  are  now  taxa- 
ble, and  will  be  in  the  future,  in  another  way ;  so  that  practically  we 
now  do  not  receive  from  the  tax  upon  income  from  (ioveniment  bonds 
exceedini^  ei.ii:lit  hundred  th(»usanddollai-s  all  told.  There  are  no  defi- 
nite returns  made  (»f  internal  revenue  showini;  exactly  the  amount  of 
the  income  tax  derived  from  the  interest  u])on  (lovernment  securi- 
ties; but  the  amount  is  very  small,  and  probably  does  not  exceed  what 
I  have  just  stated.  Therefore  the  Committee,  after  a  patient  examina- 
tion of  the  matter,  deemed  it  to  be  for  the  interest  of  the  United 
States,  as  a  mere  financial  (juestion,  to  discount  in  advance  the  right  of 
the  nation  to  tax  the  (iovernment  securities,  in  order  that  we  might 
induce  i)eo})le  to  lend  us  money  on  IkhkIs  at  a  lower  rate  of  ijiterest, 
free  from  all  taxes  whatever.  It  is,  however,  a  question  for  the  Sen- 
ate to  determine. 

Now,  sir,  with  regard  to  the  manner  of  the  negotiation  of  these 
bonds,  the  bill  leaves  that  substantially  to  the  discretion  of  the  Secre- 
tary of  the  Treasury.  When  you  j)ut  u])on  him  a  great  task  like  this, 
involving,  if  he  succeeds,  the  saving  of  from  eighteen  to  thirty-four  mil- 
lions per  annum  in  gold,  you  can  not  hamper  him  with  c<»n(litions.  If 
you  can  not  trust  nim,  some  one  else  ought  to  take  his  place.  You 
must  give  him  the  necessary  agencies  and  the  necessary  powers  to  carry 
on  the  operations  of  a  great  task  like  this.  Therefore  in  this  bill  we 
have  inserted  the  usual  powers,  which  l)efore  and  during  the  war  were 
given  to  every  Secretary  of  the  Treasury,  but  which  there  is  a  con- 
tinual disposition  to  carp  at.  I  recall  with  pleasure  the  language  of 
Mr.  Fessenden,  in  his  report  to  us  in  ISG-t,  when  Secretary  of  the 
Treasury,  upon  this  veiy  question  of  discretionary  authority  conferred 
upon  the  Secretary : 

A  wide  discretion  sliould  be  intrusted  to  the  officer  charped  with  tlie  duty  of 
negotiating,'  loans,  in  order  tliat  he  may  be  enabled  to  avoid  unexpected  difficulties 
occasioned  by  possible  conditions  of  the  money  market.  This  delicate  and  responsi- 
ble duty'must  necessarily  be  intrusted  to  somebody,  and  the  people  can  have  no 
other  reliable  security  for  faithfulness  than  may  be  found  in  the  established  charac- 
ter of  the  individual  charged  witli  so  important  a  trust,  whoever  he  may  be. 

Now,  sir,  what  are  the  discretionary  powers  conferred  on  the  Secre- 
tary of  the  Treasury  ?  Fii-st,  we  autliorize  him  to  employ  private 
agents  ;  and  it  is  proposed,  to  avoid  tliis,  to  require  all  the  operations 
of  negotiating  this  loan  to  be  done  by  the  Treasury  Department.  Why, 
sir,  this  is  practically  impossible.  Every  nation  in  Europe,  and  our  own 
nation  in  three  memorable  periods,  have  found  it  to  be  so.  The  ma- 
chinery of  the  Treasury  Department  is  not  adapted  for  the  negotiation 
of  these  loans.     Even  the  powerful  governments  of  Great  Britain,  of 


FUNDING  BILL.  255 

Russia,  of  France,  resort  to  private  bankers  or  agents  to  cari-v  on  tlie 
operations  of  funding  their  debts.  All  railroad  corporations  and  all 
associations  seeking  to  borrow  money  in  the  money  markets  of  the  world 
must  seek  these  intermediate  agencies. 

Three  times  during  the  war  we  tried  to  avoid  it.  Mr.  Chase,  when 
Secretary  of  the  Treasury,  tried  to  negotiate  the  tive-twenty  loan 
through  the  Treasury  Department,  and  failed  utterly  for  more  than  a 
year,  until  finally  he,  under  similar  authority  to  that  conferred  in  this 
bill,  employed  private  agents,  who  within  six  or  eight  months  from  that 
time  sold  the  whole  loan.  ISo  Mr.  Fessenden,  when  Secretary  of  the 
Treasury,  undertook  to  carry  on  a  negotiation  by  the  aid  of  the  national 
banks  and  the  Treasury  Department,  and  he  finally  in  his  report  said 
that  he  found  himself  unable  to  get  the  requisite  money  in  that  way, 
and  was  compelled  to  resort  to  private  agencies.  So  with  Mr.  !McCul- 
loch  under  similar  circumstances.  Here  the  authority  is  conferred  to 
employ  agents  with  limited  power  and  with  limited  pay ;  and  if  yon 
will  not  trust  the  Secretary  of  the  Treasury  with  these  discietionary 
powei"s,  of  coui^se  you  may  so  cripple  and  tie  up  his  hands  as  to  ]>revent 
him  fniin  neg<»tiating  the  loan. 

There  is  another  difficulty  ])rcscnted,  J  think,  for  the  tirst  time  in 
this  bilL  There  is  authority  granted  in  this  bill  to  employ  foreign 
agents,  or  bankers  in  foreign  countries.  Although  in  some  of  the  loan 
laws  passed  during  the  \\<iv  the  authority  was  granted  to  negotiate 
bonds  in  Furi>i)e,  yet  1  do  not  Hud  in  any  of  the  loan  laws  exi)reFS 
authority  to  employ  agents  in  foreign  countries,  although  such  jigents 
have  often  been  employed.  r>ut  here  the  authority  is  expressly  given. 
The  reason  for  it  is  tliat  the  great  mass  of  c»ur  public  debt  which  can 
be  funded  at  a  low  rate  of  interest  is  now  held  abroad.  Mr.  AVells,  in 
his  annual  rej)ort,  nuide  here  recently,  estinuites  the  amount  held  in 
Europe  at  si, 1 »(»(!,( )(»o,(M to.  I  believe  "he  has  overstated  it;  but  at  the 
same  time  I  believe  it  approaches  si, 0(i(  1,000,000,  and  is  about  one 
half  the  funded  debt  of  the  United  States.  The  rate  of  interest  in 
foreign  countries  is  lower  than  in  this  ct)untry,  and  it  is  therefore  proba- 
ble that  we  can  negotiate  bonds  on  more  favorable  terms  abroad  than 
here.  All  this  is  left  to  the  discretion  of  the  Secretary.  He  is  author- 
ized to  negotiate  bonds  at  home  and  abroad,  and  to  do  it  either  through 
the  Treasury  Department  or  private  agents  here  or  in  Furope.  lie 
may  also  print  on  the  face  of  the  bond  the  authorization  of  the  pay- 
ment of  interest  in  the  coin  of  the  country  in  which  they  are  negotiated. 
He  is  authorized  to  pay  the  interest  in  thalers,  in  francs,  in  sterling,  in 
order  to  avail  himself  of  the  lowest  possible  rate  of  interest. 

I  hope  that  this  part  of  the  measure  will  finally  lead  to  what  has 
been  so  eagerly  sought  for  by  the  honorable  Senator  from  Massachu- 
setts and  myself,  an  international  coinage.  It  is  very  easy  now,  if  we 
could  approach  this  question  as  practical  business  men,  to  adopt  a  coin- 
age unit  as  the  standard  for  all  the  civilized  nations  of  the  world. 

It  has  been  a  theme  for  poets  and  statesmen  now  for  more  than  a 
generation.  There  is  a  concurrence  of  opinion  in  Furope  and  in  Amer- 
ica in  favor  of  the  adoption  f»f  a  .«iystem  of  international  coinage,  which 
I  believe  will  now  lead  to  practical  results.     A  very  slight  change  in 


256  SPEECHES  AND  REPORTS  OF  JOHN   SHERMAN. 

the  coinage  of  Germany,  France,  Englan<l,  and  our  own  country  will 
enable  us  to  make  our  national  coins  convertihle  one  into  the  other 
without  loss  by  exchange;  and  I  have  the  hope  that  this  measure,  now 
for  the  first  time  transferred  to  our  dij^lomatic  service,  will  be  brouglit 
about  by  the  connnon  consent  of  the  dilfc-rent  nations  affected.  It  will 
be  one  of  the  greatest  reforms  in  modern  times  when  live  francs  will  be 
a  dollar,  live  dollars  a  pound  sterling,  ten  Horins  a  pound,  and  the  eagle 
of  America  the  international  unit  of  the  civilized  world.  Then  the  coin 
of  all  modern  nations  may  travel  anywhere  in  the  pockets  of  the  citi- 
zens of  all  nations,  interchangealjle  in  everv  country,  its  value  fixed 
upon  its  face,  and  of  universal  circulation.  (  have  no  doubt  that  this 
measure  will  tend  eventually  to  the  adoi)tion  of  such  a  system  of  inter- 
national coinage,  and  in  that  aspect  will  be  a  scientific  as  well  as  a 
financial  benefit. 

I  wish  now,  Mr.  President,  to  call  the  attention  of  the  Senate  very 
brietiy  to  the  sinking-fund  section  of  this  bill.  Section  seven  provides 
for  the  appro})riation  from  the  duties  on  imported  goods  of  sl.")(i,O00,- 

000  in  gold  per  annum,  applicable  fii*st  to  the  payment  of  the  interest 
and  then  to  the  payment  of  the  principal.  The  amount  of  the  interest 
on  the  public  deht  is  now  about  sl25,(K)0,0O(>,  so  that  this  is  an  appro- 
priation of  s2r),0(»0,0(M>,  or  one  per  cent,  of  the  principal,  to  be  kept  as 
a  per})etual  sinking  fund,  the  operation  of  which  will  j)ay  off  every 
dollar  of  our  indeljtedness,  old  and  new,  in  from  twenty-five  to  thirty 
years,  depending  somewhat  on  the  changes  in  the  value  of  our  bonds. 

This  is  not  only  a  wise  financial  policy,  but  it  is  the  result  of  an  ex- 
press stipulation  in  the  law.  In  the  act  to  which  I  refeired  a  M'hile  ago, 
of  February  25,  1S02,  we  stipulated  that  until  the  debt  was  ])aid  we 
would  ajipropriate  one  per  cent,  of  its  amount  every  year  to  form  a 
sinking  fund  for  the  extinguishment  of  the  principal.  This  bill  or- 
ganizes the  sinking  fund  on  a  new  plan,  which,  without  any  risk  of 
misapplication,  will  extinguish  the  debt  within  the  period  stipulated  in 
the  bonds.  The  United  States  has  in  substance  faithfully  and  hon- 
estly observed  this  stipulation.  During  the  M'ar  it  could  not  do  it;  it 
was  idle  to  attempt  it.  During  war  a  sinking  fund  is  a  delusion;  it 
can  not  operate  except  from  a  surplus  revenue.  All  the  theories  that 
have  grown  out  of  the  experiment  in  England  have  been  sho\vn  to  be 
delusive,  except  in  a  state  of  peace,  and  wlien  there  was  a  surplus  rev- 
enue. Then  the  application  of  a  sinking  fund  is  like  Aladdin's  lamp, 
it  works  wonders. 

I  said  that  the  United  States  had  constantly  maintained  the  integrity 
of  the  sinking  fund,  not  in  the  form  provided  by  the  law,  but  by  an 
actual  payment  of  a  greater  amount  of  the  debt  than  was  stipulated. 

1  have  in  my  hand  a  table,  showing  the  amount  paid  each  year  since 
the  close  of  the  war  on  the  principal  of  the  public  debt. 

On  the  1st  of  March,  1866,  our  debt  reached  the  highest  figui*e.  It 
then  amounted  to  $2,823,921:,959  ;  or,  deducting  the  cash  in  the  Trea- 
sury, to  S2,707,906,000.  From  the  1st  of  March,  1866,  to  the  1st  of 
March,  1867,  we  paid  of  the  principal  of  this  debt  8190,061-,110;  from 
the  1st  of  March,  1867,  to  the  1st  of  March,  1868,  we  paid  $2(),-lS2,- 
266 ;  from  the  1st  of  March,  1868,  to  the  1st  of  March,  1869,  we  paid 


FUNDING  BILL.  257 

85,059,918;  from  the  1st  of  Marcli,  1869,  to  the  1st  of  March,  1870, 
to-morrow,  estimating  for  a  few  days,  we  have  paid  $86,695, r»2()  of  our 
bonded  indebtedness ;  making  an  actual  payment  in  four  years  of  $303,- 
201 ,725,  or  an  average  annual  payment  on  the  ascertained  debt  during 
the  hist  four  years  of  875,800,431. 

Not  only  that,  but  we  have  paid  in  addition  a  large  mass  of  un- 
liquidated debt.  I  have  in  my  hand  a  statement  or  estimate  prepared 
by  the  Secretary  of  the  Treasury,  showing  that  during  four  years  we 
have  paid  8777,540,634  of  unliquidated  debt,  in  addition  to  the  $303,- 
201,725  of  the  principal  of  the  liquidated  del)t;  making  the  total  pay- 
ments on  the  debt,  besides  interest,  over  81jO*>'*,'">0,<»Ou  in  four  years. 
This  unlicjuidated  debt  consisted  of  supplies  furnished,  of  unpaid  re- 
quisitions, of  bounties  and  back  pay,  and  other  debts  in  various  forms 
outstanding,  not  entered  on  the  books  of  the  Treasury,  but  just  as  much 
the  debt  of  the  country  as  five-twenty  bonds.  All  these  have  been 
paid  from  the  ordinarv  revenues  of  the  Government  in  addition  to  the 
8303,0()O,OO()  of  bonds.  It  is  believed  tliat  it  is  high  time  tlie  people 
of  the  United  States  should  be  somewhat  relieved  from  such  large  pay- 
ments, and  tliat  the  policy  requiring  them  should  be  suspended  ;  but  we 
should  faithfully  carry  out  the  obligation  of  the  contract,  and  pay  at 
least  one  per  cent,  annually. 

Mr.  President,  I  have  shown  ab(»ve  that  during  the  present  year, 
the  tirst  year  of  General  (rrant's  administration,  we  have  paid  886,000,- 
000  of  the  public  del)t ;  and  tliat  during  tlie  last  year  of  Mr.  Johnson's 
administration  there  were  only  live  or  six  millions  of  the  ])ublic  debt 
paid  under  the  same  revenue  laws.  This  presents  a  favorable  aspect 
for  the  party  to  which  the  great  majority  of  the  Senate  belong.  I 
wish  to  carry  the  (•omj)arison  a  little  further.  I  have  a  table  here  show- 
ing the  receij>ts  and  expt-iiditures  of  the  last  year  of  Mr.  Johnson's  ad- 
ministration conij)ared  with  the  receipts  and  expenses  of  the  first  year 
of  General  Grant's  administration,  and  the  result  is  higldy  favorable  to 
the  Republican  party.  Although  I  do  not  intend  to  drag  into  this  dis- 
cussion anything  like  political  controversy,  yet  it  is  due  to  the  Adminis- 
tration that  these  official  tiguix-s  should  be  put  on  record,  so  that  it  may 
have  the  l)enefit  of  the  credit  due  to  its  management  of  our  public 
finances.  The  income  of  the  Government  from  Marcli  1,  lb68,  to 
March  1,  1869,  was  as  follows : 

From  customs ?17fi,2O0,692  7» 

From  internal  revenue 155,138,lt)8  99 

From  other  sources .36,9"J9,050  99 

Total $368,268,518  77 

The  income  from  March  1,  1869,  to  March  1,  1870  (estimating  for 
the  last  six  days  of  the  year,  from  February  22  to  Febniary  28),  will  be  : 

From  customs !  ^179,956,743  85 

From  internal  revenue 175,467,141  04 

From  other  sources S9,535,213  93 

Total 8394,959,098  82 

Income  in  1868-'69 308,268,518  77 

Increase  in  favor  of  1869-'70 826,690,680  05 

17 


258  SPEECHES  AND  REPORTS  OF  JOIIX  SIIERMAX. 

This  statement  is  not  iibsolutely  correct,  because  the  aecoiints  of  the 
Department  are  kept  In'  quarters  and  not  l»y  montlis,  l)nt  it  is  very 
nearly  so,  and  may  be  relied  on  for  any  ordinary  pur])osos  of  com- 
parison. 

The  total  cxpoiiditiires  iroiu  March  1,  186s,  to  Fihruary  1,  Ihi.y,  win-.  . .  .  *.S27,f>r)7,'28l  63 
The  total  expeudlturcd  iVom  Marih  1,  1809,  to  February  1,  lb7U,  wire   .    .     'll \ ,\)'1~, ,:w.l  09 

Decrease  in  expenses ;f^5, 139,981  44 

Increase  of  income '^6,69o,5sO  05 

Balance  in  favor  of  Grant's  administration f  81,8:50,6(>l  49 

Actual  payment  of  the  public  debt  since  March  1,  1869,  to  Febniary  1, 1870.     $80,649,971  09 
Estimated  payment  in  February,  187<> 6,000,(hm>  00 

Total |I86,6 19,971   0<.» 

Reduction  of  public  debt  from  March  1,  1808,  to  March  1,  l.s09 6,959,7 IX  40 

Amount  of  public  debt  paid  in  first  year  of  Grant's  administration  in 

excess  of  last  year  of  Jolmson'a  administration $80,690,252  63 

The  liist  year  of  Mr.  Jolmson's  admini.<tration  diminislicd  the  prin- 
cipal of  the  ]nd)lic  debt  but  a  little  over  five  millions,  while,  as  I  have 
already  shown,  there  has  actually  been  })aid  upon  the  public  debt  du- 
ring the  first  year  of  this  administration  ss»;,t;4<t,'.t71  ;  and  nearly  all 
the  money  that  has  l»een  paid  upon  tlie  i)ublic  debt  in  the  past  year  has 
been  derived  from  the  saving  in  expenditures  and  the  increa.sed  collec- 
tion of  revenues  under  the  same  laws.  These  are  simply  facts  derived 
from  othcial  sources,  and  imire  ojreatly  to  the  benetit  of  the  present 
administration.     1  oidy  hope  it  will  <^o  on  and  do  better  in  the  future. 

Mr.  l*resident,  the  three  remaining  sections  of  this  bill  aj>])ly  to  the 
national  banks.  That  is  much  too  great  a  theme  for  me  to  enter  upon 
at  this  stage  of  the  debate ;  but  I  will  explain  in  a  very  few  words  the 
theory  of  those  sections.  The  national  banks  are  mere  creatures  of  law. 
They  hold  their  existence  at  the  })leasure  of  Congress.  AVe  may  to- 
morrow, if  it  promotes  the  ])ublic  interests,  withdraw  their  authority. 
Their  franchise  has  been  valuable  to  them.  We  think  it  right  that 
they  should  aid  us  in  funding  the  public  debt.  They  hold  of  our  secu- 
rities $340,000,000.  Xearly  all  of  these  bear  six  per  cent,  interest  in 
coin.  We  will  not  deprive  them  of  any  of  them ;  we  will  not  take 
from  them  the  property  they  enjoy ;  we  will  not  deny  them  even  the 
payment  of  six  per  cent,  gold  interest  as  long  as  they  are  the  ownei'S  of 
these  bonds.  But  they  hold  the  franchise  of  issuing  paper  money  guar- 
anteed by  the  United  States,  which  constitutes  the  circulation  of  our 
country ;  and  we  say  that,  enjoying  that  franchise,  we  now  stipulate  with 
them  for  the  reduction  of  interest  on  the  bonds  they  hold.  The  pro- 
visions of  this  bill  are  not  arbitrary ;  they  are  not  harsh ;  they  do  not 
take  from  the  national  banks  any  right  which  they  enjoy,  except  one 
confessedly  at  our  pleasure.  If  they  are  not  content  to  enjoy  their 
franchise  on  the  terms  proposed,  they  can  retire. 

As  to  new  banks  which  may  be  organized  under  the  free-banking 
section,  it  is  easier  for  them  to  engage  in  banking  under  this  bill  than 
under  the  old  law,  because  they  can  go  to  the  Treasury  and  buy  bonds 
at  par  in  cuiTency,  and  upon  these  receive  circulating  notes,  and  a  cor- 


FUNDING  BILL.  259 

responding  amount  of  legal  tenders  will  be  then  canceled.  The  new 
banks  may  issue  in  circulating  notes  four  fifths  of  the  amount  of  their 
bonds  under  the  terms  and  conditions  of  the  banking  act,  while,  if  they 
were  now  required  to  go  into  the  market  to  buy  bonds  with  which  t(> 
start  new  banks,  they  would  be  compelled  to  pay  a  premium  of  from 
ten  to  twenty  per  cent,  for  the  existing  bonds,  and  then  could  issue 
only  ninety  per  cent,  of  the  amount  of  the  principal  of  the  bonds. 

I  think  it  is  ver}'  clear  that  under  the  last  section  of  the  bill  the 
banking  system  becomes  free,  and  old  and  new  banks  are  on  an  equal 
footing  ;  but  if  it  is  not  clear,  it  ought  to  ])e  made  so.  The  section  is 
intended  to  be  a  free-banking  law,  oj)ening  wide  the  door  for  the  or- 
ganization (jf  banks  to  any  extent,  only  upon  condition  that  an  e(pial 
amount  of  greenbacks  shall  be  retired  as  the  new  notes  are  issued. 
That  is  the  purpose.  The  only  limitation  on  it  is  the  amount  of  green- 
backs now  outstanding;  and  when  they  are  exhausted,  it  will  be  for 
(.'ongress  to  determine  whether  we  shall  go  further. 

Such,  sir,  are  the  general  provi>ions  of  this  bill.  The  great  ol)ject 
is  the  reduction  of  the  interest  of  the  ])ublic  debt.  If  the  >il,2(»0,()(iO,- 
(»()()  proposed  is  taken,  it  Avill  be  a  reduction  of  our  annual  taxes  of 
^18,(MiO,OOU  of  gold,  representing  a  capital  at  live  percent,  of  ^3r»0,- 
000,000;  and  the  incidental  results  of  this  measure  will  be  as  beneficial 
as  the  direct  saving  of  the  pultlic  treasure.  A  jxdicy  will  l)e  ado])ted, 
by  fixing  the  minimum  to  be  aj>j)lied  to  the  j)ayment  of  the  public 
debt,  that  will  enal)le  us  to  ascertain  j)reciselv  the  amount  of  necessary 
taxes.  The  jmblic  debt  will  be  represented  by  an  annuity  of  §>1  .')(),- 
000,000,  which  will  pay  every  dollar  of  it  witliin  thirty  years.  Our 
taxes  can  then  be  measured  by  our  a])j)ro])riations,  with  the  constantly 
pressing  lesson  that  every  new  a])j>roj)riation  is  a  new  tax,  and  every 
saving  of  a])])ropriation  is  the  rej)eal  oi  a  jjart  of  the  most  burdensome 
of  existing  taxes.  And,  sir,  the  tendency  of  the  measure  is  to  the  re- 
turn of  specie  payments.  AVe  now  again  restore  to  the  United  States 
note  its  quality  of  redeenuibleness,  a  (pialitv  which  was  taken  from  it 
under  the  pressure  of  the  war,  and  which  wlien  restored  to  it  will  give 
it  value  and  stability,  will  ])lace  it  bey(»nd  the  range  of  mere  gamblers, 
and  will  firndy  anclior  it  upon  the  credit  of  interest-bearing  securities, 
so  that  while  specie  payments  are  suspended  the  note  will  n(»t  fall  in 
market  value  below  the  value  of  the  bonds.  Having  thus  fixed  a  mode 
of  redemption  and  a  limit  of  depreciation,  you  may  hope  s(»on  to  see 
these  broken  promises  redeemed  and  their  places  supplied  with  paper 
money,  convertible  at  pleasure  into  gold  or  silver  coin. 

And,  sir,  the  beneficial  effect  of  this  measure  will  be  seen  in  the  re- 
duction of  the  rate  of  interest  on  capital  employed  in  private  enterprise, 
which  by  the  usurious  rates  paid  by  the  Government  during  the  war 
has  been  forced  to  an  average  in  tiie  United  States  of  ten  per  cent. 
This  unnatural  rate  has  tended  to  deter  new  enterprises,  to  accunmlate 
capital,  and  to  increase  prices  ;  for  interest  is  a  large  element  in  the 
cost  of  all  commodities. 

The  national  banks  will  be  required  to  aid  us  by  some  sacrifices  on 
their  part,  but  even  this  is  voluntary  with  each  bank.  If  any  of  them 
do  not  choose  to  enjoy  a  privilege  conferred  and  held  at  the  pleasure 


260  SPEECUES  AND  REPORTS  OF  JOHN  SHERMAN. 

of  Congress,  tliey  are  at  liberty  to  take  tljeir  property  and  retire. 
Otliers  will  gladly  avail  themselves  of  the  privilege  of  buying  these 
bonds,  with  the  right  to  issue  four  fifths  of  their  amount  in  ])aper 
money  upon  their  security.  If  bankers,  whose  profits  have  been  largely 
increased  by  the  high  j)remiuni  in  gold  received  of  the  (lovernment, 
will  not  now  aid  us  to  reduce  our  interest,  let  them  take  their  money 
and  try  other  investments  if  they  will.  I  would  n<jt  violate  in  the 
slightest  degree  any  ])romise  made  to  them  ;  but  the  probable  effect  of 
this  measure  in  reducing  their  dividends  does  not  excite  my  sympathy, 
nor  do  I  believe  it  will  deprive  us  of  any  of  the  banks  or  banking  capi- 
tal necessary  to  the  good  of  the  ]>eople.  Under  this  system,  as  it  will 
remain  under  this  bill,  these  bonds  will  be  the  most  i-emunerative  and 
attractive  investment  for  idle  capital  managed  in  the  interest  of  those 
not  willing  or  able  to  manage  it  by  pei'sonal  care. 

And,  sir,  another  beneficial  effect  of  this  measure,  if  adopted,  is 
that  we  will  have  a  financial  policy.  The  broken  threads  made  by  the 
revolutionary  expedients  of  the  war  will  be  tied  again.  Business  men 
can  know  what  to  rely  u])on.  They  will  not  have  to  look  daily  to  the 
Treasnry  Department  foi-  its  bidletin  of  tlie  sale  of  gold  or  of  bonds; 
they  will  not  have  to  depend  ujxtn  an  inflexible  and  arbitrary  limit  of 
a  currency  which  is  not  measured  in  value  by  gold,  bonds,  or  anything, 
which  is  redeemable  in  nothing  but  taxes,  and  the  }>rice  of  which  may 
at  any  time  be  affected  by  speculation  ;  they  will  not  have  to  compete 
with  the  United  States  in  the  money  markets  to  borrow  at  a  usurious 
interest.  No  longer  will  there  be  doubts  as  to  the  terms  of  our  out- 
standing bonds.  The  danger,  I  trust  a  remote  one,  of  a  political  party 
coming  into  power  pledged  to  repudiation,  will  be  put  to  rest.  No  one 
could  raise  the  question  of  taxing  bonds  bearing  so  low  a  rate  as  these, 
on  which  the  taxes  are  so  jdainly  discounted  and  reserved  in  advance 
by  the  United  States. 

As  to  the  practicability  of  this  measure,  the  only  doul)t  I  have  upon 
it  rests  upon  the  ability  of  the  Secretary  of  the  Treasury  to  negotiate 
a  bond  ha%'ing  a  less  rate  of  interest  than  five  per  cent. ;  but  as  he  is 
confident  that  he  can  do  so,  I  am  willing  that  he  should  try,  and  am 
willing  to  give  him  every  aid  and  power  that  will  tend  to  make  his 
effort  a  success.  If  he  succeeds,  he  Avill  deserve  the  higher  credit. 
That  he  can  fund  the  debt  at  five  per  cent.  I  have  not  a  doubt.  If  he 
does  better,  he  will  have  the  thanks  of  his  countrymen,  and  should  re- 
ceive from  Congress  every  aid  and  facility  it  is  possible  for  us  to  give 
him. 

To  the  extent  that  these  bonds  are  made  tlie  basis  of  banking,  their 
sale  is  practicable  and  just.  Beyond  that  it  will  de])end  upon  the  con- 
fidence of  capitalists  in  the  public  faith,  in  the  develoj^ment  of  our  re- 
sources, and  in  the  willingness  of  our  ])eople  to  bear  for  a  while  the 
burden  of  taxation.  Nothing  can  aid  so  much  as  strict  economy  and  a 
surplus  revenue.  Money  saved  or  collected  now  will  be  saved  to  our 
people  many  times  in  the  lessening  of  the  taxes  in  the  future. 

This  is  not  the  time  to  discuss  the  question  whether,  while  the 
funding  process  is  going  on,  it  is  wise  to  reduce  our  taxes.  That  ques- 
tion will  be  distinctly  presented  when  the  tax  and  tariff  bills  come  to 


FtJNDING  BILL.  261 

us  from  the  House.  It  is  clear  enough  that  in  a  short  time  we  shall  be 
al>le  to  reduce  larorely  our  internal  taxes  and  contine  their  operation  to 
a  few  articles.  I  hope  we  shall  not  com])licate  this  bill  by  a  premature 
discussion  as  to  the  kind  of  taxes  to  be  lirst  repealed.  AVe  know  well 
that,  if  this  measure  is  a  success,  we  can  go  much  further  in  the  repeal 
•f  taxes  than  if  we  continue  to  pay  six  per  cent,  interest  on  our  debt, 
rhe  question  of  taxation  is  subordinate  to  and  should  be  dealt  with  so 
as  to  promote  the  success  of  this  measure.  If  by  maintaining  our 
present  taxes  for  a  year  we  can  secure  tlie  permanent  reduction  of  our 
interest,  it  would  be  an  act  of  statesmanship  to  do  so,  even  though  the 
taxes  are  heavy. 

A  suqjlus  revenue  is  the  most  effective  agency  to  employ  for  the 
reduction  of  the  interest  of  the  debt ;  but  it  is  equally  clear  that 
diminished  expenditure  and  postponement  to  the  future  of  new  objects 
of  ex])enditure  will  promote  the  success  of  this  measure.  If  we  are 
now  wise  enough  to  act  in  harmonv  witli  the  j)olicy  of  the  President, 
if  we  Avill  now  reduce  ex])enses  anci  maintain  taxes,  we  can  by  the  suc- 
cess of  this  measure  pave  the  way  for  a  very  large  reduction  the 
moment  our  debt  is  funded.  With  a  suii^lus  of  !^10o,000,000,  with  the 
increased  value  given  to  our  bonds  l>y  a  postponement  of  tlie  payment 
of  tlie  ]U-iiK'ij)al,  with  j)ower  to  liorrow  and  pay  money  when  money  is 
the  cheaj)est,  and,  above  all,  with  tlie  confidence  that  will  he  inspired 
by  a  tixed  tinancial  poliey,  I  am  confident  that  the  whole  §1,20U,U<)0,- 
000  provided  by  this  bill  may  be  j^laced  at  par  within  a  reasonable 
time. 

And,  sir,  one  of  the  most  effective  agencies  in  the  success  of  this 
measure  is  the  information  now  universally  diffused  throughout  the 
civilized  world  of  our  great  power  and  resources.  J^efore  the  war  tlie 
power  claimed  for  the  several  States  kept  us  in  tlie  money  market  as  a 
confederacy  of  States,  and  not  as  a  nation.  Slavery  threatened  us  with 
a  perpetual  civil  war ;  it  mingled  in  all  our  political  contests,  arrayed 
us  into  sectional  parties,  and  in  the  judgment  of  sagacious  statesmen 
was  to  tear  the  fabric  of  rej)ublican  government  from  turret  to  founda- 
tion stone.  All  tliis  is  happily  ended.  No  interest  or  faction  threatens 
the  national  authority.  Forty-two  millions  of  free  people,  confessedly 
among  the  most  enterprising  and  intelligent  of  the  human  race,  with  a 
Government  tested  in  civil  and  foreign  war,  securing  to  all  the  equal 
benefit  of  the  laws,  the  privilege  of  free  education  and  religion,  the 
protection  of  property,  and  equality  in  every  field  of  enterprise,  in- 
habiting a  vast  region  in  the  fairest  portion  of  a  great  continent  filled 
with  undeveloped  resources,  furnish  a  guaranty  of  public  credit  as 
strong  as  any  human  government  can  offer.  AV^ith  such  advantages, 
now  universally  appreciated,  we  may  with  reasonable  confidence  hope 
to  sell  our  bonds  on  as  favorable  terms  as  any  nation  of  the  world. 

But,  sir,  wliether  we  succeed  in  negotiating  all  the  bonds  provided 
for  in  this  bill,  or  fail  in  some  of  them,  we  can  assure  the  Senate  that 
this  measure,  to  any  extent  to  which  its  provisions  can  be  enforced, 
will  tend  to  the  public  interests. 

This  bill  does  not  undertake  arbitrarily  to  fix  a  da}'  for  the  resump- 
tion of   specie  payments.     Human  wisdom  can  not  foresee  a  guard 


262  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

against  the  immborless  contingencies  that  aifect  our  power  to  resume. 
Tlie  attempt  to  tix  a  day  will  only  invite  a  severe  contraction  or  a 
hoarding  <>t"  currency,  and  thus  make  more  difficult  actual  resumption. 
Nor  does  this  hill  provide  for  an  arbitrary  contracti»»n  of  tiie  cur- 
rency. To  the  extent  that  cuirency  tl(jws  into  the  Treasury  in  pay- 
ment for  four  per  cent,  bonds,  and  is  not  paid  out  for  ordinary  wants^ 
its  volume  w'ill  be  reduced,  but  only  when  its  exchange  for  such  bonds 
shall  absolutely  demonstrate  its  redundancy. 

As  bank  notes  are  issued,  United  States  notes  will  be  retired,  thus 
changing  the  burden  of  resumption  frojii  the  United  States  to  the 
banks  by  their  voluntary  consent.  There  is  no  pctssible  inflation  of 
the  currency,  and  I  can  not  conceive  a  state  of  facts  that  would  induce 
me  to  enlarge  its  volume  until  it  is  redeemable  in  gold  and  silver  coin. 
All  we  can  say  is  that  this  bill,  so  far  as  it  affects  our  paper  currency, 
will  increase  its  value  and  bring  it  nearer  and  nearer  to  tlic  gold  stan- 
dard. 

Sir,  we  have  seen  many  changes  in  the  progress  of  the  great  events 
through  which  we  have  ])assed.  Vie  have  seen  our  country  nobly 
passing  through  the  greatest  civil  war  of  modem  times.  We  have  seen 
slavery  abolished,  and  liberty  and  political  rights  secured  to  all  our 
citizens.  AVe  have  passed  through  iinancial  difficidties  without  taint 
of  dishonor.  If  we  can  now  restore  our  suspended  notes,  the  favor- 
ite currency  of  our  people,  ])y  a  gradual  j^rocess  of  appreciation,  to 
the  constitutional  standard,  we  shall  have  witnessed  from  the  begin- 
ning to  the  end  the  most  reniarkable  era  in  the  history  of  any  people. 

With  the  firm  faith  that  this  measure  will  tend  to  this  result,  I 
ask  for  it  the  considerate  judgment  of  the  Senate. 


FUNDING   BILJ.. 

/y  TffE  SENATE,  MARCH  2,  1870. 

The  bill  to  aiitliorize  the  refunding  and  consolidation  of  the  national  debt,  to 
extend  banking  facilities,  and  to  establish  specie  payments,  being  before  tlie  Senate, 
Mr.  Sherman  said : 

I  WOULD  like  to  inquire  of  the  honorable  Senator  from  Massachu- 
setts why  it  is  that  he  desires  to  give  the  holders  of  the  first  five-twenty 
bonds  a  monopoly  of  this  five  per  cent,  loan  ?  Is  the  obligation  of  a 
five-twenty  bond  of  1862  any  stronger,  or  is  it  more  oppressive  to  the 
United  States,  than  any  other  five-twenty  bond  ?  Is  there  any  greater 
obligation  to  pay  the  first  issue  of  $500,000,000  of  five-twenty  bonds 
than  any  others  ?  Is  it  more  advantageous  to  the  United  States  to  re- 
deem it  than  any  other  loan  ?  It  is  now  held  abroad  almost  entirely, 
in  masses  in  a  few  hands.  Why  give  to  the  holders  of  that  loan  the 
monopoly  of  the  new  five  per  cents.,  and  refuse  them  to  any  other  class 
of  creditors  ?     I  never  could  make  up  my  mind  to  accept  that. 

The  Senator  gives  us  a-  poetic  reason :  somebody  has  ojjposed  the 


FUNDING  BILL.  263 

old  five-twenties  and  threatened  to  pay  them  off  in  greenl)acks ;  and  in 
order  to  resent  that  insnlt  on  the  public  credit  lie  is  determined  to  give 
them  a  monopoly  and  the  advantage  of  an  annuity  of  one  half  per  cent, 
per  year  in  order  to  wipe  out  that  stigma.  I  do  not  think  there  is  any 
occasion  to  do  that.  xLll  the  five-twenties  stand  on  the  same  footing. 
They  are  all  issued  under  the  same  law,  the  act  of  Februar}'  25,  1S62. 
They  are  all  equally  Inirdensome.  One  thousand  million  dollars  of 
them  are  now  redeemal>le.  It  is  no  more  the  interest  of  the  United 
States  to  redeem  one  than  another ;  it  is  its  interest  to  redeem  them 
all  ;  and  why  give  five  per  cents  to  the  holdei-s  of  the  first  five-twen- 
ties, and  probably  only  lour  and  a  half  per  cents  to  the  holders  of  the 
others,  unless  the  poetical  idea  of  my  honorable  friend  is  a  sufficient 
reason  ?  I  can  not  answer  the  question  myself.  Perhaps  he  can.  In 
regard  to  the  other  points  I  may  as  well  answer  the  honorable  Senator 
now  M'hile  I  am  up. 

In  sj)ite  of  the  dread  of  which  the  Senator  from  Massachusetts  com- 
plained as  having  hung  over  the  five-twenties  of  1802,  they  have,  until 
within  a  year  past,  taken  the  lead  in  the  market,  and  sold  higher  than 
any  bonds  we  have  had,  even  the  long  loan  of  Iss]. 

The  talk  al)i>ut  paying  them  off  in  that  way  has  not  injured  them. 
It  seems  to  me  if  wr  pay  tliL-m  off  with  gold  at  par,  when  most  of  them 
were  sold  by  the  T'liitcd  States  at  about  seventy  or  eighty  cents  on  the 
dollar,  we  wipe  out  any  stigma  that  may  have  been  cast  on  them. 

But  I  may  as  well  now  rej)ly  to  one  or  two  other  points  made  by 
the  honorable  Senator,  sr>  that  I  need  not  recur  to  them  again.  He 
says  that  the  amount  of  five  per  cents  should  be  $500,0(10,000  instead 
of  $;40O,0O(>,00O,  The  answer  to  that,  as  I  stated  the  other  day,  is  that 
the  Secretary  is  of  opinion,  which  he  has  now  repeated  in  the  most 
solemn  form",  that  with  S4o0,O(i0,0o0  of  five  per  cents  he  can  redeem 
all  the  di'l)t  that  is  now  desirable  to  redeem,    I  have  always  had  doubts 


about  his  ability  to  redeem  the  mass  of  the  six  per  cent,  debts  with  any 
bonds  at  a  less  rate  of  interest  than  five  per  cent.  I  am  rather  disposed 
to  concur  in  the  opinion  exjiressed  by  the  honorable  Senator  from  Con- 
necticut on  that  point ;  but  -when  the  ofticer  of  the  Government  who 
is  called  upon  to  discharge  this  duty  tells  us  distinctly  that  this  is  all 
he  wants  of  five  per  cent,  securities,  it  seems  to  me  that  it  is  idle  and 
wrong  for  us  to  force  on  him  a  greater  amount  at  that  rate  of  interest. 
That  is  the  only  answer.  Four  hundred  million  dollars  at  the  higher 
rate  M-ill  be  sufficient;  and  the  total  $1,200,000,000  will  be  probably 
all  that  will  be  necessary  to  fund  the  six  per  cents. 

The  Senator  from  Massachusetts  says  that  we  have  reduced  the 
time  for  the  paAnnent  of  these  bonds  from  forty  to  twenty  years.  I  do 
not  regard  that  as  veiy  material.  If  we  reserve  the  right  to  redeem 
after  ten  years,  I  do  not  deem  it  important  whether  the  absolute  pay- 
ment of  tiie  debt  is  fixed  at  twenty,  forty,  or  one  hundred  years.  The 
right  to  redeem  after  ten  years  is  all  that  is  necessar)^,  and  that  should 
be  reserved  in  every  forni  of  loan.  But  we  wish  to  hold  out  to  the 
world,  in  the  negotiation  of  these  l)onds,  the  fact  that  we  do  not  intend 
to  abandon  the  American  system  of  paying  our  debt  within  the  genera- 
tion that  contracted  it.     That  is  the  idea.     We  therefore  stipulate  to 


264  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

pay  each  of  these  classes  of  bonds  absohitely  within  twenty,  thirty,  or 
forty  years.  That  was  tlie  idea  tii-st  advanced  by  Alexander  ILiniiUon, 
and  maintained  by  this  Government  without  exce])tiun  to  this  hour; 
and  now,  when  we  are  about  to  fund  the  debt,  I  do  not  wish  to  surren- 
der the  idea  that  we  shall  absolutely  pay  it  all  within  forty  years,  and 
that  we  shall  absolutely  pay  oft'  these  live  per  cent,  bonds  in  twenty 
years.  Does  any  Senator  doubt  our  ability  or  our  disposition  to  do  it  { 
No  one  can  doubt  it.  The  operation  of  the  sinking  fund  alone  will 
probahly  pay  otf  tiie  debt  before  the  time  that  the  bomls  are  payable. 
Therefore,  I  think  it  is  well  to  maintain  in  this  bill  the  athrniation  of 
the  distinct  policy  of  the  Government  to  pay  the  principal  of  the  whole 
debt  within  forty  years. 

The  only  other  ]>oint  to  which  I  wish  to  reply  is  as  to  the  rapid 
payment  of  the  public  debt.  The  honorable  Senator  objects  that  the 
seventh  section  provides  for  its  too  ra})id  payment.  It  simply  })rovide.s 
what  we  agreed  to  pay.  AVe  are  just  a.s  much  bound  to  ]>ay  each  year 
one  per  cent,  of  the  principal  of  the  debt  contracted  under  the  act  of 
IFebruary  25,  1862,  as  we  are  lx>und  to  pay  six  per  cent,  interest  on  the 
five-twenty  loans.  But  the  Senator  says  that  now  we  can  make  a  new 
bargain,  we  can  change  the  terms  of  the  act  of  February  2."),  1862. 

The  tiftli  section  of  the  act  of  rel)ruary  25,  1862,  providing  for  the 
payment  of  this  one  per  cent.,  applies  to  all  the  debt;  and  every  iive- 
twentybond  now  outstanding  in  the  market  is  issued  under  the  original 
act  ot  February  25,  1862.  The  amount  only  is  enlarged  ;  but  all  the 
subsequent  issues  are  of  the  same  character  and  description,  having  the 
same  rates  and  the  same  (pialities  as  those  issued  under  the  original  act. 
So  it  has  been  regarded  by  all  departments  of  the  Government.  The 
one  per  cent,  clause  applies  to  the  whole  public  debt,  most  of  wliich 
was  created  under  the  act  of  February  25,  1862. 

So  this  is  a  stipulation ;  it  is  what  we  have  agreed  to  do.  We  agreed 
in  that  act  that  we  would  apply  one  ]:)er  cent,  of  the  principal  of  the 
debt  to  the  pivment  of  the  deltt.  The  -debt  is  now  s2,5(i0,000,000. 
One  per  cent,  is  S25,000,000,  and  that  miiBt  not  only  be  aj^plied  every 
year,  but  it  must  be  applied  in  the  nature  of  a  sinking  fund ;  that  is,  as 
the  principal  decreases  the  amount  applied  should  be  increased  pari 
passu,'  so  that  this  is  but  the  organization  of  a  sinking  fund.  It 
was  not  organized  before  for  the  reason  stated  by  the  Secretary  of  the 
Treasury,  but  the  United  States  has  always  paid  the  825,000,000  a  year, 
and  more  too.  Now,  the  question  is  M'hether,  when  we  were  about  to 
repeal  taxes,  we  shall  not  keep  in  view  the  obligation  incurred  by  us 
during  the  war,  and  pay  at  least  $25,000,000  in  the  nature  of  a  sinking 
fund  on  the  principal  of  the  public  debt. 

The  objections  made  by  both  these  Senatoi-s  to  the  payment  of  the 
interest  of  the  new  bonds  abroad,  and  especially  to  the  employment 
of  foreign  agents,  have  a  great  deal  of  force  in  them.  The  answer  is, 
however,  that  by  the  employment  of  foreign  agents,  especially  by  the 
employment  of  leading  bankers  abroad,  we  can  place  our  loans  at  a 
lower  rate  of  interest.  One  thousand  millions  of  this  debt  are  now 
scattered  all  over  Europe,  a  considerable  part  of  it  in  the  remotest  parts. 
It  is  proposed  now  to  employ  agents  scattered  all  over  Europe  to  help 


FUNDING  BILL.  265 

us  place  it.  If  by  doing  so  we  can  save  money,  it  is  better  for  us  to 
do  it.  It  is  true  It  shocks  a  little  my  American  pride  to  pay  interest 
abroad ;  but  other  nations  do  it ;  and  if  we  can  reduce  the  interest  to 
the  low  rates  proposed  by  this  bill  by  paying  a  portion  abroad,  I  see  no 
objection  to  it. 

There  is  no  cost  about  it.  It  costs  nothing,  except  the  possible  loss 
of  interest  from  the  time  of  transmitting  coin  or  exchange  up  to  the 
date  of  the  payment  of  the  interest,  because  there  is  probably  not  a 
banker  in  Europe  who  would  not  be  very  glad  to  keep  this  account 
without  charging  anything,  and  even  perhaps  allowing  us  interest  on 
the  balances  from  time  to  time.  Xow,  and  for  years  past,  an  account 
has  been  kept  by  the  American  Government  with  a  leading  banking- 
house  in  Lonihjn  on  these  terms.  They  pay  drafts  drawn  by  the  Gov- 
ei-nment  of  the  United  States  on  Europe  without  cost  to  the  United 
States,  and  allow,  I  believe,  a  sn)all  rate  of  interest  on  the  amounts 
accumulated  from  time  to  time  for  that  ])urpose. 

I  prefer  to  say  first  what  I  have  to  say  in  regard  to  the  last  clause 
of  the  sixth  section,  which  appro])riates  not  exceeding  one  per  cent,  of 
the  amount  of  bonds  herein  authorized  to  pay  the  expenses  of  prepar- 
ing, issuing,  and  disposing  of  them. 

This  clause  is  taken  from  several  of  the  loan  laws  passed  during 
the  war.  Indued,  this  clause,  with  some  moditieations,  has  been  con- 
tained in  all  the  loan  laws  passed  from  18(12  to  this  time.  The  same 
clause,  different  in  form  however,  was  in  the  old  laws  from  the  founda- 
tion of  the  (iovernment.  Sometimes  the  loan  laws  limited  the  amount 
of  commissions  allowed  to  agents  to  one  eighth,  sometimes  to  one  tenth, 
and  sometimes  to  one  fourth  of  one  per  cent.,  and  made  direct  appro- 
priations for  the  other  expenses  of  the  various  loans.  ^Vlien  the  Fi- 
nance Committee  re])(»i1:ed  this  bill  we  inserted  this  usual  clause  of  the 
loan  laws.  Here  a  verv  strange  thing  occurred,  to  which  I  wish  to  in- 
vite the  attention  of  tlie  Senate.  Xo  sooner  was  this  bill  reported 
than  it  was  proclaimed  all  over  the  United  States  that  the  Senator  from 
Massachusetts  [Mr.  Wilson]  had  a  plan  to  submit  to  the  Senate  by 
which  this  appropriation  of  one  per  cent,  was  to  be  saved,  and  it  was 
intimated  in  the  pu])lic  prints  and  by  telegrams  that  this  one  per  cent. 
M'as  a  vast  coiTuption  fund,  or  something  of  that  kind,  of  ,Sl-,"0<i,00(>, 
and  that  the  Senator  from  Massachusetts  was  to  propose  an  amendment 
or  modification  to  it.  About  the  same  time  the  other  Senator  from 
Massachusetts  [Mr.  Sumner]  introduced  three  or  four  or  five  sheets  of 
amendments,  touching  almost  every  line  and  clause  of  the  bill  except 
this.  This  particular" clause  was  contained  in  his  funding  bill,  also  sub- 
mitted to  the  Committee  on  Finance. 

As  this  was  the  ordinary  discretionary  power  heretofore  conferred, 
it  excited  my  surprise  somewhat  to  find  a  contest  made  on  it,  especially 
when  it  was  sought  to  create  a  false  impression  in  regard  to  the  appro- 
priation of  one  per  cent.  I  was  induced,  therefore,  to  examine  a  little 
more  carefully  into  this  enormous,  as  was  alleged,  discretionary  power 
given  to  the  Secretary  of  the  Treasure'.  When  I  came  to  examine  the 
old  laws  I  found  that  the  same  discretion  had  been  conferred  on  Secre- 
tary Chase,  on  Secretary  Fesseuden,  and  Secretary  McCulloch,  in  pre- 


266  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

cisely  the  same  language.  Tlie  present  Seeretarv  of  tlie  Tivasury,  a 
citizen  of  Massachusetts,  is  a  comparative  stranger  to  me,  hut  known 
to  me  as  a  distinguished  Eepresentative  of  that  State  in  the  House  of 
Representatives,  and  as  a  gentleman  who  has  earned  a  good  deal  of 
credit,  and  I  tliink  deservedly,  for  his  management  of  our  finances 
during  tlie  past  year. 

Mr.  President,  the  loans  negotiated  during  the  war  did  not  tiirow 
upon  tiie  Secretary  anything  like  the  ditHcult  task  that  is  thrown  uj)on 
Mr.  Ijoutwell  by  the  operation  of  this  bill.  The  original  live-twenty 
loan,  the  law  authorizing  which  contains  the  same  clause  and  empowei*s 
Secretary  Chase  to  negotiate  ><r)0(>,(tO0,0O()  on  certain  terms,  Mas  not 
so  ditHcnlt  a  task  as  is  now  to  be  im])osed  upon  Secretary  Jioutwell. 
Why  ^  Because  that  loan  was  to  be  sold  at  par  for  paper  money,  and 
before  we  undertook  to  sell  the  five-twenty  hian  we  de])reciated  tlie 
paper  money  by  issuing  first  $irj(),()()U,(»(»()  of  legal  tenders,  then 
another  ^150,000,000,  and  then  another  §150,000,000;  and  it  was  not 
ujitil  ?^45O,OOO,0OO  were  outstanding  and  largely  depreciated  in  the 
money  market  that  we  undertook  to  sell  the  ixtnds  at  ])ar  in  ])a])er 
money,  or  at  about  seventy-live  cents  on  tlie  dollar  in  gold.  That  wils 
a  much  easier  task  than  the  task  of  selling  s1,2<k»,000,()oO  bonds  bear- 
ing a  nnich  lower  rate  of  interest,  for  gold  at  par. 

So  with  the  task  thrown  on  Secretaiy  Fessenden.  At  that  time 
paper  money  was  v/orth  but  fifty  cents  on  the  dollar;  and  we  author- 
i/ced  him  to  sell  six  per  cent,  bonds  at  par  in  this  paper  money,  and 
gave  him,  without  a  single  objection  in  either  Ifouse,  the  discretionary 
authority  to  use  as  the  cost  of  negotiation  an  amount  not  to  exceed  one 
per  cent.  That  is  all  the  discretion  contained  in  this  bill.  Ilis  taak 
was  comparatively  an  easy  one.  So  with  Mr.  AlcCulloch.  By  the  act 
of  July,  18»)(»,  we  ccMitinued  this  one  per  cent,  on  the  loans  and  ex- 
changes authorized  by  the  act  of  April,  18G0. 

In  all  those  cases  this  authority  was  carefully  and  wisely  used.  I 
hold  in  my  hand  a  letter  of  the  Secretary  of  the  Treasury,  transmitting 
a  full  account  of  all  the  sales  of  bonds  of  the  United  States  from  the 
beginning  of  the  war  until  1867,  which  shows  precisely  what  each  of 
those  three  gentlemen  did,  how  much  commi.>^sion  they  paid  on  the 
sale  of  gold,  the  sale  of  bonds,  and  all  the  various  transactions  of  the 
Treasury  carefully  analyzed.  Here  is  the  correspondence  also  of  tho.^e 
Secretaries,  showing  who  were  employed,  the  time  and  circumstances 
of  the  employment,  and  the  amount  paid ;  and  it  will  be  perceived 
that  they  each  discharged  this  duty  with  great  care  and  fidelity. 

It  seemed,  therefore,  natural  to  the  Committee  on  Finance  that,  in 
imposing  on  Mr.  Secretary  Boutwell  a  task  far  more  difficult,  requiring 
him  to  sell  these  bonds  at  par  in  gold  at  low  rates  of  interest,  live,  four 
and  a  half,  and  four  per  cent.,  to  the  amount  of  81,200,000,000,  we  at 
least  ought  to  be  willing  to  give  him  the  ordinary  means  and  facilities 
with  which  previous  Secretaries  had  been  intrusted,  and  by  which  they 
executed  their  trust ;  but  it  seems  that  there  is  objection  all  at  once  to 
granting  the  necessary  power.  The  honorable  Senator  from  Pennsyl- 
vania [ivir.  Cameron]  even  proposes  to  strike  out  all  appropriations  for 
expenses ;  in  other  words,  the  Secretary  must  print  these  bonds  at  his 


FUNDING  BILL.  267 

own  expense ;  lie  must  ncf^otiate  tliem  at  his  own  expense ;  lie  must 
eno-rave  them  at  his  own  expense  ;  no  provision  is  to  he  made  for  car- 
rymo-  on  the  vast  operations  of  this  great  task.  lie  is  to  employ  agents 
at  liome  and  ahroad.  Our  present  bonds  are  scattered  as  far  as 
Christian  civilization  goes.  They  are  now,  according  to  the  documents 
I  have  on  my  table,  spread  all  over  Europe,  in  its  remotest  parts.  He 
is  expected  to  gather  up  all  these  bonds,  prevail  on  the  holders  of  them 
to  surrender  their  six  per  cent,  bonds,  and  take  a  bond  bearing  a  less 
rate  of  interest,  without  cost  to  the  Treasury,  without  any  facilities, 
without  money  to  emi)loy  agents,  without  even  money  to  purchase  the 
paper  on  which  the  proniiseOf  the  United  States  is  printed  1  That  is 
not  the  way  we  ought  to  treat  our  executive  otticers.  Wo  ought  to 
trust  them  with  ordinary  discretionary  power,  and  hold  them  strictly 
and  rifidly  res])onsil)le  for  the  execution  of  the  trust. 

As'^soon  as  1  saw  this  oppositi(.n  to  giving  to  the  Secretary  of  the 
Treasury  the  ordinarv  necessary  facilities  for  carrying  on  the  loan,  I 
a<ldressed  a  letter  to' him  calling  his  attention  to  tiie  fact,  and  asking 
him  whether  he  could  not  take  less  and  accomplish  the  task.  It  is  true 
that  for  every  810<>  of  these  bonds  he  sells  he  saves  to  us  an  annuity 
of  not  less  tliaii  one  (h.lhir  until  tlie  wliole  debt  is  paid,  and  at  a  cost 
not  to  exceed  one  dolhir,  which  is  cfiuivakMit  to  at  least  twenty  times 
the  amount  we  pay.  ^'o  bond  will  be  sold  at  an  exjieiise  beyond  one 
per  cent.  That  is' the  saving  of  one  vear  in  the  rate  of  intere>t.  Thus, 
oif  the  sale  of  the  first  $400,000,(»JO  of  live  per  cent,  bonds  lie  saves 
?;4  000  000  per  annum  until  the  whole  of  the  debt  is  paid,  at  an  ex- 
pense of  ^4,( >()(»,()< Ml.  Olf  the  sales  of  the  second  $400,000,000  he 
saves  sr),(>(»0,<><i(t  per  annum  at  an  expense  of  84,000,000.  Off  sales 
of  the  third  s4oo,ou(  »,•)()(>  lie  saves  ,$8,000,000  per  annum  at  an  exi)ense 

of  $4,000,000.  ,      ,    1         ,  1 

Here  is  his  reply  to  my  letter,  which  I  send  to  the  desk  to  be  read. 

The  Secretary  read  as  follows:  ,/■„.;  o   ^(^'7n 

TuEASiKY  Depabtmext,  Alarc/i  2,  1870. 

Sir-  In  reply  to  your  communication  of  this  date  I  hayc  the  honor  to  say  that 
it  is  inipossii)le  for  me  to  estimate  with  a  reasonahk-  decree  of  accuracy  tlie  prohahlo 
expense  of  neirotiating  the  proposed  loan— preparing,  pnntinjr,issumg  the  bonus 
and  negotiating  the  same  in  the  United  States  and  Europe.  I  have  no  douht  that 
the  one  per  cent,  named  in  the  hill  will  exceed  the  aggregate  charges  hut  I  bliould 
not  consider  it  wise  to  reduce  the  appropriation,  as  any  dehciency  umk-r  the  existing 
general  laws  would  put  it  out  of  the  power  of  the  Secretary  of  the  Ircasury  to  pro- 
ceed in  the  negotiation,  and  thus  the  ohject  of  the  proposed  legislation  would  be 

defeated.  .,,  ,  ■,    ,     •  *i  „  ,^^«i. 

In  reply  to  your  suggestion,  that  a  proposition  will  he  made  to  impose  the  Avork 
upon  the  otheials  of  the  Treasury  Department  exclusively,  I  hayc- the  honor  to  say 
that  that  proposition,  if  adopted,  would  put  it  out  of  the  power  of  the  Department 
to  place  the  new  loan.  A  large  amount  of  our  bonds  are  held  in  Europe,  and  the 
holders  of  them  can  onlv  he  reached  through  hankers  of  reputation  and  influenco 
in  various  countries,  and' I  presume  it  will  be  found  necessary  to  employ  them  to 
negotiate  the  loan  upon  a  commission.  That  commission  will,  of  course,  be  a  small 
fraction  only  of  the  one  per  cent,  proposed  as  the  total  expense.    _        .     ■,    .  „„x^ 

I  have  not  entered  into  negotiations  for  the  purpose  of  ascertaming  at  what  rate 
they  would  undertake  the  business;  but  I  may  say  that  it  will  be  accepted  by  the 
leading  bankers  at  the  lowest  rates  at  which  sunli  l^"^'"^^'/,^'';-!;!'?"^-^,       , 

Very  respectfullv.  GEORGE  S.  BOUT^V  ELL    Secretary. 

Hon.  JouN  SiiEEMAN,  Chairman  Committee  on  Finance,  United  States  benat^. 


268  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

After  the  receipt  of  tliat  letter,  not  entirely  satisfied  yet,  I  made  an 
examination  of  the  cost  of  various  loans  by  tlie  Cnitcd  States  and  by 
European  nations.  I  found  that  the  first  five-twenty  loan  cost  us  three 
eighths  of  one  per  cent,  for  agents ;  the  second,  the  large  loan  made  by 
Mr.  Fessenden  in  1804,  cost  three  fourths  of  one  per  cent.  I  have 
here  a  very  instructive  letter  by  Mr.  Fessenden,  whioli  I  will  not  now  ask 
to  have  read,  showing  the  reason  wliy  he  finally  employed  the  agents 
he  did  employ  ou  the  28th  of  January,  ISO.').  Tlie  amount  ]>aid  by 
him  was  three  fourths  of  one  per  cent.,  far  more  tlian  is  necessary  now  ; 
but  the  circumstances  under  which  it  was  paid,  I  think,  clearly  justified 
him  in  making  that  allowance.  So  Mr.  McCidloch,  according  to  the 
reports  on  the  table,  ])aid  one  eighth  of  one  per  cent. 

In  conversation  with  the  Secretary  I  suggested  that  all  that  part  of 
the  loan  to  be  taken  by  the  national  banks  might  be  negotiated  without 
cost.  Undoubtedly  no  commission  would  be  paid  in  a  case  of  that 
kind  ;  so  far  as  the  loan  nn'ght  be  taken  as  a  domestic  loan,  it  might 
possibly  be  sold  to  some  extent  by  the  ofiicers  of  the  Treasury  Depart- 
ment, although  they  have  not  the  ordinary  means  and  facilities  for  doing 
that  business.  No  private  persons  would  attempt  to  sell  a  loan  of  this 
kind  without  employing  the  ordinary  banking  agencies  of  the  world. 
It  must  be  rcmend)e"re(Uhat  Sl,0(»0,000,000  of  our  bonded  debt  is  held 
in  Europe.  All  of  these  bonds  must  necessarily  be  sold  in  Europe,  ex- 
cept probably  the  five  per  cents,  or  a  portion  of  them,  and  those  that 
are  absorbed  by  the  banks.  AVe  know  very  well  that  an  attempt  to  put 
a  loan  upon  the  American  market  now  at  four  and  a  half  or  four  per 
cent,  would  be  utterly  idle. 

This  bill  is  based  on  the  idea  tliat  we  may  place  the  four  and  four 
and  a  half  per  cents  abroad,  and  thus  ^et  gold  to  redeem  the  six  per 
cent,  bonds  which  are  scattered  all  over  Europe.  IIow  can  the  Secre- 
tary do  it?  He  must  emjiloy  bankers  and  agents,  and  pay  them.  lie 
has  no  agent  of  the  Treasury  Department  in  Europe,  where  the  loan 
must  be  negotiated.  IIow  can  he  expect  persons  to  engage  in  this 
business  without  the  ordinary  facilities  and  profits  (  If  you  can  sell 
the  bonds  at  the  rates  proposed  it  is  because  .^l,OuO,000,<»(io  of  our  six 
per  cent,  bonds  are  held  abroad ;  and  by  the  sale  of  a  loan  there  at  a 
smaller  rate  of  interest,  extending  the  time,  we  may  get  money  to  pay 
them  off.  Therefore  we  must  make  the  terms  of  this  law  so  that  the 
Secretary  can  have  the  means  and  facilities  for  negotiating  them  al>road. 
When  I  came  to  examine  into  the  cost  of  foreign  loans  I  found  that 
the  cost  of  the  Russian  loan  was  two  and  a  half  per  cent,  for  commis- 
sions. The  long  loans  of  various  governments  of  Europe  have  cost 
from  one  to  five  per  cent.,  and  even  the  cost  of  the  loans  of  England 
through  the  Bank  of  England  has  been  very  nearly  the  rate  proposed 
in  this  bill. 

Under  these  circumstances  the  attempt  to  reduce  the  power  of  the 
Secretary  of  the  Treasury,  and  to  take  away  the  discretion  necessary  to 
be  placed  upon  him  in  the  negotiation  of  this  loan,  is  an  attempt  to 
defeat  this  bill  and  to  cast  a  discredit  upon  him. 

I  have  addressed  him  a  second  letter,  expressing  the  hope  that  he 


FUNDING  BILL.  269 

mi^ht  be  able  to  see  his  way  clear  to  lower  the  rate  of  commission,  and 
have  received  the  following  letter  in  reply : 

Treasckt  Department,  March  1, 1870. 

Sir:  I  take  the  liberty  of  inclosing  to  you  two  extracts  from  Jf "e'-^^^ceived 
fro.u  the  United  States  consul  at  Sonneherg,  under  date  of  ^f  ^^^  '^'J,'^'  ^,^' "^^ ^'"/^ 
from  the  United  States  consul  at  Amsterdam,  dated  iebruary  12,  18<0,  relating  to 
the  bonds  and  credit  of  the  United  States  m  Europe.  ..  ^.      i       „ 

I  am  unable  to  ascertain  the  cost  to  European  governments  of  n^gof  f  J?  1«';:^« 
made  by  them;  but  I  understand  that  the  recent  Russian  loan  cost  that  Gove  n- 
ment  abou  tw^  and  a  half  per  cent.  This  statement,  however,  can  not  be  regarded 
lis  authentic  I  find  from  m  examination  of  Executive  Document  ^o.  2G,o  of  the 
For^tth  Congress  second  session,  printed  by  the  House  of  Kepresentatives,  tha 
the  comniissions  allowed  to  bankers  have  generally  been  at  the  rate  of  one  eighth 
o  on'  p"  cent,  upon  the  amount  negotiated.  In  some  -,f-f ^/^^^^f^^^^^f, 
has  been  paid.  The  correspondence  commencing  on  page  151  o  that  document 
contains  further  information  upon  the  subject.  I  also  refer  in  this  connection  to 
Executive  Document  No.  52.  second  session  Thirty-ninth  Congress;  >*0;3|  second 
fession  Fortieth  Congress;  No.  205,  second  session  Fortieth  Congress;  and  Iso.  2b, 

'''1  ^:::'\Ir:;t^i:^:^u.a^o  of  tl.  expense  of  the  en^ving,  p^er  and 
printin-  made,  and  fin.l  that  it  is  not  likely  to  exceed  one  eighth  of  ""^  >^^  cent. 
S  "  e  amount  Of  the  bonds  issued.  It  will  be  necessary  to  make  some  allowance, 
per  m  in  addition  to  this,  as  the  average  cost  will  depend  materially  upon  the 
^nlill^t'of  the  several  denominations  issued  It  will  ^l^l^^^^^l^^^^^^^^ 
some  allowance  fur  advertising  and  other  inculental  expenses.  It,  however,  seen  s 
?o  me  ccTbdn  that  the  entire  expense  of  placing  the  loan  will  not  exceed  one  half 

''^'  You^will7e;ollect  that  the  appropriation  named  in  the  bill  now  before  the  Sen- 
ate V's  in  accordance  with  the  j.  evious  practice  of  the  ^  ';-■->--  '.-^l^^.^^i,",:^ 
the  result  of  any  investigation  either  upon  my  part  or  on  tiie  pait  ot  the  Committee 
as  f'r  as  I  know  If  it  shall  seem  desirable  to  the  Committee  or  to  the  Senate  to 
iTni^^  tie  appmpriation  to  one  half  of  one  per  cent.  I  think  it  .afe  to  do  so;  and 
yet  I  am  p?epare^d  to  say  that  the  expense  will  not  be  increased  by  allowing  the  ap- 
propriation to  remain  at  one  per  cent.  \  ^^gl^^^^^oUTV^^A.,  Secretary. 
Hon.  Jonx  Sherman,  Chairman  Committee  on  Finance,  United  States  Senate. 
The  Senate  is  now  in  possession  of  the  facts  and  will  do  as  it 
deems  best.  The  expense  figured  within  the  lowest  limit,  m  the  Ixjunds 
of  reason,  is  reduced  to  one  half  of  one  per  cent.  ;  so  that  ^ve  can  save 
S18,000,000  a  year  at  a  cost  of  gG,000,000.  :Now,  what  ought  to  be 
done  by  sensible  men  under  the  circumstances  >  I  ^^7  ^f .  «"?];*^  J,^ 
give  to  the  Secretarv  of  the  Trea-.ury,  who  is  to  perform  this  dithcult 
task,  the  same  discretion  that  was  confeiTcd  uy.on  previous  becretanes 
under  circumstances  much  less  difficult. 

With  these  facts  before  us,  with  the  statement  that  he  may  possi- 
bly be  able  to  confine  the  expenditures  for  this  loan  to  one  ^f  of  one 
per  cent.,  we  ou-ht  to  deal  witli  him  in  a  manly  way ;  treat  him  with 
confidence  and  Vspect ;  give  him  the  discretion  to  ex.P^"f  P^^^^  /^ 
exceed  one  per  cent.,  and  then  hold  him  to  a  strict  responsibihty  oi  the 
accurate  and  proper  expenditure  of  this  public  money.  >V  hy,  s  r, 
every  day  in  tlie  Appropriations  made  by  law  in  our  ^^^'^l^^^y^PF^P^^: 
ation  bills,  in  the  usual  progress  of  our  daily  administration,  we  intrust 
such  discrctionarv  powers  to  higli  officers  of  ^^.^^^^^T  f.  Zl 
certainly  can  confidi  for  the  faithful  execution  of  the  tnis  in  the  prcf^ 
enV  Secretary  of  the  Treasury.     AVe  ought  not  now  to  dishonor  this 


270  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

loan  or  to  dishonor  this  attempt,  and  tie  iip  his  hands  and  weaken  liim 
in  the  slightest  degree  1)V  any  limitation  oi  the  ordinary  discretionary 
power  conferred  on  the  Secretary  of  tlie  Treasury  under  such  circum- 
stances. If  he  can  accomplish  the  task  at  one  per  cent,  he  will  have 
achieved  one  of  the  greatest  wonders  of  modern  finance.  If  he  should 
fail  because  his  hands  are  tied,  then  you  are  responsible,  not  he. 

It  may  be  that  in  many  cases  it  M'ill  cost  nothing ;  in  many  cases 
but  one  eighth  of  one  per  cent. ;  but  in  some  cases — for  instance,  in 
remote  countries  in  the  negotiation  of  the  four  or  the  four  and  a  half 
per  cent,  loans,  wliere  the  amounts  held  are  comparatively  small,  as  say 
in  a  single  district  in  a  remote  part  of  Germany — it  may  cost  the  full 
amount  of  one  per  cent.  Suppose  it  does  ;  we  gain  far  more  than  we 
lose.  My  opinion,  then,  is  that  it  is  better  on  the  whole  to  let  the  bill 
stand  as  it  is  in  this  respect ;  but  if  Senators  wish  to  tie  the  Secretary 
down  to  what  he  now  says  is  the  lowest  limit  within  which  it  is  possi- 
ble for  him  to  undertake  to  negotiate  the  loan,  one  half  of  one  per 
cent.,  then  I  do  say  that  if  there  is  any  fault  or  any  failure  it  is  yours, 
not  his. 

]^ow,  Mr.  President,  in  regard  to  the  appointment  of  agents,  I 
need  not  here  argue  the  question  that  agents  are  necessary,  and  that 
the  Treasury  Department  is  not  so  organized  as  to  perform  this  duty. 
In  all  the  loan  laws  from  the  foundation  of  the  (irovemment,  which  I 
have  before  me,  the  employment  of  agents  has  been  provided  for,  ex- 
cept in  a  few  cases  where  the  loans  were  awarded  upon  advertisement. 
Sometimes  in  years  of  peace  a  small  loan  has  l)een  given  out  upon 
ordinary  advertisement ;  but  it  was  shown  in  those  cases  that  the  bonds 
after  they  were  sold  advanced,  and  the  bankers  who  bought  them  made 
two,  three,  or  four  per  cent,  profit,  resulting  from  the  fact  that  in  the 
sale  of  bonds  by  public  advertisement  the  bankers  have  a  monopoly  of 
the  market.  Hence  it  has  been  customary  in  our  loan  laws  to  author- 
ize the  employment  of  agents  in  Europe  and  in  the  United  States  to 
any  number  that  the  Secretary  might  deem  proper. 

In  the  fifth  section  of  the  bill,  which  is  the  one  immediately  before 
the  Senate,  there  is  a  question  of  great  difiiculty.  It  is  simply  a  ques- 
tion of  dollars  and  cents,  not  one  of  national  pride.  This  Government 
has  several  times  heretofore  authorized  foreign  loans,  and  has  paid  them 
in  guilders,  francs,  and  in  sterling  money.  Many  of  the  States  of  this 
country,  some  of  them  in  the  highest  credit,  as  for  instance  the  State 
of  Massachusetts,  have  negotiated  foreign  loans  in  sterling.  Many  of 
the  leading  raiboad  companies  of  the  United  States  negotiate  their 
loans  abroad  in  sterling.  Why  ?  Because  they  can  save  money  by  it. 
I  have  no  doubt  that  you  could  sell  a  four  per  cent,  bond  payable  in 
francs  in  the  valley  of  the  Rhine  or  in  France  at  as  high  a  rate  as  you 
can  sell  a  four  and  a  half  per  cent,  bond  payable  in  American  coin,  l)e- 
cause  the  holders  of  these  bonds  in  Europe  are  generally  small  capital- 
ists. The  correspondence  which  is  submitted  to  me  here  shows  that 
American  bonds  are  now  held  in  sums  of  from  one  hundred  to  five 
thousand  dollars  by  the  peasantry,  by  the  small  farmers,  by  the  people 
of  limited  means  scattered  all  through  Europe.  The  question  with 
them  is,  what  terms  can  you  make  ? 


FUNDING  BILL.  271 

When  you  propose  to  pay  them  oH  in  gold  the  question  is,  what 
kind  of  bonds  will  they  be  willing  to  take  ?  If  you  offer  them  a  bond 
payable  in  a  kind  of  currency  that  they  know  all  about — francs,  thalers, 
or  sterling — they  will  take  it  at  a  less  rate  of  interest ;  they  can  afford 
to  do  it.  The  coupons  are  now  sold  by  these  proprietors  to  the  banker 
in  Frankfort ;  they  then  go  to  Amsterdam,  and  finally  come  to  Xew 
York,  and  are  cashed  in  American  gold.  But  if  you  could  pay  off  the 
small  holders  in  the  remote  portions  of  Europe  or  in  the  centers  of 
European  capital  with  four  per  cent,  in  gold  of  their  own  coinage,  they 
would  much  prefer  it,  and  it  would  be  nmcli  better  for  them  to  have 
such  a  bond  than  even  a  five  per  cent.  bond.  There  is  no  difliculty  in 
paying  the  money  abroad.  The  rate  of  exchange  never  varies  more 
than  one  or  two  per  cent.  We  can  place  the  money  in  the  European 
money  markets  almost  without  cost.  Sometimes  exchange  is  against 
us  ;  sometimes  it  is  for  us  ;  but  the  general  average  varies  very  little. 
The  cost  would  be  trifiing.  The  cost  of  tlie  agencies  in  Europe  would 
be  nothing.  There  is  not  a  banker  in  Europe  who  would  not  do  all 
that  is  necessary  to  be  done  under  the  provisions  of  this  bill  without  a 
single  dollar  of  cost  to  the  Treasury,  because  the  very  fact  that  a  bank- 
ing house  in  Europe  was  selected  by  the  American  Government  for  the 
{mrpose  of  paying  the  interest  on  a  portion  of  its  debt  would  give  that 
lOuse  credit,  and  it  would  not  only  be  glad  to  do  tlie  business  for 
nothing,  but  would  pay  interest  on  the  amount  remaining  on  credit 
from  day  to  day.  That  is  now  the  ordinary  course  of  business.  It  is 
the  means  by  which  we  pay  all  the  expenses  of  our  foreign  intercourse. 
I  think,  therefore,  this  fifth  section  may  enable  the  Secretary  of  the 
Treasury  to  sell  a  good  many  four  per  cent,  bonds  in  Europe  at  par. 
At  any  rate,  it  will  enable  him  to  sell  four  and  a  half  per  cent,  bonds 
there  at  par ;  but  without  it  I  very  much  fear  he  will  not  be  able  to 
sell  any  bonds  in  Ihirope  bearing  a  less  rate  than  five  i)er  cent. 

The  difference  between  four  and  four  and  a  half  per  cent,  will  be 
lost  to  the  owner  of  the  bond  by  the  exchange  he  has  to  pay  in  various 
forms  before  the  coupon  is  sent  to  New  "1  ork,  there  cashed,  and  the 
money  remitted  to  him.  All  this  is  done  at  his  expense.  If,  by  trans- 
mitting the  money  for  interest  in  bulk,  say  81,000,000  or  82,00(»,O00  at 
a  time,  to  a  recognized  banker  in  Europe,  who  can  secure  the  Treasuiy 
Department  bj-  the  deposit  of  bonds,  or  in  some  other  way,  because  all 
this  is  left  to  the  Secretary,  we  can  save  interest  in  the  negotiation  of 
our  loans,  we  shall  be  very  unwise  not  to  do  it. 

Sometimes,  in  answer  to  this  argument  of  saving  money  for  the 
Government,  the  American  flag  is  flaunted  in  our  faces.  Why,  sir,  it 
is  not  any  dishonor  to  the  Government  of  the  United  States  to  pay 
wherever  it  agrees  to  pay.  In  the  originah  loan  law  of  Alexander 
Hamilton  we  provided  for  interest  on  the  old  foreign  loan.  So  in  the 
war  of  ISI'2  and  in  1811)  we  provided  for  the  negotiation  of  foreign 
loans.  We  saved  one  half  of  one  per  cent,  in  interest  on  a  considerable 
amount  of  our  foreign  debt  by  paying  it  abroad,  and  our  fathers  did 
not  consider  it  a  disgrace  to  do  so.     Tlie  Russian  Government  does  it. 

It  is  said  that  France  and  England  do  not  do  it,  and  perhaps  Prus- 
sia does  not  do  it.     Why  ?     Because  those  three  countries  are  located 


272  SPEECHES  AND  EEPORTS  OF  JOHN   SHERMAN. 

jnst  in  tlie  center  of  the  money  of  Europe  and  there  is  therefore  no 
occasion  for  their  doing  it ;  and  besides,  tlioir  debts  are  liekl  at  home. 
I  wish  that  our  debt  was  all  held  here,  and  that  our  citizens  were  re- 
ceiving the  interest.  I  would  nlther  pay  a  little  more  to  our  own 
citizens  than  to  foreigners.  But  the  fact  is  that  we  are  now  paying 
six  per  cent,  interest  in  gold  to  foreigners,  and  bankers  are  discounting 
our  coupons  at  a  loss  of  three,  four,  or  live  per  cent,  to  the  holders  of 
the  coupons  in  some  cases. 

We  sometimes  glory  in  our  American  coin.  The  live-dollar  half 
eagle  is  worth  more  than  twenty-live  francs,  more  than  a  pound  ster- 
ling ;  and  yet  let  any  American  traveler  go  abroad  with  a  half  eagle  in 
his  pocket  and  he  will  Und  that  it  is  not  worth  as  much  as  twenty-five 
francs  or  a  pound  sterling.  The  pound  sterling  is  worth  but  ^4.84  of 
our  money,  and  a  twenty-live-franc  piece  is  worth  considerably  less 
than  five  dollars;  but  the  actual  exchange  made  by  the  discount  of 
bankers  makes  the  American  lose  always  when  abroad.  IS^ow,  if  we 
can  get  the  benefit  of  this  difference  by  paying  a  portion  of  our  public 
debt  abroad  in  foreigTi  currencies,  why  should  m'c  not  do  it  i 

But  after  all  this  matter  is  left  to  the  discretion  of  the  Secretary  of 
the  Treasury.  Xo  one  can  say  how  much  of  the  loan  will  be  nego- 
tiated abroad ;  but  if  a  portion  of  it  is  issued  under  the  fifth  section  of 
this  bill  it  M'ill  only  be  because  a  considerable  sum  of  money  can  be 
saved  to  the  people  of  the  United  States.  My  opinion,  therefore,  is 
that  it  is  wise  to  leave  this  discretion  with  the  Secretary  of  the  Trea- 
sury. It  has  been  left  in  almost  every  loan  law.  In  the  laws  that 
were  passed  during  the  war  the  same  authority  was  conferred  upon 
Secretary  Chase,  Secretary  Fessenden,  and  Secretary  McCulloch.  They 
were  authorized  to  negotiate  bonds  in  Europe  as  well  as  in  America. 

In  the  first  loan  law  of  the  war,  under  which  the  bonds  of  1881 
were  issued,  we  authorized  the  Secretary  to  make  the  interest  payable 
in  any  country  in  Euro])e.  The  Secretary  thought  it  was  best  not  to 
pay  it  abroad  at  that  time  ;  but  the  matter  was  left  to  his  discretion  in 
the  law.  I  have  before  me  the  act  of  July  17,  1S61 ;  and  the  fifth 
section  of  that  act  provides — 

That  the  Secretary  of  the  Treasury  may,  if  he  deem  it  advisable,  negotiate  any 
portion  of  said  loan,  not  exceeding  $100,000,000,  in  any  foreign  country,  and  paya- 
ble at  any  designated  place  either  in  the  United  States  or  in  Europe,  and  may  issue 
registered  or  coupon  bonds  for  the  amount  thus  negotiated,  agreeably  to  the  pro- 
visions of  this  act,  bearing  interest,  payable  semi-annually  either  in  the  United 
States  or  at  any  designated  place  in  Europe;  and  he  is  further  authorized  to  ap- 
point such  agent  or  agents  as  he  may  deem  necessary  for  negotiating  such  loan 
under  his  instructions,  and  for  paying  the  interest  on  the  same,  and  to  fix  the  com- 
I)ensation  of  such  agent  or  agents,  and  shall  prescribe  to  them  all  the  rules,  regula- 
tions, and  modes  under  which  such  loan  shall  be  negotiated,  and  shall  have  power 
to  fix  the  rate  of  exchange  at  which  the  principal  shall  be  received  from  the  con- 
tractors for  the  loan ;  and  the  exchange  for  the  payment  of  the  principal  and  inter- 
est in  Europe  shall  be  at  the  same  rate. 

This  section  gave  to  Secretary  Chase  far  more  power,  so  far  as  a 
foreign  loan  was  concerned,  than  is  confen*ed  by  the  fifth  section  of 
this  act.  Kow,  shall  we  take  away  from  the  present  Secretary  that 
discretion  ?     He  may  not  exercise  it.     The  very  fact  that  he  has  the 


FUNDING  BILL.  273 

power  to  go  into  a  foreign  market  and  negotiate  a  loan  may  be  a  lever 
by  wliieli  he  can  negotiate  the  domestic  loan.  lie  may  decline  to  ne- 
gotiate the  loan,  but  the  very  fact  that  he  has  the  power  to  go  to 
Europe,  and  place  a  bond  payable  there,  principal  and  interest,  may 
enable  him  to  negotiate  a  bond  at  a  less  rate  of  interest. 

Mr.  President,  there  is  not  a  single  thing  in  this  bill,  from  begin- 
ning to  end,  conferring  a  discretion  on  the  Secretary  of  the  Treasury, 
wliich  has  not  been  conferred  heretofore  in  repeated  laws  ;  and  the 
question  is  whether  you  will  put  upon  him  a  task  that  he  may  be 
unable  to  execute  with  all  the  power  you  can  give  him,  and  deny  to 
liim  the  ordinary  facilities  and  powei's  that  have  been  conferred  re- 
peatedly upon  other  Secretaries  ?  If  you  do,  you  will  defeat  this  bill 
by  indirection,  and  thus  ])rcvent  the  saving  to  the  people  of  the  United 
States  of  a  large  sum  of  money  and  the  reduction  of  the  interest  on 
the  public  debt ;  and  the  responsibility  will  not  rest  on  him  ;  it  will 
rest  on  you. 

The  1)111  was  further  discussed,  when,  in  reply  to  Mr.  Conkling,  Mr.  Sherman 
said : 

Ko  Secretary  of  the  Treasury  Avould  undei-take  to  issue  new  bonds 
for  the  purpose  of  funding  any  of  the  existing  debt  of  the  United 
States  on  the  autliority  of  the  act  of  April  12,  ISOO.  That  act  was 
designed  for  a  limited  purpose,  that  of  enabling  the  Secretary  of 
the  Treasury  to  fund  the  floating  debt  of  the  Ijnited  States  which 
was  then  in  the  fonn  of  Ave  per  cent,  certificates  and  various  other 
forms  of  floating  indebtedness,  and  that  purpose  has  been  accom- 
plished ;  the  seven-thirty  notes  then  outs^tanding  have  been  converted, 
in  pui'suance  of  the  authority  conferred  on  the  holders  of  the  notes, 
into  five-twenty  bonds,  and  all  the  floating  debt  of  the  United  States 
at  that  time  has  been  converted  into  five-twenty  bonds,  so  that  the 
functions  of  the  act  have  ceased  and  determined.  The  act  in  its  nature 
was  a  temporary  one,  and  merely  extended  the  provisions  of  the  act  of 
March  3,  1865,' for  the  puiiwse  of  funding  the  floating  debt  of  the 
United  States.  That  act  refei-s  to,  and  the  only  bonds  to  which  it 
could  refer  are,  the  five-twenty  bonds  authorized  "by  the  act  of  Febni- 
ary  25,  1862,  and  the  ten-forty  bonds  authorized  by  the  act  of  March, 
1 864.  They  were  authonzed'^  to  be  issued  for  the  purpose  of  funding 
the  fioating  debt,  and  that  has  been  accomplished.  No  one  would 
undertake  "to  execute  this  great  task  under  the  authority  of  that  act. 
Ko  Secretary  would  dare  do  it.  Xo  person  would  buy  the  bonds  on 
an  authority  of  that  kind.  The  attempt  to  issue  81/>0<»,000,0r>q  under 
the  authority  of  that  act  would  at  once  be  arrested  by  legal  ol)jections 
and  denial  of  the  authority  ;  and  no  Secretary  would  undertake  it. 

The  Senator  states  the  case  a  little  too  strongly,  it  seems  to  me, 
when  he  makes  the  allegation  that  no  debt  of  the  United  States  has 
ever  been  payable  in  foreign  coin.  The  original  debt  of  the  revolution 
which  existed  at  the  time  of  the  framing  of  the  Government  was  pay- 
able in  French  coin,  and  was  so  paid."  The  first  act  on  the  subject, 
known  as  the  great  act  for  the  support  of  the  public  credit,  contains  a 
provision  protecting  the  old  foreign  debt  and  requiring  it  to  be  paid. 
18 


274  SPEECHES  AXD  EEPORTS  OF  JOHN  SHERMAN. 

Under  the  act  wliicli  provided  fo^  the  payment  of  the  stock  for  the 
purchase  of  Louisiana  I  lind  this  provision  : 

That  tlie  annual  interest  accruing  on  tlie  said  stock,  wliich  may  lie  in  conformity 
with  the  convention  aforesaid  bo  payable  in  Europe,  shall  be  paid  at  tlie  rate  of  four 
shillings  and  sixpence  sterling  for  each  dollar  if  payable  in  London,  or  at  the  rate  of 
two  guilders  and  one  half  of  u  guilder,  current  money  of  Holland,  if  payable  in  Am- 
sterdam. 

It  is  true  that  this  was  the  purchase  money  of  Louisiana ;  but  there 
is  also  a  provision  authorizint^  a  foreign  loan  in  the  act  of  1819,  though 
my  impression  is  that  no  debt  was  actually  created  under  that  act. 
Also,  in  tlie  act  of  18<U,  under  which  the  bonds  of  1881  were  issued, 
there  is  the  fullest  possible  authority  to  issue  a  foreign  loan.  It  is  true 
that  that  loan  was  never  issued  because  Secretary  Chase  found  he  could 
not  negotiate  it  on  favorable  terms.  Indeed,  at  the  time  of  the  passage 
of  that  act  Confederate  bonds  were  worth  more  in  the  London  market 
than  our  own,  and  the  attempt  to  negotiate  a  foreign  loan  failed. 

Mr.  President,  the  question  before  us  is  simply  this :  whether  in 
order  to  save  about  one  fourth  or  one  fifth  of  the  interest  paid  upon 
the  public  debt  we  arc  willing  to  pay  the  coupons  abroad.  The  small 
property-holders  who  hold  our  l)onds  abroad  would  greatly  prefer  a 
loan  payable  in  their  own  currency ;  and  not  merely  the  Secretary  of 
the  Treasury,  but  many  intelligent  men  who  are  familiar  with  this 
business  believe  that  a  four  per  cent,  bond  payable  in  the  currency  of 
foreign  countries,  where  the  debt  is  now  held,  would  sell  as  readily  as 
a  live  or  a  four  and  one  half  per  cent,  bond  payable  in  American  coin, 
if  the  coupons  have  to  be  sent  to  the  United  States  to  be  collected. 
The  saving  to  the  United  States  is  illustrated  by  the  sunplest  sum  in 
arithmetic,  which  any  schoolboy  can  cipher  out.  If  we  negotiated  a 
81,000  bond  at  four  per  cent,  the  annual  interest  would  be  forty  dollars, 
and  the  cost  of  transmitting  that  interest  from  Xew  York  to  any  port 
in  Euroj^e  would  not  exceed  forty  cents  or  one  per  cent.  The  average 
rate  of  exchange  is  from  one  fourth  of  one  per  cent,  to  one  per  cent. ; 
taking  the  higliest  rate,  it  would  cost  forty  cents  to  remit  that  forty 
dollars  to  Amsterdam,  in  Holland.  Thus  the  cost  to  the  Government 
of  the  payment  of  the  interest  on  a  $1,000  bond  would  be  S-IO.-IO.  If 
on  the  other  hand  a  domestic  bond  of  8LO00  is  issued,  it  will  cost  in 
United  States  coin  paid  at  our  Treasury  fifty  doUai-s  at  five  per  cent. ; 
or  if  a  four  and  one  half  per  cent,  bond  is  issued,  the  cost  of  paying  it 
in  jS^ew  York  will  be  forty-five  dollars. 

Then  if  a  foreign  loan  is  negotiated  under  the  provisions  of  the  sec- 
tion as  I  have  now  amended  it,  we  shall  save  at  least  one  tenth  of  the 
interest  on  the  foreign  debt,  and  perhaps  one  fifth  of  the  interest  on 
so  much  of  the  debt  as  is  payable  abroad. 

This  question  of  striking  out  the  eighth  section  has  been  constantly 
pressed  upon  us  since  the  opening  of  this  debate.  I  do  not  intend  to 
discuss  it  at  any  length,  simply  because  each  Senator  must  have  made 
up  his  mind  by  this  time  upon  the  subject.  Xo  injustice  is  done  to 
the  banks.  The  right  to  amend  the  banking  law  was  carefully  reserved. 
Many  changes  have  been  made  from  time  to  time,  and  many  changes 
must  be  made  in  the  future.     The  right  to  change,  and  to  require  them 


FUNDING  BILL.  275 

to  change,  tlieir  securities  is  expressly  reserved.  There  are  many  pro- 
visions of  the  hanking  law  by  which  they  can  be  required  to  increase 
the  amount  of  securities  now  held  by  them.  They  may  withdraw  or 
change  their  securities  at  pleasure,  and  under  the  provisions  of  the  act 
we  may  require  them  to  increase  the  securities  deposited. 

Now,  what  is  the  hardship  complained  of  'i  We  are  about  to  resume 
specie  payments.  We  are  about  to  negotiate  our  bonds  at  par  in  gold 
bearing  interest  at  five  per  cent.  We  all  know  from  the  state  of  the 
money  market  that  we  can  do  so.  All  the  bonds  held  by  these  banks 
are  redeemable  at  our  pleasure,  except  859,00(1,000  ;  $280,000,000  of 
their  bonds  are  now  practically  redeemable  at  the  pleasure  of  the  Uni- 
ted States.  They  hold,  it  is  true,  a  large  amount  of  ten-forty  bonds, 
but  they  are  pavable  at  a  lower  rate  of  interest.  There  is  no  trouble 
or  difficulty  about  them.  Only  85i>,(tO0,00(J  of  all  the  bonds  held  by 
the  banks  are  bonds  that  would  bear  a  premium  in  the  market.  We 
do  not  deprive  them  of  that  premium.  We  leave  them  the  right  to 
sell  the  bonds  and  receive  the  premium.  We  do  not  even  require  them 
to  exchange  their  five-twenty  bonds.  They  can  if  they  clioose  sell  them, 
or  they  can  retain  them  in  their  vaults.  But  we  do  require  that,  as  the 
basis  of  a  privilege  the  most  extensive  that  has  ever  been  granted  to 
any  set  of  private  coqwrations  in  the  wide  world,  they  shall  give  as  se- 
curity the  bonds  of  the  United  States  which  we  are  now  about  to  offer. 

What  do  we  give  them  in  exchange  'i  We  give  them  upon  purchas- 
ing these  bonds  the  right  to  issue  four  fifths  of  their  amount  in  money, 
and  we  give  them  the  monopoly  of  that  right.  We  are  about  to  with- 
draw from  circulation  the  greenbacks  of  the  country.  We  are  about  to 
retire  and  cancel  our  notes  by  the  provisions  of  this  act.  We  are  about 
to  give  them  the  monopoly  of  the  circulation  of  this  country,  the  sole 
and  exclusive  privilege  oi  issuing  pa]>er  money.  We  have  destroyed 
the  State  banks.  And  now  what  do  we  require  in  return  ''i  That  they 
shall  join  us  in  reducing  the  burdens  of  the  public  debt ;  that  they  shall 
bear  some  little  of  their  share  of  the  loss  of  income  which  every  holder 
of  the  public  securities  must  suffer. 

Sir,  national  banks  would  be  very  unwise,  indeed,  to  make  an  issue 
on  this  question.  If  any  man  here  is  a  friend  of  the  national-bank 
system  I  certainly  can  claim  to  be.  I  was  here  at  its  cradle,  introduced 
the  original  banking  bill  and  advocated  it,  and  also  introduced  the 
amendment  to  it,  conducted  it,  and  saw  it  passed.  But  if  I  believed 
now  that  the  banks  of  the  United  States  were  unwilling  to  aid  us  in 
reducing  the  rate  of  interest  on  the  public  del)t  to  the  extent  of  the 
limited  sacrifices  they  are  called  upon  by  this  bill  to  make,  I  should 
certainly  change  very  much  my  opinion  of  them  and  of  the  whole  sys- 
tem, i  do  not  believe  there  is  any  practical  difficulty  in  the  way ;  nor 
do  they  lose  by  it  if  five  per  cents  are  worth  par  in  gold.  Wliat  do 
they  lose  by  taking  one  third  of  these  bonds  at  five  per  cent.,  another 
third  at  four  and  a  half  per  cent.,  and  another  third  at  four  per  cent.  ? 
They  possibly  lose  one  half  of  one  per  cent,  of  the  interest  on  the 
bonds ;  that  is  all.  But  before  this  scheme  can  succeed  at  all  it  must 
be  on  the  basis  that  five  per  cent,  bonds  are  worth  at  least  par  in  gold. 
We  require  them  when  we  surrender  to  them  the  privilege  of  issuing 


276  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

all  the  paper  money  of  this  country  to  reduce  the  rate  of  interest  on 
their  bonds  one  half  of  one  per  cent,  on  the  average.  Is  that  a  hard- 
ship ?     I  think  not. 

When  my  honorable  friend  from  Maine  was  complaining  that  we 
were  taking  these  banks  by  the  throat  and  forcing  them  to  do  a  great 
many  things  that  were  wrong,  he  forgot  that  the  privilege  we  conferred 
upon  them,  and  which  they  hold  at  our  favor,  is  one  of  the  most  im- 
portant franchises  ever  granted '  to  private  corporations.  I  did  not 
expect  that  this  section  of  the  bill  would  be  attacked  from  the  quarter 
that  it  has  been,  but  I  expected  that  it  would  be  attacked  from  another 
quarter  on  a  political  point,  on  the  ground  that  we  were  about  to  with- 
draw the  favorite  currency  of  the  people  and  fund  it,  and  get  it  out  of 
the  way  and  give  to  the  national  banks  so  imj^ortant  a  franchise.  That 
was  the  point  upon  which  I  was  prepared  to  show  that  tlie  national 
bank  cmTency  was  the  best  that  could  possibly  be  devised.  But  I  did 
not  suppose  that  in  the  interest  of  the  national  banks,  or  rather  because 
of  the  alleged  hardships  to  the  national  banks  of  a  slight  reduction  of 
one  half  of  one  per  cent,  of  the  interest  on  their  bonds,  any  complaint 
w^ould  be  made.  Why,  sir,  $92,000,000  of  bonds  now  deposited  as 
security  bear  but  five  per  cent.  I  have  the  report  before  me  showing 
that  the  ten-forty  bonds  are  now  the  basis  of  this  circulation  and  are 
filed  to  the  amount  of  $91,579,000.  The  banks,  if  they  make  the  ex- 
changes provided  by  this  bill,  will  lose  one  half  of  one  per  cent,  of  the 
interest  on  their  bonds,  and  they  will  receive  a  bond  exempt  from  all 
income  tax,  with  many  privileges,  as  the  Senator  from  New  York 
showed  yesterday,  that  the  ten-forty  did  not  have. 

When  they  surrender  their  ten-forty  bonds,  wliich  are  redeemable 
in  1874,  they  receive  a  bond  which  runs  fifteen  years  without  the  possi- 
bility of  redemption,  a  bond  entirely  free  from  income  or  other  tax  by 
State  or  national  authority.  For  all  that  and  for  the  monopoly  of  the 
privilege  of  issuing  paper  money  they  yield  us  one  half  of  one  per  cent, 
on  the  interest  of  their  bonds.  To  call  that  a  hardship  it  seems  to  me 
is  to  use  a  misnomer.  When  we  give  them  a  bond  bearing  five  per 
cent,  interest  in  gold,  we  give  them  a  bond  that  is  worth  par  in  gold ; 
and  when  we  pay  their  six  per  cent,  bonds  off  in  gold,  we  only  do  what 
we  have  a  right  to  do  under  the  very  terms  of  the  bond. 

There  is  not  now  a  bond  filed  by  the  banks  as  a  security  for  their 
circulating  notes  that  is  not  redeemable  at  the  pleasure  of  the  United 
States,  except  the  bonds  of  1881  and  the  ten-forty  bonds  ;  and  we  pro- 
pose either  to  let  them  sell  their  bonds  in  open  market  or  aid  us  in  this 
great  scheme  to  reduce  interest  on  the  public  debt,  by  a  sacrifice  of  one 
half  of  one  per  cent.  It  seems  to  me  that  to  defeat  this  bill,  or  the 
portion  of  it  which  provides  for  the  funding  of  $400,000,000  of  the 
new  loan,  on  the  plea  of  injustice  to  the  national  banks,  would  endan- 
ger the  banking  system ;  it  would  be  an  act  of  injustice  to  the  people 
of  this  country.  And  I  have  this  to  say  as  to  the  bankers  of  my  own 
State,  that  to  this  hour,  although  tliey  are  affected  by  the  operations  of 
this  bill,  and  I  should  be  the  person  above  all  others  to  whom  they 
would  address  their  complaints,  not  one  of  them  has  complained  of  the 
operation  of  the  bill ;  but  as  far  as  I  know  they  have  given  it  their 
hearty  assent. 


FUNDING  BILL.  277 

Sir,  the  only  objection  made  to  this  section  of  the  bill  is  that  it  is 
a  hardship  to  the  banks.  It  is  no  hardship,  it  is  a  great  benefit  to  them. 
It  secures  the  national  banking  system  from  ultimate  overthrow,  in  my 
judgment,  and  will  give  us  a  stable  currency,  bring  us  back  rapidly  to 
Bj)ecie  payments,  withdraw  from  the  currency  the  now  dishonored  United 
States  notes,  fund  them,  and  retire  them  to  give  place  to  a  circulation 
founded  on  Government  securities.  All  the  sacrifice  that  is  required 
of  these  banks  is  the  jjossible  surrender  on  the  average  of  one  half  of 
one  per  cent,  of  the  interest  upon  their  bonds.  They  will  enjoy  on  an 
average  upon  these  bonds  four  and  a  half  per  cent. ;  and  no  one  can 
doubt  that  in  three,  four,  five,  or  six  years  after  this  process  of  funding 
has  been  completed,  after  the  first  class  of  bonds  has  been  sold  at  par 
in  gold,  after  the  banks  have  exchanged  their  bonds  and  funded  them 
to  the  amount  of  $345,000,000,  the  quantity  now  held  by  them,  that 
the  four  and  a  half  per  cent,  bonds  will  be  at  par  in  gold. 

But  there  is  another  important  thing  to  be  remembered,  that  the 
provisions  you  are  now  about  to  apply  to  the  old  banks  are  also  applica- 
ble to  the  new.  You  do  by  this  bill  substantially  incorporate  banks  to 
the  amount  of  $356,000,000,  if  people  desire  to  go  into  the  banking 
business.  You  open  the  system,  make  it  free  to  the  extent  at  least  of 
the  amount  of  legal  tenders,  and  there  you  furnish  another  market  for 
the  bonds  provided  for  in  the  bill,  taking  the  old  banks  and  the  new, 
for  if  new  banks  are  organized  on  the  greenbacks  now  outstanding, 
you  will  have  a  banking  basis  of  some  $655,000,000,  furnishing  a  mar- 
ket for  at  least  this  amount  of  bonds. 

Now,  Mr.  President,  it  seems  to  me  that  so  important  a  measure  as 
this  ought  not  to  be  sacrificed  merely  on  the  plea  of  hardship  to  the 
national  banks,  who  of  all  classes  have  during  the  last  six  or  seven  years 
certainly  received  a  reasonable  and  fair  profit  on  their  investments  and 
their  enterprise.  They  ought  not  to  obstruct  this  measure.  Their  in- 
terest is  promoted  by  it.  And  I  was  a  little  surprised  at  a  remark  made 
by  my  honorable  friend  from  Connecticut,  who  I  know  is  as  just  a  man 
as  lives.  After  declaiming  against  this  section  because  of  the  hardship 
to  the  national  banks,  he  said  he  could  not  vote  for  any  proposition 
that  would  make  a  national  bank  take  a  bond  bearing  five,  four  and  a 
half,  or  four  per  cent,  interest ;  and  then,  without  rcnecting  upon  the 
position  in  which  that  placed  him,  he  said  he  w^ould  be  very  willing  to 
see  here  the  system  adopted  in  England,  by  which  every  trustee  would 
be  required  to  invest  his  trust  funds  in  Government  securities,  and  in 
these  very  securities.  That  is,  he  would  require  trustees  to  invest  the 
funds  of  the  widow  and  the  orphan  in  these  bonds  bearing  a  low  rate 
of  interest ;  and  yet  he  would  not  compel  the  national  banks  to  take 
this  same  class  of  bonds. 

Mr.  President,  it  is  my  belief  that  the  national  banks  ought  to  and 
will  heartily  assent  to  this  new  arrangement.  A  defeat  of  this  propo- 
sition is  the  substantial  defeat  of  the  whole  funding  scheme,  because  if 
we  may  not  require  the  banks  which  enjoy  the  benefit  of  a  privilege 
granted  by  the  Government,  and  held  at  our  pleasure,  to  take  these 
bonds  witiiin  one  year,  with  what  face  can  we  go  into  the  market  and 
ask  the  people  to  give  us  gold  at  par  for  them  ?     It  is  said  that  the 


278  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

theory  of  the  pending  bill  is  that  it  will  succeed,  that  the  bonds  can  be 
floated  at  par,  and  that  then  the  Government  will  be  in  possession  of 
the  avails  of  the  bonds ;  and  it  is  suggested  that  all  the  bonds  belonging 
to  the  banks  being  redeemable,  except  the  ten-forties  and  the  1881s, 
these  avails  might  bo  used  to  redeem  the  bonds  l)el(>nging  to  the  banks, 
leaving  tlie  banks,  like  indivi(hials,  free  to  pursue  the  business  of  bank- 
ing or  not  as  tliey  ])lease  ;  and  if  they  do  pursue  it,  of  coui'se  the  laws 
of  trade  as  well  as  the  laws  of  Congress  would  reriuire  them  to  possess 
themselves  of  the  only  bonds  then  to  be  had  for  the  ])uq)ose. 

My  answer  to  this  is  very  sim])le.  So  far  as  the  live  per  cent, 
bonds  are  concerned  we  do  not  thank  the  banks  or  anybody  else  to  take 
them.  They  will  be  taken  in  any  money  market  of  the  world.  But 
we  do  require  them  to  take  a  ])ortion  of  the  four  and  a  half  and  a  por- 
tion of  the  four  per  cent,  bonds  which  can  not  now  be  sold  at  par  in 
gold.  That  is  the  oidy  advantage  and  the  only  aid  the  banks  render 
to  this  whole  funding  scheme.  We  compel  them,  as  we  have  a  right 
to  do,  to  purchase  one  third  of  these  bonds  at  four  per  cent,  which  we 
can  not  now  probably  sell  in  the  market,  and  one  third  of  the  four  and 
a  half  per  cents,  and  in  that  way  we  do  ask  them  substantially  to  sac- 
ritice  one  half  of  one  jier  cent,  on  the  amount  of  bonds  they  purchase, 
the  average  rate  being  four  and  a  h&lf  per  cent.  ;  and  in  this  way  we 
give  the  bonds  circulation,  give  them  a  credit  they  would  not  other- 
wise have.  What  is  the  cost  of  that  i  What  do  Ave  give  them  in  re- 
turn for  this  ?  Tlie  right  of  issuing  all  the  paper  money  of  the  United 
States;  the  right  to  draw  interest,  not  only  upon  the  bonds  deposited 
with  us  belonging  to  them,  but  the  right  to  draw  interest  on  four 
iifths  of  that  amount  in  paper  money.  And  the  honorable  Senator 
who  now  occupies  the  chair  complained  that  this  enormous  privilege 
was  given  to  them  too  cheaply,  lie  proposed  to  make  all  their  bonds 
four  per  cent,  bonds ;  in  other  words,  to  require  them  to  surrender  one 
per  cent,  interest  instead  of  one  half  of  one  per  cent. 

Mr.  President,  under  these  circumstances  I  do  think  this  bill  is  as 
favorable  to  the  banking  system  as  it  could  possibly  be.  We  require 
the  banks  to  surrender  nothing  but  the  small  margin  of  one  half  of 
one  per  cent,  on  the  amount  of  the  bonds  held  by  them.  The  taking 
by  them  of  these  three  new  classes  of  bonds  will  tend  vastly  to  pro- 
mote the  credit  and  the  value  of  the  bonds.  It  will  furnish  a  market 
for  them,  and  in  return  for  that  tlie  banks  enjoy  the  privilege  of  fur- 
nishing paper  money  printed  at  the  expense  of' the  United  States,  is- 
sued at  our  cost,  printed  by  us,  guaranteed  by  us,  and  of  using  and  cir- 
culating this  paper  money  and  loaning  it  to  their  customers.  It  seems 
to  me,  therefore,  that  any  o})position  to  this  section  ought  not  to  come 
from  those  who  represent  the  national  banks  ;  but  if  tliere  is  any  ob- 
jection to  it  it  ought  to  be  that  this  privilege  should  not  be  given  to 
them  so  readily,  but  that  they  ought  to  surrender  a  little  more  in  return 
for  so  valuable  a  franchise. 

The  subject  has  been  so  often  debated  that  I  will  consume  only  a 
few  moments  of  time  in  presenting  distinctly  the  question  which  I 
think  is  the  most  imjDortant  one  embraced  in  this  bill.  My  honorable 
friend  from  Indiana,  ever  since  he  has  been  an  able  and  honored  mem- 


FUNDING  BILL.  279 

ber  of  tills  body,  has  been  continually  haunted  by  the  fear  of  contrac- 
tion.    It  is  a  word  with  him  of  evil  import. 

Now,  Mr.  President,  I  do  not  want  to  contract  the  currency  one 
dollar,  but  I  want  to  resume  specie  payments,  and  to  avail  ourselves 
of  the  favorable  state  of  the  money  market  and  of  the  condition  of 
the  times  with  that  object  in  view.  This  is  a  bill  not  only  to  fund 
the  public  debt,  but  to  bring  about  specie  payments  without  material 
contraction.  We  know  very  well  that  a  proposition  to  retire  the  whole 
mass  of  greenbacks  would  be  met  here  not  only  by  my  friend  from 
Indiana  but  by  a  general  public  sentiment,  and  therefore  we  have  in- 
serted in  this  bill  the  smallest  modicum  of  pro\'ision  toward  specie 
payments. 

There  is  in  this  bill  only  one  clause  that  does  look  toward  resump- 
tion. Wliat  is  it  ?  We  give  to  every  holder  of  a  greenback,  which  is 
the  dishonored  promise  of  the  nation,  the  right  to  present  it  at  the 
Treasury  of  the  United  States  and  convert  it  into  a  bond  beai'ing  four 
per  cent,  interest  in  gold. 

My  honorable  friend  thinks  that  will  contract  the  currency.  Does 
he  suppose  that  in  the  present  state  of  the  money  market  everybody 
holding  greenbacks  will  be  eager  to  rush  to  the  Treasury  for  four  per 
cent,  bonds  i  I  do  not  believe  that  greenbacks  will  be  funded  into 
bonds  to  the  extent  of  s5,00(»,0(iO  in  the  course  of  a  year.  The  sec- 
tion is  so  framed  as  to  l)e  the  most  moderate  proposition  of  the  kind 
that  could  be  made.  If  I  had  my  own  way  in  the  matter  I  would  treat 
the  note-holder  precisely  like  the  bond-holder ;  I  would  say  to  the  note- 
holder, "  You  can  convert  your  note  into  any  form  of  bond  provided 
for  in  this  bill."  That  would  at  once  provide  for  a  mode  of  retiring 
greenbacks  and  provide  another  circulation  in  their  place.  ,  But  that  is 
not  the  ]u-oposition.  The  proposition  is  simply  to  give  to  the  holder 
of  our  dishonored  promise  the  right  to  convert  it  into  a  bond.  AVhy 
should  we  not  ?  Is  it  not  honest  i  Clearly  so.  AVe  are  bound  to  pay 
the  note  in  gold.  Nobody  has  disputed  that  proposition.  Why  do  we 
not  do  it  i  Is  it  said  we  can  not  do  it  <  My  honorable  friend  from  In- 
diana will  hardly  say  we  can  not  pay  the  note  now.  With  our  improved 
credit  we  are  able  to  pay  it. 

Sir,  we  are  bound  in  honor  and  lionesty  if  we  can  not  pay  the  note 
in  gold  to  do  the  next  best  thing.  We  can  give  note-holders  at  least  a 
bond  bearing  interest  in  gold ;  and  now  we  give  them  the  smallest 
bond,  the  bond  least  burdensome,  one  at  the  lowest  rate  of  interest 
ever  proposed  in  the  United  States  of  America,  in  payment  of  a  debt 
past  due,  that  is  daily  dishonored.  It  seems  to  me  that  so  simple  a 
proposition  ought  not  to  startle  or  alarm  any  one.  The  Senator  him- 
self, I  suppose,  will  admit  that  the  process  of  contraction  under  this 
bill  will  be  very  slow.  The  holders  of  the  greenbacks  will  not  hurry 
to  the  Treasury'  to  convert  them  into  four  per  cent,  bonds.  The  ques- 
tion may  be  asked,  what  is  the  benefit,  then,  in  the  provision  ?  The 
benefit  is  that  in  no  j^ossible  state  of  the  money  market  will  the  green- 
back l)e  depreciated  below  the  market  value  of  a  four  per  cent.  1)ond. 
It  is  the  virtue  of  this  provision  in  the  bill,  together  with  a  favorable 
turn  in  the  money  market,  that  has  now  brought  us  to  the  condition 


280  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

of  affairs  when  our  note  is  within  ten  per  cent,  of  gold.  It  is  only 
the  manifest  purpose  on  tlie  part  of  Congress  to  redeem  and  give  addi- 
tional value  to  the  greenback  that  makes  tlie  money  market  favorable. 

AV^hy,  sir,  since  the  time  when  we  sus])ended  the  right  to  contract 
the  currency  or  retire  tlie  greenbacks  until  the  beginning  of  this  ses- 
sion the  depreciation  in  our  currency  was  from  thirty  to  si.\ty  cents  on 
the  dollar.  It  is  only  when  we  are  again  talking  about  restoring  to  the 
greenback  the  privilege  of  l)eing  funded  into  a  bond,  giving  it  an  ad- 
ditional value  in  tliis  way,  tliat  we  can  ajipntach  within  sight  of  specie 
payments.  It  is  the  very  propositions  j)cnding  in  the  Senate,  the  very 
propositions  contained  in  this  bill,  that  have  brought  us  so  near  now  to 
this  end.  Why  should  we  refuse  to  the  holder  of  the  greenback  the 
right  to  convert  it  into  a  bond  i  We  give  the  holders  of  all  our  inter- 
est-bearing obligations  that  right.  We  give  the  holder  of  the  five- 
twenties  and  ten-forties  on  the  terms  pi-escribed  in  this  bill  a  chance  to 
exchange,  provided  we  make  something  by  it.  Why  sh<tnld  we  dis- 
criminate against  the  favorite  debt  of  the  ])eople  i  Why  should  we  not 
give  it  an  additional  value  ?  I  never  could  answer  the  rpiestion  myself 
except  by  raising  the  phantom  of  contraction  which  disturbs  the  brain 
of  the  honorable  Senator  from  Indiana.  But  to  meet  that  we  have 
provided  that  there  need  be  no  contraction.  For  every  dollar  of  green- 
backs converted  into  bonds  or  surrendered,  one  dollar  of  baid-c  currency 
may  take  its  place.  Under  the  tenth  section  of  the  bill  anybody  can 
present  these  greenbacks  and  get  national  currency  and  organize  new 
banks,  and  then  the  greenbacks  are  canceled. 

If  the  greenbacks  float  into  the  Treasury  under  the  third  section  of 
the  bill  they  are  not  canceled ;  they  are  held  in  the  Treasury,  and  may 
be  paid  out  in  the  ordinary  operations  of  the  Government,  with  this 
condition  only,  that  by  it  the  amount  of  the  debt  shall  not  be  inerea.sed. 
Our  surplus  revenue  now  is  a  gold  revenue.  That  surplus  revenue  can 
be  applied  to  the  payment  of  bonds  or  the  purchase  of  bonds  in  tlie 
open  market,  as  has  been  done  almost  daily  for  some  time  past.  We 
have  no  surplus  revenue  in  greenbacks.  Indeed,  we  have  not  enough 
revenue  in  greenbacks  to  pay  the  ordinary  expenses  of  the  Government 
in  greenbacks.  The  surplus  is  gold,  and  we  sell  tlie  gold  and  convert 
it  into  greenbacks,  and  with  the  proceeds  buy  in  our  bonds.  If  the 
money  floats  into  the  Treasury  in  exchange  for  bonds,  that  money  may 
be  used  in  the  ordinary  operations  of  the  Government  if  there  is  oc- 
casion to  use  it ;  but  if,  on  the  other  hand,  there  is  no  occasion  to  use 
it,  if  there  is  more  money  in  the  Treasury  than  is  necessary  to  carry  on 
the  operations  of  the  Government,  it  may  be  retired.  Contraction  will 
take  place  only  when  the  greenback  is  worth  less  in  market  value  than 
a  four  per  cent,  bond ;  then,  and  then  only,  will  it  come  into  the  Trea- 
sury. Until  then  there  can  be  no  contraction  of  the  currency,  and  no 
retirement  of  the  greenbacks.  It  is  to  guard  against  possible  deprecia- 
tion, to  give  the  greenbacks  steadiness  in  the  money  market,  that  this 
measure  is  so  vitally  necessary.  Why,  sir,  if  this  provision  had  been 
contained  in  the  law  last  September  when  the  stock  gamblers  were  en- 
deavoring to  break  up  the  business  men  of  the  country  they  would 
have  been  defeated  at  the  outset,  when  they  ran  greenbacks  down  to 


FUNDING  BILL.  281 

about  seventy  cents  on  the  dollar,  or  sixty  cents,  which  I  think  they 
reached.  If  they  had  midertakeu  such  a  movement  as  that  in  the  face 
of  this  provision  of  law  the  greenbacks  would  have  had  the  market 
value  of  four  per  cent,  bonds,  and  those  speculators  would  have  been 
broken  long  before  the  Government  gold  was  thrown  on  the  market. 

Mr.  President,  all  there  is  of  specie  payments  in  this  bill  is  con- 
tained in  these  simple  words ;  and  if  the  Senate  is  not  willing  to  do 
thus  much  to  give  value  to  the  security  of  the  note-holder,  the  nagain 
the  note  will  drift  off,  valuable  only  for  the  payment  of  taxes.  Now, 
the  United  States  Government  refuses  to  take  this  note  for  any  pur- 
pose except  for  taxes.  You  do  not  give  it  any  value ;  you  do  not 
promise  to  pay  it ;  you  do  not  fix  a  time  when  you  will  pay  it ;  you  do 
not  authorize  it  to  be  received  for  customs  dues ;  you  do  not  authorize 
it  to  be  received  in  pa^nnent  of  bonds ;  you  Mill  not  take  it  at  all ;  you 
dishonor  it ;  you  stamp  it  with  infamy  by  refusing  it  in  almost  every 
form  possible.  And  now,  when  we  propose  to  give  to  it  the  additional 
value  of  making  it  at  least  equal  to  a  four  per  cent,  bond,  we  are  met 
by  a  phantom  fear. 

Mr.  President,  I  would  not  regard  it  as  a  misfortune  if  tifty  or  one 
hundred  million  dollai-s  of  greenbacks  should  Moat  into  these  four  ])er 
cent,  bonds.  AVe  can  never  redeem  them  so  cliea])ly  again.  The  Sen- 
ator is  willing  to  sell  four  per  cents,  even  live  per  cents,  at  par  in 
gold.  Why  docs  lie  not  give  the  holdei-s  of  greenbacks  now  four  per 
cent,  bonds  if  they  are  willing  to  take  them  (  If  we  were  now  back 
to  specie  payments,  an  object  we  all  desire,  but  few  seem  really  to 
wish  to  come  to,  the  holder  of  a  greenback  could  present  it  and  de- 
mand his  gold  and  silver  coin.  We  are  now  offering  to  borrow  the 
gold  and  silver  coin  at  five  per  cent.,  giving  our  bonds  for  it.  Why 
not,  then,  shorten  the  process  by  dealing  at  once  with  the  holder  of  our 
legal  tenders,  and  give  him  a  bond  payable  at  four  per  cent.,  and  thus 
save  the  difference  i 

It  is  idle  to  talk  about  specie  payments  either  now  or  in  the  future, 
when  you  refuse  to  give  for  the  greenbacks  an  obligation  of  the  Gov- 
ernment bearing  four  per  cent,  interest  in  gold.  Sir,  this  measure,  as 
far  as  this  point  is  concerned,  is  a  weak  one.  The  note-holder  ought  to 
have  more  privileges  than  are  conferred  by  this  bill ;  but  the  fear  of 
contraction,  of  a  disturbance  of  the  business  relations  of  the  country, 
as  an  effect  of  a  sudden  return  to  specie  payments,  must  be  guarded 
against,  as  we  have  endeavored  to  do. 

We  have,  then,  given  to  the  greenback  some  productive  value,  the 
least  productive  value  that  has  ever  been  proposed  in  this  country  since 
its  fonnation  ;  that  is,  the  right  to  be  converted  into  a  bond  bearing 
four  per  cent,  interest.  If  you  are  not  willing  to  do  that  much  to 
strengthen  the  market  value  of  the  greenback,  then  you  proclaim  that 
it  is  good  for  nothing  except  to  pay  a  small  portion  of  the  taxes  of  the 
United  States ;  not  good  to  pay  duties  on  imported  goods  ;  not  good 
to  pay  interest  on  the  public  debt ;  not  good  for  anything  until  in 
some  distant  future  the  United  States  may  hoard  enough  gold  in  the 
Treasury  to  resume  specie  payments. 

Mr.  President,  this  question  is  simple,  although  very  important  in 


282  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

its  effects.  The  vote  of  the  Senate  on  this  question  will  have  far  more 
effect  on  the  resumption  of  specie  payments  than  anj  vote  that  has 
been  taken  at  the  present  session.  If  we  now  again  dissever  the  con- 
nection between  the  note  and  the  bond,  we  allow  the  note  to  float  on 
the  market  a  mere  toy  for  speculators,  to  be  raised  or  lowered  at  their 
pleasure.  But  if  we  now  tie  it  to  our  public  credit,  tie  it  to  the  mar- 
ket value  of  the  bonds,  we  shall  have  anchored  it  to  a  sure  foundation, 
where  it  may  rest  in  the  hands  of  the  people,  to  be  floated  into  the 
Treasury  in  payment  of  bonds  until  all  that  are  left — and  nearly  all 
will  be  left — will  be  paid  in  gold  and  silver  coin  when  we  resume  spe- 
cie payments.  To  avoid  the  possible  evils  of  withdrawing  the  cur- 
rency, or  any  portion  of  it,  from  the  circulation  of  the  country,  we 
have  provided  for  free  banking.  Any  association  of  individuals  may 
present  these  greenbacks,  or  the  bonds  provided  for  by  this  act,  to  the 
Treasurer  of  the  United  States,  and  receive  and  issue  circulating  notes, 
and  then  and  only  then  an  equal  amount  of  greenbacks  is  canceled 
under  the  oj)eration  of  this  act.  This  measure,  simple  as  it  is,  I  think 
will  have  a  beneficial  effect.  But  if  this  is  stricken  out,  the  effect  of 
the  bill  as  far  as  specie  payments  are  concerned  is  destroyed. 

After  which  the  hill  was  further  debated,  amended,  and  passed. 

The  bill  as  passed  by  the  Senate  was  disagreed  to  by  the  House,  and  a  committee 
of  conference  appointed,  whose  report  was  not  concurred  in,  and  a  second  com- 
mittee of  conference  agreed  to,  and  their  report  was  submitted  by  Mr.  Sherman, 
who  made  the  following  brief  exi^lanation : 

I  desire  the  attention  of  the  Senate  while  I  make  a  brief  statement 
in  regard  to  this  very  important  bill.  The  controversy  between  the 
two  Houses  as  to  the  funding  bill  related  principally  to  three  matters : 
first,  as  to  the  description  of  the  bonds ;  second,  as  to  the  mode  of 
negotiation  ;  and  third,  as  to  their  operation  upon  national  banks.  The 
House  of  Representatives  provided  for  a  four  per  cent,  thirty-year  bond. 
The  Senate  provided  for  three  classes  of  bonds,  at  five,  four  and  a  half, 
and  four  per  cent.  We  have  adjusted  that  matter  by  providing  for 
three  classes  of  bonds  of  the  description  provided  for  in  the  Senate  bill, 
but  have  limited  the  amount  of  five  per  cent,  bonds  to  $200,000,000, 
of  four  and  a  half  per  cent,  to  $300,000,000,  and  the  residue,  $1,000,- 
000,000,  must  be  four  per  cent,  bonds  running  for  thirty  years. 

The  second  question  was  as  to  the  mode  of  negotiation.  The  House 
provided  for  no  means  of  negotiation,  no  agencies  and  no  facilities. 
The  Senate  had  opposed  the  appointment  of  agents,  and  the  adver- 
tising of  the  loan,  etc.,  and  limited  the  expenditure  to  one  half  of  one 
per  cent.  We  have  agreed  to  a  modification  which  places  the  one  half 
of  one  per  cent,  at  the  disposal  of  the  Secretary  of  the  Treasury  for 
the  negotiation  of  the  loan  ;  so  that  in  substance  it  is  the  proposition 
of  the  Senate. 

As  to  the  national  banks,  we  had  a  great  deal  of  trouble.  The 
original  section  in  the  funding  bill,  as  it  passed  the  Senate,  required 
that  all  the  national  banks  should  substitute  the  new  bonds  for  the  old. 
There  was,  as  I  tliink,  a  very  unreasonable  and  unnecessary  clamor 
raised  by  the  banks  against  that  provision.     I  was  sorry  to  see  it.     In 


FUNDING  BILL.  283 

the  House  bill  there  was  no  provision  made  in  regard  to  tlie  national 
banks.  But  when  we  came  into  conference  the  House  conferees  them- 
selves proposed  that  the  new  banks  to  be  organi;ied  under  the  currency 
act  which  recently  passed  should  be  ui:)on  the  new  description  of  bonds ; 
a  provision  which  was  manifestly  just  in  itself  and  not  unjust  to  the 
banks.  That  was  a  proposition  made  by  the  conferees  of  the  House, 
and  we  agreed  to  it.  When  the  bill  went  back  to  the  House,  it  seems 
that  some  of  the  very  gentlemen  who  were  so  nnich  opposed  to  our 
section  about  the  national  banks  attacked  the  report  of  the  committee 
on  the  ground  that  it  did  not  extend  this  provision  in  regard  to  the  new 
banks  to  the  old  ones.  The  contest  thus  sprang  up  on  the  proposition 
proposed  by  the  House  conferees,  and  the  bill  was  defeated,  after  de- 
bate, upon  this  proposition. 

The  second  committee  of  conference,  being  composed  of  the  same 
gentlemen,  had  but  one  of  two  courses  to  pursue  :  either  to  restore  the 
section  proposed  by  the  Senate  originally,  which  we  thought  was  the 
better  way,  or  to  omit  all  reference  to  national  banks  in  the  bill.  In 
view  of  the  action  of  the  House  we  concluded  that  it  was  better  to 
strike  out  the  seventh  section  of  the  bill  entirely,  leaving  the  old  and 
new  banks  upon  the  same  footing,  and  leaving  the  national  banks  en- 
tirely at  liberty  to  help  or  to  mar  the  funding  of  the  public  debt. 

I  wish  now  to  record  my  deliberate  judgment  that  in  this  conclu- 
sion, to  which  we  have  been  compelled  to  amve  by  the  action  of  the 
House,  we  are  doing  the  national  banks  a  great  injury,  which  will  im- 
pair their  influence  and  power  among  the  people,  and  that  the  opjio- 
sition  of  the  national  banks  to  this  provision,  which  would  have  re- 
quired them  to  aid  in  the  funding  of  tlie  pubhc  debt,  will  tend  more 
to  weaken  and  destroy  them  than  anything  that  has  transi^ired  since 
their  organization.  I  do  not  see  how  we  can  go  before  the  people  of 
the  United  States  and  ask  them  to  lend  us  gold  at  par  for  our  bonds, 
when  we  refuse  to  require  agencies  of  our  own  creation  to  take  them  ; 
when  we  even  refuse  to  require  new  banks  not  yet  organized  to  take 
the  new  bonds,  and  when  we  refuse  to  require  old  banks,  which  have 
made  on  the  average  from  fifteen  to  twenty  per  cent,  annually  upon 
the  franchise  derived  from  the  United  States,  to  aid  us  to  this  extent 
in  funding  the  pubhc  debt. 

But,  sir,  the  vote  of  the  House  shows  the  power  of  the  national 
banks.  It  is  so  great,  at  least  in  the  House,  that  in  order  to  secure  a 
funding  bill  we  have  been  compelled  to  abandon  all  provisions  in  regard 
to  the  national  banks ;  but  I  give  notice  that  in  the  future  I  for  one 
shall  be  prepared  at  all  times  to  require  the  national  banks  to  take  that 
class  of  bonds  which  we  propose  in  this  bill,  and  I  have  no  doubt  this 
wnll  be  the  result.  But  for  the  present,  in  deference  to  the  wishes  of 
the  House,  we  have  withdrawn  the  section  in  regard  to  national  banks. 

This  bill  became  the  Refunding  Act  of  July  14,  1870. 


284  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

RECEIPTS   AND   EXPENDITURES— REDUCTION  OF 

TAXATION. 

ly  TUB  SENATE,   MAY  23,   1870. 

The  Senate,  as  in  Committee  of  the  Whole,  having  under  consideration  the  bill 
making  appropriations  for  the  legislative,  executive,  and  judicial  expenses  of  the 
Government  for  the  }'ear  ending  tlie  3Uth  of  June,  1871,  Mr.  Sherman  said  : 

Mr.  President  :  This  appropriation  bill  is  tlie  fii'st  of  a  series  that 
will  bring  before  us  every  branch  of  the  exj^cnditures  of  the  National 
Government.  It  may  be  well  before  we  enter  into  their  details  to  take 
a  general  view  of  our  exi)cn(liturcs,  and  of  such  measures  of  taxation 
as  will  be  necessary  to  raise  the  vast  sums  about  to  be  aj>pr<»priated. 
Taxes  and  appropriations  are  inseparably  associated.  They  are  the 
pleasing  and  painful  sides  of  financial  legislation.  If  to  aj>propriate 
money  was  the  "  end  all  and  be  all "  of  this  and  kindred  bills,  it 
would  be  the  most  gratifying  employment  in  the  world.  We  could 
indulge  in  the  luxuries  of  art  and  tlie  fancies  of  statesmanship;  we 
could  erect  temples  for  custom-houses,  and  cover  the  ocean  witli  our 
subsidized  steamers ;  we  could  increase  our  salaries,  and  buy  all  the 
islands  adjacent  to  our  continent.  But  unhappily  we  can  only  appro- 
priate what  we  first  collect  by  taxation,  and  taxation  is  a  painful  pro- 
cess at  best,  in  its  nature  unequal,  and  generally  intlicting  more  injury 
to  the  individual  than  it  confei*s  benefit  upon  the  people.  Every  ap- 
propriation bill  is  a  tax  bill,  and  every  item  added  is  a  draft  upon  the 
earnings  and  labor  of  our  citizens,  to  which  is  superadded  the  cost  of 
collection.  If  the  money  is  borrowed,  then  interest  is  adde.d,  and 
interest  is  as  consuming  to  the  resources  of  a  nation  as  it  is  to  an 
individual.     It  never  rests  or  sleeps. 

The  estimates  upon  which  these  appropriation  bills  are  founded 
are  made  annually  by  bureau  clerks  nearly  one  year  before  the  com- 
mencement of  the  fiscal  year  for  which  they  are  made,  and  l)y  law 
are  submitted  to  us  at  the  beginning  of  each  session.  A  general  re- 
sume of  these  for  the  year  may  be  found  on  pages  240  to  244:  of  the 
book  of  estimates,  as  follows  : 

Legislative  department .?2,833,891  40 

Executive  department 21,321,804  00 

Judicial  department 1,575,990  00 

Military  department 33,845,747  75 

Naval  department 24,598,277  37 

Indians 5,048,334  51 

Pensions 30,490,000  00 

Miscellaneous 5,531,267  83 

Public  works 24,625,173  55 

Postal  appropriations  (deficiency) 5,427,131  21 

Annual  appropriations $155,297,617  62 

Permanent  appropriations,  mainly  collection  of  customs  and  postal  service.  5,110,000  00 

Other  indefinite  permanent  appropriations,  as  drawbacks,  excess  of  duties, 

bounties,  etc 9,031,300  00 

Interest  of  public  debt 129,077,815  00 

Total §298,516,732  62 


EECEIPTS  AND  EXPENDITURES.  285 

A  palpable  error  occurred  in  the  postal  estimates,  but  this  I  have 
corrected  in  the  statement  read.  The  great  mass  of  these  estimates 
is  to  carry  into  effect  existing  laws,  and  can  only  be  reduced  by  a 
change  of  the  law.  All  the  appropriations  for  public  works,  and  some 
of  the  appropriations  for  other  heads  of  expenditure,  amounting  in  the 
aggregate  to  more  than  fifty  million  dollars,  depend  upon,  and  may  be 
increased  or  diminished  in,  the  annual  appropriation  bills.  The  amount 
estimated  by  the  Secretary  of  the  Treasury  in  his  annual  report  for 
the  service  of  the  next  fiscal  year  is  §201,000,000,  made  up  as  follows  : 

Civil  service  and  miscellaneous f!60,000,000 

Pensions  and  Indians 36,000,000 

War  Department 50,000,000 

Navy  Department 18,000,000 

Interest  on  the  public  debt 127,000,000 

Total 6291,000,000 

The  difference  between  the  two  estimates  is  readily  explained,-and 
consists  mainly  of  his  reduction  of  estimates  for  pul)lic  works ;  but 
the  actual  ai)]u-opriation  will  depend  ui)on  the  economy  or  liberality 
of  Congress.  I  shall  be  gratified  if  the  ai)propriation8  are  kept  within 
the  estimates  of  the  Secretary  of  the  Treasury. 

Now,  in  these  estimates  there  are  elements  of  uncertainty  growing 
out  of  other  causes  than  the  action  of  Congress ;  and  some  of  these  de- 
mand an  immediate  legislative  remedy.  Under  the  law  and  the  prac- 
tice of  the  dopai-tments  unexpended  balances  of  appropriation  for  one 
year  are  carried  over  to  the  credit  of  that  fund  in  the  next  year.  Thus 
we  may  appropriate  a  speciiic  sum  for  the  pay  of  transportation  in  the 
army,  enough  in  the  judgment  of  Congress  for  that  purpose;  yet  a 
much  larger  sum  may  be  expended  by  adding  to  the  new  appro])riation 
the  balances  of  former  appropriations.  It  is  at  this  moment  difficult  to 
estimate  what  balance  of  unexpended  appropriations  will  remain  on 
the  1st  of  July  next,  and  it  was  nmc-h  more  difficult  to  estimate  such 
balance  in  October  last.  Tlie  actual  Italance  of  unexpended  appropria- 
tions on  the  1st  of  July  last  was  Sl02,390,159.3T,  of  which  s4],548,- 
477.30  were  for  the  AVar  Department,  and  820,532,453.94  for  the  In- 
terior Depai-tment,  or  more  than  one  full  year's  appropriations  for  each 
of  those  departments.  Indeed,  their  "  balances  "  were  nearly  as  large 
as  the  whole  appropriations  for  the  present  fiscal  year,  thus  giving  the 
departments  two  years'  supplies  for  one.  I  refer  Senators  for  further 
information  upon  "this  subject  to  Executive  Document  No.  155,  House 
of  Representatives. 

Here  we  have  an  element  of  uncertainty,  which  explains  why  the 
appropriations  are  not  the  limit  of  expenditures.  The  only  way  to  cor- 
rect this  is  by  carrying  all  the  balances  of  approi)riations  at  the  end  of 
the  fiscal  year  to  "the  surplus  fund  ;  then  the  expenditures  can  never 
exceed  the  appropriations  for. that  year.  This  refonn  has  been  adopted 
by  the  Senate  in  an  amendment  reported  by  the  Committee  on  Finance 
to  this  bill,  by  confining  these  balances  to  expenditures  included  in  the 
fiscal  year  for  which  they  are  appropriated.  If  unforeseen  wants  should 
arise,  they  can  be  provided  for  by  deliciency  bills ;  but  with  the  present 
practice  there  is  not  sufficient  check  u])on  expenditure.     I  know  of 


286  SPEECHES  AND  EEPORTS  OF  JOHX  SHERMAN. 

heads  of  appropriations  kept  alive  in  this  way  ever  since  the  war,  that 
would  not  for  a  moment  be  authorized  in  an  annual  appropriation  bill 
now. 

Another  element  of  uncertainty  gro\v8  out  of  the  authority  during 
the  war  to  transfer  apju-opriations  from  one  head  of  expenditure  to  an- 
other. This  ought  nut  now  to  be  allowed  in  any  case.  The  history  of 
these  transfers  is  a  curious  one.  The  Constitution  of  the  United  States 
provides  that  no  money  shall  be  drawn  from  the  Treasury  but  in  con- 
serpience  of  appropriations  made  by  law.  This  highly  important  and 
fundamental  provision  has  frequently  been  evaded  under  the  specious 
device  of  a  transfer  of  appropriations,  authorized  from  time  to  time  by 
different  acts  of  Congress.  This  was  cured  by  the  deficiency  bill  of 
February  12,  1808,  Avhich  repeals  all  acts  authorizing  such  transfers, 
and  provides  that  no  money  appropriated  for  one  ]uirpose  shall  here- 
after be  used  for  any  other  purpose  than  that  for  which  it  was  appro- 
])riated.  We  had  a  case  in  point  last  summer,  when  our  adventurous 
Admiral  of  the  Navy,  without  consulting  Congress,  embarked  in  a  vast 
sea  of  expenditure  for  building  a  navy,  and  his  reliance  was  in  the  un- 
expended balances  accumulating  from  appropriations  under  various 
heads  during  and  since  the  war.  This  law,  which  must  have  been 
overlooked,  guarded  these  balances  from  a  transfer  and  checked  an  al- 
most unlimited  expenditure. 

Sometimes  we  have  bills  authorizing  transfers;  but  the  word  when- 
ever used  ought  to  be  regarded  as  an  indication  of  fraud  ;  it  ought  to 
excite  distrust  and  suspicion.  Annual  appropriations  for  specific  pur- 
poses, and  for  a  specific  time,  are  the  only  guards  for  expenditure.  If 
then  we  have  extravagance,  it  can  only  be  the  extravagance  of  Congress 
and  not  of  executive  officei"s. 

Another  element  of  uncertainty  in  our  estimates  is  the  demand  for 
public  works,  amounting  this  year  to  the  sum  of  $24,625,173,  against 
$5,493,000  appropriated  last  year.  Upon  the  action  of  Congress  on 
this  branch  of  expenditure  it  will  depend  whether  we  have  to  provide 
for  $280,000,000  or_  $305,000,000 ;  and  what  I  say  in  regard  to  the  re- 
duction of  taxes  will  be  affected  by  this  uncertainty.  Certain  great 
works  of  improvement  demand  liberal  ajjpropriations,  but  they  are 
often  compelled  to  carry  a  multitude  of  appropriations  for  objects  of 
minor  importance. 

Another  uncertainty  arises  from  the  manner  in  which  the  estimates 
and  appropriations  are  made.  We  are  asked  to  appropriate  $100,000 
for  the  erection  of  a  custom-house ;  th'cn  a  plan  is  adopted  which  re- 
quires $1,000,000 ;  the  money  appropriated  is  sunk  in  the  foundation, 
and  this  is  made  the  basis  for  future  appropriations.  No  public  work 
should  be  authorized  until  its  completed  cost  is  ascertained  and  fixed  by 
law  or  contract ;  and  I  am  happy  to  see  that  this  plan  has  been  adoj)ted 
in  the  bills  of  this  session. 

The  amount  of  claims  that  are  provided  for  by  Congress  is  also  an 
indefinite  sum.  If  the  proposition  which  was  supported  the  other  day 
with  a  very  able,  eloquent,  and  elaborate  speech  should  pass,  it  will  cost 
from  thirty  to  fifty  million,  dollars  to  meet  that  demand  for  next  year ; 
and  we  must  provide  for  it.     As  a  matter  of  course,  if  the  proposition 


RECEIPTS   AXD  EXPENDITURES.  287 

should  be  adopted,  and  we  should  concede  the  principle  that  we  must 
pay  all  the  damages  incurred  and  sustained  by  loyal  people  in  the 
Southern  States  during  the  war,  it  would  add  to  our  expenditure  an 
enormous  sum,  an  amount  which  even  the  Senator  from  Indiana  did 
not  venture  to  state.  It  would  amount  to  perhaps  fifty  million  dollars, 
perhaps  double  that ;  I  do  not  know  how  much. 

Besides  that,  there  are  judgments  of  the  Court  of  Claims.  In  this 
estimate  of  the  aggregate  of  expenditure,  $1,000,000  is  estimated  for 
the  payment  of  the  judgments  of  the  Court  of  Claims.  But  last  year 
they  were  over  $1,250,000,  and  this  yeai'  will  probably  largely  exceed 
that,  as  many  cases  are  now  pending  on  appeal  in  the  Supreme  Court, 
as  well  as  in  the  Court  of  Claims  originally.  Then  the  action  of  Con- 
gress on  private  claims  that  come  to  us  is  very  uncertain.  "\Ve  some- 
times see,  without  attracting  much  attention,  a  claim  of  $50,000,  or 
$100,000,  or  even  $250,000,  go  through.  That  swells  the  vast  aggre- 
gate of  our  public  expenditures  without  our  scarcely  perceiving  it. 

A  still  more  dangerous  element  of  uncertainty  grows  out  of  our 
Indian  service.  The  conduct  of  the  United  States  to  the  Indian  tribes 
is  infamous.  It  is  in  its  results  as  ciiiel  and  heartless  as  the  worst 
chaptci-s  of  English  doinination  in  India  under  Hastings  and  Clive.  It 
has  been  so  for  years.  But  two  years  ago  we  imdertook  to  make  a 
great  reform.  We  undertook  in  the  most  solemn  manner  to  gather 
our  Indian  tribes  into  reservations,  to  feed  them,  and  adapt  them  to 
civilized  life.  We  authorized  a  board  of  officers  of  the  highest  rank 
in  military  and  civil  life  to  make  treaties  with  them.  This  was  done 
with  much  ostentation,  and  the  treaties  were  ratified  and  confirmed  by 
the  Senate.  We  guaranteed  them  reservations,  food,  shelter,  assist- 
ance, and  clothing,  in  obligations  as  sacred  as  the  public  debt.  AYe 
have  openly  and  knowingly  violated  these  obligations.  We  even  gath- 
ered bands  of  Indians  on  the  reservations  promised  them,  and  left 
them  to  starve.  Our  people  invaded  the  very  reservations  set  apart 
for  them,  and  Congress  refused  last  year,  and  still  refuses,  to  make 
appropriations  to  carr}'  the  treaties  into  effect. 

The  Indians  resorted  to  the  only  remedy  for  savages  or  civilized 
people  for  violated  treaties  ;  but  their  warfare  is  the  warfare  of  bar- 
barians. They  steal  and  rob,  burn,  murder,  and  mutilate  their  victims. 
What  else  can  they  do  ?  You  have  invaded  their  territory ;  you  have 
cut  off  their  food.  They  are  starving.  You  promised  them  food,  and 
you  have  sent  them  Quakers  without  money.  They  flaunt  your  vio- 
lated treaties  in  your  faces.  You  talk  about  Indian  massacres  !  AVhaJt 
death  is  more  terrible  than  starving  ?  What  crime  is  greater  than  this 
Congress  commits  daily  in  violating  these  treaties  ?  With  them  it  is 
the  crime  of  desperation ;  with  you  it  is  the  crime  of  listlessness  and 
indifference.  I  fear  it  is  now  too  late  to  repair  our  error.  We  may 
be  startled  any  day  by  a  Fettennan  massacre,  to  punish  which  our  sol- 
diers may  be  compelled  to  commit  another.  In  any  event,  very  lar^e 
additional  appropriations  must  be  made,  and  these  will  be  either  m 
money  for  food,  or  in  supplies  and  transportation  for  the  army. 

Tiien  there  is  another  thing.  The  House  the  other  day  passed  a 
bounty  bill,  which,  in  my  judgment,  if  carried  into  a  law,  will  cost  us 


288  SPEECHES   AND  EEPORTS  OF  JOHN  SHERMAN. 

about  two  hundred  million  dollars.  It  allows  one  hundred  dollars  a 
year,  if  I  remember  aright,  for  every  year's  service  by  any  soldier  in 
the  war.  Two  or  three  years  ago  I  examined  into  it  tlioroughly,  and 
the  estimates  then  of  the  Department,  which  I  have  now  in  my  hand, 
showed  that  the  whole  amount  to  ])ay  the  bounties  provided  for  by  it 
would  be  from  three  to  four  hundred  million  dollars.  As  a  coiM])ro- 
mise  we  provided  for  a  mode  of  paying  a  certain  amount  of  bounties 
that  has  cost  the  Government  eighty  millions,  and  this  new  bill  pro- 
poses to  make  up  the  difference,  as  1  understand.  AVlien  the  original 
House  proposition  came  to  us,  the  estimate  was  that  it  would  cost 
more  than  tiiree  or  four  hundred  million  dollars,  and  the  House  bill 
as  passed  now  allows  a  deduction  of  the  amount  of  bounties  already 
paid.  I  feel  as  grateful  to  the  soldiers  as  any  one  ;  we  have  done  what 
we  agreed  to  do  for  them  ;  but  I  must  present  these  facts  aiul  so])er 
statistics  to  tlie  members  of  the  Senate,  so  that,  if  they  pass  that  bill, 
they  may  know  precisely  what  they  are  doing. 

I  state  the  facts  to  show  the  ditticulty  of  accurately  estimating  our 
future  expenditures.  An  English  statesnuin  felt  himself  caHed  upon 
to  apologize  at  great  length  for  a  discrepancy  of  £500,000  between  his 
estimates  and  the  actual  expenditures  ;  but  under  our  system  it  would 
require  more  than  human  sagacity  to  guess  Nvithin  $.5,000,000  of  our 
expenditures  for  the  next  year.  AVe  can  only  take  the  hopeful  esti- 
mate of  the  Secretary  of  tlie  Treasury  of  s2l»I,'noo,000  and  try  to  keep 
the  appropriations  within  that  limit.  To  this  amount  we  must  add  the 
amount  required  for  the  sinking  fund  under  the  act  of  February  25, 
18G2,  of  one  per  cent,  of  the  entire  debt,  or  824,000,000,  making  the 
sum  to  be  provided  for  8315,000,000. 

I  omit  from  the  view  I  present  of  our  financial  condition  the  sur- 
plus gold  on  hand,  wliicli,  according  to  the  statement  submitted  to  us, 
on -the  1st  of  May  amounted  to  8115,525,213  ;  but  that  is  subject  to  a 
deduction  of  833,840,400  of  gold  belonging  to  private  parties,  leaving 
of  gold  belonging  to  the  Government  $81,684,i^l3.  This  gold  was 
collected  under  the  act  ajipropriating  and  setting  apart  the  gold  rev- 
enues for  the  interest  and  principal  of  the  public  debt.  It  might  now 
be  safely  used  for  funding  the  debt.  But  I  avoid  all  discussion  of  the 
funding  bill  and  all  measures  that  look  to  the  reduction  of  the  rate  of 
interest.  These  subjects  we  have  elaborately  discussed  in  the  Senate  ; 
and  although  the  action  of  the  House  is  long  delayed,  I  hope  we  shall 
yet  agree  upon  some  measure  that  will  enable  the  Secretary  of  the 
Treasury  to  reduce  this  burden  of  interest.  I  look  to  the  gold  held 
by  the  Treasury  as  the  basis  of  any  funding  system  that  can  be  pro- 
posed, because  the  Government  when  it  engages  in  the  operation  of 
funding  must  be  very  strong  indeed. 

Then  it  is  also  necessary  to  provide  for  the  three  per  cent,  certifi- 
cates, which,  under  the  currency  bill  as  it  passed  the  Senate,  must  be 
retired.  They  can  be  provided  for  out  of  the  accumulated  gold  and 
the  surplus  revenue  that  will  accnie  before  the  measures  I  propose  to 
indicate  shall  operate.  This  gold  will  form  also  the  basis  of  a  resump- 
tion of  specie  payments.  Therefore  we  can  not  count  as  an  element  or 
source  of  revenue  the  amount  of  money  we  have  on  hand.    That  money 


EECEIPTS  AND  EXPENDITURES.  289 

is  ppecifically  pledged  for  other  piir|ooses,  and  can  only  be  nsed  either  in 
the  retirement  of  the  three  per  cent,  certificates  or  of  greenbacks,  or  in 
the  payment  of  a  certain  portion  of  the  bonded  debt  of  the  United 
States.  The  only  resources  we  have  for  the  large  sum  that  is  necessary 
to  be  appropriated  this  year,  estimated  by  me  at  the  lowest  calculation  at 
8315,000,000,  are  the  taxes  collected  in  various  forms  from  the  people. 

And  here,  when  we  approach  this  question,  I  am  glad  to  say  that  we 
are  ah\e  to  estimate  with  a  great  deal  more  accuracy.  It  is  much  easier 
to  estimate  tlie  result  of  taxation  than  it  is  the  process  of  expenditure. 
There  are  four  different  heads  of  receipts  under  our  Government.  The 
first  and  least  of  all  is  tlie  public  lands,  which  yield,  say,  S5,000,000 — 
more  than  formerly.  I  beg  leave  to  differ  from  my  colleague,  who  made 
a  very  able  speech  some  weeks  ago  to  show  that  the  grants  of  public 
lands  to  railroads  tended  to  impair  the  money  revenue  of  the  Govern- 
ment from  tlie  proceeds  of  the  public  lands.  The  facts,  if  examined  into, 
will  show  directly  the  revei-se.  Whenever  we  grant  land  to  a  railroad, 
we  raise  the  price  of  the  reserved  sections,  and  those  reserved  sections 
are  at  once  brought  into  market,  so  that  we  sell  the  same  amount  of  land 
at  doul)le  the  price ;  and  the  rc.-erved  sections,  instead  of  being  settled 
under  the  homestead  act  or  under  the  ])reemption  laws,  are  in  many 
cases  sold  for  money.  The  result  is,  that  last  year  we  received  from 
the  proceeds  of  the' pu])lic  lands  in  money  8r),(>0o.()(>0  ;  and  that  has 
been  the  operation  of  all  the  grants  of  lands  for  railroads.  I  do  not 
now  mean  to  go  into  the  general  subject  of  the  disposition  of  the  public 
lands;  I  merely  speak  of  it  as  a  source  of  revenue.  It  is  most  proba- 
ble, therefore,  that  we  may  rely  upon  the  same  amomit  from  public 
lands  next  year,  and  that  is  the  amount  estimated  by  the  Treasury 
Department. 

There  are  sources  of  revenue,  to  the  amount  of  82>;,O0O,000,  Mhich 
are  in  every  sense  of  the  word  miscellaneous.  The  principal  items 
are :  the  premium  on  the  sales  of  coin ;  the  fees  from  United  States 
consuls  (the  consular  system  now  being  self-sustaining),  storage,  rent, 
la])or,  and  drayage,  under  the  administration  of  the  customs  laws ;  fines 
and  penalties  for  violations  of  the  customs  laws;  the  fees  on  letters- 
patent,  which  were  S050,00<»,  or  more  than  the  expenses  of  the  Patent 
Office;  the  taxes  levied  on  the  circulation  and  deposits  of  national 
banks,  say  $6,000,000  (which  is  not  collected  through  the  Internal 
Revenue  'Office,  but  directly  by  the  Treasurer  of  the  United  States) ; 
the  homestead  fees,  which  yielded  us  S300,000,  going  far  toward  de- 
fraying the  expense  of  surveying  the  public  lands,  and  perhaps  paying 
the  whole  expense ;  steamboat  fees  under  the  steamboat  law,  which 
yield  us  §200,000;  and  various  unenumerated  items,  s3,300,000 ;  mak- 
ing an  aggregate  of  $28,000,000  from  miscellaneous  sources. 

One  item  in  this  account  is  perhaps  overestimated.  The  amount  of 
816,000,000  estimated  as  the  premium  on  the  sales  of  gold  is  larger 
than  we  shall  probal)ly  receive  next  year.  The  estimate  was  made  in 
October  last,  Mhen  gctjd  was  bearing  a  much  higher  premium  than  to- 
day. I  think,  therefore,  there  will  be  a  reduction  in  that  item  on 
account  of  the  fall  in  the  premium  on  gold ;  but  it  will  be  amply  made 
Id 


290  SPEECHES  AND  EEPORTS   OF  JOUX  SHERMAN. 

up  by  other  sources,  so  that  we  may  rely  at  least  upon  828,000,000 
from  these  various  incidental  sources  of  revenue. 

We  then  have  the  customs  duties  and  the  internal  revenue.  The 
customs  duties  are  estimated  for  the  next  fiscal  year  at  §185,000,000 ; 
and  I  think  this  is  an  underestimate  rather  than  an  overestimate.  The 
actual  receipts  of  the  last  three  quarters  of  the  present  liscal  year  are 
$140,(339,000.  Estimating  an  equal  amount  for  the  present  quarter, 
the  amount  of  customs  duties  this  year  will  be  about  81bG,0oO,000. 
Next  year  they  will  probably  be  as  much  ;  but  the  Secretary  estimates 
them  at  $185,000,000. 

The  internal  revenue,  if  maintained  at  its  present  position  and  with- 
out any  diminution  or  change,  will  yield  not  less  than  §175,000,000. 
The  actual  receipts  dui-ing  the  last  calendar  year  were  something  over 
$174,000,000.  They  have  been  gradually  increasing  since  this  Ad- 
ministration came  into  power,  aiul  now,  instead  of  $157,000,000  or 
$158,000,000  annually,  they  are  $174,000,000  or  $175,000,000;  and 
next  year,  if  the  law  remains  unchanged,  they  will  be  over  the  amount 
estimated,  $175,000,000.  This  makes  an  aggrepte  of  $393,000,000. 
Deduct  the  amount  estimated  by  the  Secretary  of  the  Treasury  for  ex- 
penditures, and  it  leaves  a  surj^lus  of  $78,000,000  upon  the  basis  of 
existing  law. 

Now,  the  question  arises,  "What  shall  be  done  with  this  surplus  i  Is 
it  better  to  repeal  and  diminish  the  taxes,  or  to  maintain  them  at  their 
present  position  with  a  view  to  the  reduction  of  the  public  debt? 
Upon  that  I  believe  there  is  a  unanimity  of  sentiment  in  this  country, 
in  which  I  most  heartily  concur.  I  can  see  no  object  in  nuiintaining 
our  revenue  at  its  present  position,  no  object  in  a  more  rapid  payment 
of  tlie  public  debt  than  is  provided  for  in  the  sinking  fund  of  Februa- 
ry, 1862,  or  the  funding  bill  as  we  sent  it  to  the  other  House,  which 
will  pay  off  the  whole  debt  in  twenty-five  or  thirty  years.  I  see  no 
object  in  accunmlating  sur})liLs  funds,  because  they  are  always  a  tempta- 
tion to  extravagant  expenditures,  and  many  of  the  items  which  will  be 
put  on  this  appropriation  bill  will  be  put  there  because  we  have  a  sur- 
plus revenue. 

A  surplus  revenue  could  only  be  used  for  the  more  rapid  reduction 
of  the  public  debt.  It  might  strengthen  the  power  of  the  Secretary  of 
the  Treasury  to  reduce  the  interest  of  the  debt.  These  are  objects 
of  high  public  importance,  but  in  my  opinion  it  is  now  more  im- 
portant to  relieve  our  people  from  burdensome  taxation.  The  money 
is  more  valuable  to  the  tax-payers  in  the  multiplied  business  of  a  new 
and  vast  country  Hke  ours,  than  it  is  to  the  National  Government.  The 
large  surplus  now  on  hand,  together  with  the  fixed  provision  for  the 
reduction  of  the  debt  contame'd  in  the  funding  bill,  will  enable  us  to 
reduce  the  rate  of  interest  and  gradually  to  pay  the  principal,  without 
continuing  the  drain  of  taxation  upon  our  people.  We  pi)int  with 
pride  to  the  vast  sums  they  have  freely  and  voluntarily  paid,  leHed  by 
themselves  during  and  since  the  war.  They  have  borne,  not  only  with 
patience,  but  with  patriotic  alacrity,  a  burden  of  taxation  without  ex- 
ample in  history.  The  object  of  this  taxation  has  been  attained,  and 
even  the  disturbing  waves  of  civil  war  have  ahuost  subsided,  and  friend 


RECEIPTS  AND  EXPEOT)ITURES.  291 

and  foe,  master  and  slave,  are  industriously  adding  to  the  national  re- 
sources and  contributing  to  the  national  taxes.  Under  these  circum- 
stances we  ought  to  limit  our  demands  upon  them  to  the  smallest  sum 
consistent  with  the  national  credit  and  the  proper  maintenance  of  the 
different  departments  of  the  National  Government. 

Assuming,  then,  that  our  surplus  revenue  is  to  be  disposed  of  by  a 
reduction  of  taxes,  we  are  enabled,  for  the  sixth  time  since  the  close  of 
the  war,  to  perform  this  pleasing  duty.  We  have  already  reduced 
taxes  as  follows : 

By  the  act  of  July  13,  1866 $65,000,000 

By  the  act  of  March   2,  1867 40,000,000 

By  the  act  of  February  3,  1868 23,000,000 

By  the  act  of  March  31,  1868  }  ..  n^n  ..nn 

By  the  act  of  July  20,  1868      ^ 4..,uuu,uuiJ 

Making  a  total  of $173,000,000 

The  real  question  is,  What  taxes  ought  to  be  repealed  ?  which 
among  them  bear  most  upon  the  industry  of  our  peo])le  ?  We  have 
two  systems  of  taxation,  entirely  distinct  in  their  origin,  in  the  laws 
g(jverning  them,  and  in  tlie  officers  administering  them.  Our  internal 
revenue  system  is  the  pnxluct  of  the  war.  It  was  im])rovised  to  meet 
a  sudden  exigency.  The  taxes  imposed  under  it  are  immediately  felt ; 
they  are  direct ;  they  fall  upon  our  own  industry.  Our  customs  duties, 
though  largely  increased  during  and  since  the  war,  have  been  in  force 
since  the  formation  of  the  (ioveniment.  They  are  levied  mainly  at 
five  large  cities.  They  are  indirect.  They  are  mainly  upon  articles 
of  luxury  or  consumption,  so  well  distributed  that  the  taxes  fall  fairly 
and  in  just  proportion  to  ability  to  pay.  To  the  extent  that  they  are 
levied  upon  articles  similar  to  our  own  productions,  the  taxes  foster 
and  protect  home  industry.  Though  we  may  differ  very  much  about 
mere  theories,  yet  it  is  likely  under  any  administration  that  the  chief 
burden  of  taxation  will  rest  upon  imported  goods.  These  now  yield 
us  $185,000,000  in  gold,  and  this  revenue  is  not  likely  to  diminish. 
The  question  is,  whether  it  is  not  better  to  retain  this  revenue,  retain 
this  system  of  customs  duties,  and  for  the  present  confine  our  reduc- 
tion of  taxes  to  the  new  and  direct  laws  of  interaal  taxation. 

If  we  examine  the  details  of  our  customs  duties,  it  will  be  found 
that  they  are  as  well  distributed  as  any  taxes  on  consumption  can  be. 
The  real  objection  to  them  is  that  they  fall  entirely  on  consumption. 
Property  does  not  pay  any  portion  of  tliem.  If,  in  fact,  the  consump- 
tion of  taxable  goods  used  by  the  poor  bore  the  same  proportion  to 
their  property  or  income  that  the  consumption  of  the  rich  does  to  their 
property  or  income,  then  the  tax  would  be  as  equitable  as  any  tax  can 
be  ;  but  this  is  not  so.  This  fact  ought  to  be  borne  in  mind  in  adjust- 
iiig  other  taxes  on  property  or  income.  Nearly  one  third  of  all  our 
customs  duties  fall  upon  articles  of  food,  the  ])roduets  of  tropical  cli- 
mates, such  as  sugar,  tea,  coft'ee,  and  the  spices.  Duties^  on  these  arti- 
cles are  purely  revenue  duties.  They  are  stable,  for  their  consumption 
does  not  much  diminish  by  increase  of  price.  They  are  as  generally 
diffnsed  and  as  lightly  felt  as  any  portion  of  our  taxes. 

We  levy  not  less  than  thirty  millions  upon  raw  articles,  the  basis  of 


292  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

our  domestic  industry,  wliicli  is  not  only  added  to  the  cost  of  the  do- 
mestic product,  hut  also  tends  to  prevent  domestic  production.  The 
tariff  is  conunonly  denounced  as  a  high  protective  taritl',  in  order  to 
arouse  old  political  controversies ;  hut  in  tact  it  is  so  framed  as  to  pro- 
duce the  largest  revenue  upon  the  smallest  importations.  The  average 
rate  of  duty  levied  extends  to  nearly  all  articles  imported  into  this 
country.  It  would  be  a  more  protective  tariit'  if  the  duties  on  prod- 
ucts of  tropical  climates  were  repealed.  It  would  be  still  more  pro- 
tective if  the  duties  on  raw  products  were  repealed. 

The  true  distinction  between  a  protective  tariff  and  a  revenue 
tarifE  is  that  a  protective  tariff  consists  of  high  duties  on  articles  of 
foreign  production  that  come  into  competition  with  domestic  produc- 
tions, and  low  duties  on  all  other  articles.  A  purely  revenue  tariff 
consists  of  high  duties  on  articles  of  foreign  growth  that  we  can  not 
produce,  and  low  duties  on  articles  that  we  do  produce.  The  latter  en- 
courages importations  and  swells  revenues.  The  present  tariif  levies 
high  duties  on  nearly  all  the  productions  of  foreign  countries,  both  raw 
and  manufactured  productions,  both  such  as  we  can  not  produce  and 
such  as  we  can  produce.  It  is,  therefore,  the  best  revenue  tariff  we 
have  ever  had,  yielding  the  largest  revenue  possible.  Its  protective 
features  are  very  much  modified  by  the  duties  on  raw  materials  and  on 
the  tropical  food  which  enters  into  the  cost  of  domestic  labor.  The 
general  effect  of  the  present  tariff  has  been  largely  beneficial  to  our 
industry ;  and  I  am  not  anxious  for  its  reduction  until  we  have  largely 
reduced  our  internal  taxation.  When  the  tariff  is  reduced  there  will 
be  a  struggle  of  opposing  interests.  It  should  be  done  Avith  great  de- 
liberation. When  done,  it  should  be  upon  some  genera?  princij^le  of 
financial  policy,  such  as  guided  Sir  Robert  Peel  in  1842,  and  by  the 
application  of  general  rules  not  to  be  dej^arted  from  by  the  demand  of 
isolated  interests. 

If  the  purpose  is  to  reduce  revenue  duties,  it  can  easily  be  accom- 
plished by  enlarging  the  free  list,  or  reducing  the  duties  on  tropical 
fruits.  If  it  is  to  reduce  the  protective  duties  on  metal  and  textile 
fabrics,  it  should  be  by  a  fixed  percentage.  The  mere  reduction  of  a 
small  amount  of  either  class  of  duties  will  not  give  the  country  that 
relief  that  will  be  given  by  an.  equal  amount  of  reduction  of  internal 
taxes.  I  make  these  general  observations  without  any  desire  to  pre- 
judge a  revision  of  the  tariff  when  the  subject  is  presented  by  the 
House  of  Representatives,  but  only  that  I  may  present  to  you  the  great 
relief  that  our  surplus  revenue  enables  us  to  give  our  people  by 
the  repeal  of  internal  taxes.  Indeed,  I  hope  that  the  tariff  bill  now 
pending  in  the  House  of  Representatives  may  pass  at  this  session  in  the 
form  deemed  best  by  the  House,  and  then  that  it  may  be  subject  to  the 
scrutiny  of  the  people,  so  that  at  the  next  session  the  Senate  may  pro- 
pose such  amendments  as  a  full  and  patient  investigation  may  show  to 
be  necessary.  It  is  manifest  that  at  this  period  of  the  session  such  an 
investigation  is  impossible  ;  and  that  if  a  greater  reduction  of  revenue 
than  I  will  propose  is  deemed  prudent,  it  should  be  done  by  enlarging 
the  free  list,  or  by  reducing  the  duty  on  a  few  products,  such  as  sugar, 
coffee,  and  tea. 


RECEIPTS  AND  EXPENDITURES.  293 

The  question  then  recurs,  What  internal  taxes  ought  to  be  repealed  ? 
How  can  we  within  the  limits  of  our  surplus  give  most  relief  to  our 
constituents  ?  And  here  the  Committee  on  Finance  were  met  with  a 
difficulty  growing  out  of  the  necessity,  in  our  opinion,  of  continuing 
the  income  tax  in  a  modified  form. 

We  are  restrained  by  the  constitutional  provision  which  declares 
that  the  House  of  Representatives  alone  can  '"  originate  bills  for  raising 
revenue."  The  question  occurred,  whether  or  not  a  committee  of  the 
Senate  ought  to  undertake  to  introduce  a  bill  reducing  revenue.  It  is 
the  general  sense  of  the  Senate  that  we  have  a  right  to  originate  a  bill 
reducing  revenue.  We  introduce  appropriation  bills  every  day.  It  is 
the  establislied  law  and  practice  that  the  Senate  has  the  right  to  origi- 
nate appropriation  bills,  funding  bills,  loan  biUs,  and  all  other  forms  of 
financial  legislation  except  a  tax  bill  "  raising  revenue." 

I  can  show  precedents  without  number  on  this  point.  The  ques- 
tion whether  or  not  the  Senate  can  originate  a  bill  which  reduces  rev- 
enue has  never  been  made,  because  the  occasion  has  never  arisen.  I 
have  no  doubt  of  the  power  of  the  Senate  to  do  it ;  but  while  we  are 
throwing  off  revenue,  we  propose  to  renew  and  continue  some  portion 
of  the  income  tax,  which  by  existing  law  expires  with  this  year.  The 
Committee  had  some  doubt  whether  it  was  wise  for  them  to  present 
any  bill  reducing  taxes,  as  we  wished  to  make  no  controversy  or  ques- 
tion with  the  House  ;  and  the  only  reason  why  it  was  done  was  because, 
in  the  then  condition  of  affairs,  there  seemed  to  be  a  probability  of  so 
great  delay  in  the  reduction  of  taxes,  that  we  thought  it  our  duty  to 
brinoj  the  subject  before  the  Senate  promptly. 

If  two  or  three  months  ago  a  bill  had  been  introduced  and  passed 
repealing  all  special  taxes  which  are  levied  on  the  first  day  of  this 
month,  it  would  have  given  a  vast  deal  of  relief  to  our  people.  We 
are  entirely  able  to  do  it.  These  taxes  are  mainly  levied  in  the  month 
of  May,  and  consequently  will  be  assessed  for  the  present  year.  Be- 
cause of  the  long  delay  in  these  measures  of  relief,  the  Senate  Commit- 
tee thought  it  proper  to  introduce  and  report  a  bill  to  reduce  taxation, 
which  we  believed  to  be  within  our  constitutional  power. 

I  am  rather  inclined  to  think  that  it  is  not  within  the  power  of  the 
Senate  to  introduce  a  bill  to  continue  a  tax  that  has  expired  or  will  ex- 
pire by  its  own  limitation.  There  is  no  doubt  about  our  power  to  re- 
duce taxation,  but  there  is  doubt  of  our  power  to  continue  the  income 
tax  after  its  expiration.  In  my  judgment  it  is  necessary  to  maintain, 
for  a  time  at  least,  the  income  tax ;  and  therefore  I  agree  that  it  is  bet- 
ter to  postpone  action  on  the  Senate  bill  to  reduce  taxation,  until  we 
have  the  action  of  the  House  on  the  bill  for  that  purpose  since  reiDorted 
to  the  House. 

It  now  only  remains  to  point  out  those  taxes  which,  in  the  opinion 
of  the  Committee  on  Finance,  ought  to  be  repealed,  and  those  that 
ought  to  be  retained.  I  have  had  prepared  for  the  benefit  of  the  Sen- 
ate a  statement,  now  on  your  tables,  showing  the  precise  taxes  that  are 
proposed  to  be  repealed  and  those  proposed  to  be  retained. 

Tiie  first  and  most  oppressive  form  of  taxation,  in  my  judgment 
most  indefensible  in  principle,  most  unusual  in  practice — indeed,  I 


294:  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

know  of  country  that  levies  it  except  our  own,  and  certainly  it  was 
levied  very  much  against  my  opinion,  and,  I  may  say,  also  of  other 
members  of  the  Committee  on  Finance — is  the  tax  on  sales,  which 
yielded  us  last  year  S8.2(>r),839.(>3.  There  is  no  objection  to  any  kind 
of  tax  that  is  not  applicable  to  this.  It  is  a  tax  on  industry  ;  it  is  a  tax 
on  the  most  careful,  the  most  prudent,  and  the  most  enei'getic  of  our 
people  ;  it  is  a  license  tax,  a  tax  on  employments.  It  is  a  tax  that  re- 
quires espionage,  because  it  is  estimated  l)y  the  amount  of  sales,  and 
every  merchant's  l)ooks  must  be  liable  to  l>e  investigated  by  the  tax- 
gatherer.  It  is  a  tax  that,  in  my  judgment,  ought  to  be  the  first  of  all 
repealed.     It  applies  to  dealers  and  manufacturers  of  all  kiuds. 

Tlie  tax  on  gross  receipts  is  also  a  most  oppressive  form  of  taxation. 
It  applies  to  the  gross  receipts  of  corporations,  transportation  companies, 
railroad  and  insurance  companies.  If  this  tax  was  paid  out  of  the  ac- 
cumulated profits  of  those  corporations,  it  might  be,  in  the  prosperous 
condition  of  our  country,  right  enough  to  continue  it ;  but  this  tax  is 
at  once  charged  over  to  the  individual.  Every  passenger  that  travels 
on  a  railroad  pays  this  tax.  Tlie  law  so  provides  in  words ;  and,  in- 
deed, in  some  cases  individuals  pay  several  times  the  amount.  The 
street  railroad  companies,  in  order  to  cover  the  small  fraction  of  a  cent 
tax  levied  on  them,  liave  added  one  cent  to  their  fare.  Nearly  all  the 
street  railroads  in  the  United  States  have  done  so.  So  with  insurance 
companies.  They  always  add  the  amount  of  the  tax  to  the  premium 
on  insurance.  This  tax  on  gross  receipts  is,  therefore,  a  tax  on  insur- 
ance and  on  the  transportation  of  persons.  It  yielded  $6,300,998  last 
year,  and  is  proposed  to  be  repealed. 

The  taxes  on  legacies  and  successions  have  always  been  invidious 
and  odious,  and  very  imperfectly  collected.  If  they  were  taxes  only  upon 
collateral  inheritances,  as  upon  a  grand-nephew  who  acquired  an  iidieri- 
tance  by  the  death  of  a  remote  uncle,  there  would  be  no  great  sympa- 
thy for  the  subjects  of  the  tax ;  but  the  great  body  of  these  taxes  is 
levied  on  the  son  who  inherits  from  the  father,  the  lineal  issue,  or  an- 
cestor, the  brother  or  sister.  So  we  propose  to  repeal  these  taxes. 
They  yielded  about  two  and  a  half  million  dollars  last  year. 

The  articles  in  schedule  A,  as  it  is  called,  billiard  tables,  carriages, 
gold  plate,  watches,  etc.,  are  next  proposed  to  be  relieved  from  tax.  In 
principle  and  theory  it  would  be  well  enough  to  collect  that  tax,  but  it 
yields  us  less  than  a  million  dollars.  It  throws  upon  assessors  a  vast 
amount  of  work,  and  does  not  compensate  for  the  expenses  of  collec- 
tion. We  propose  to  repeal  that,  and  leave  the  watches  and  gold  and 
silver  plate,  which  yield  us  very  little,  to  the  State  authorities. 

The  tax  on  passports,  which  is  continued  in  the  House  bill,  yields 
but  $29,453.  It  is  an  invidious  tax,  and  there  is  no  occasion  for  con- 
tinuing it ;  it  is  too  small. 

The  tax  on  salaries  of  United  States  employees  is  a  grossly  unequal 
tax,  as  it  is  now  levied,  because  a  clerk  who  is  employed  in  the  depart- 
ments here  does  not  get  the  benefit  of  a  deduction  for  the  rent,  taxes, 
and  other  exemptions  allowed  to  other  incomes.  It  denies  to  our  own 
officers  the  exemptions  allowed  to  all  other  persons  on  their  income  tax. 
It  is  proposed,  therefore,  by  the  Senate  bill  to  repeal  this  tax  by  name, 


EECEIPTS  AND  EXPENDITUEES.  295 

and  to  require  the  person  receiving  an  income  from  the"  Government  in 
the  way  of  salary  to  include  it  in  his  general  return,  so  that  if  he  pays 
an  income  tax  he  pays  it  on  his  salary  at  the  same  time  that  he  pays  it 
on  other  income. 

The  tax  on  banks  and  bankere,  and  all  the  special  taxes,  I  may  say, 
amounting  to  nearly  ten  million  dollars,  it  is  proposed  to  sweep  entirely 
out  of  existence. 

The  chief  difference  between  the  Senate  bill  and  the  House  bill  to 
reduce  taxes  is,  tliat  the  House  bill  preserves  a  considerable  number  of 
the  special  taxes.  The  House  bill  proposes  to  retain  the  tax  on  banks 
and  bankei-s,  billiard  rooms,  bowling-alleys,  brokers,  claim  agents,  and 
a  vast  number  of  others.  The  Finance  Committee,  however,  were  of 
opinion  that  it  was  better  to  strike  out  the  whole  list  of  special  taxes, 
excepting  the  taxes  on  whisky  and  tobacco.  Tlie  result  of  this  will  be 
a  reduction  of  revenue  of  about  ten  million  dollars,  but  it  gives  vast 
relief  to  every  branch  of  industry.  There  is  no  tax  so  unequal,  with 
perhaps  the  exception  of  the  tax  on  sales,  as  this  tax  called  the  special 
or  license  tax.  It  levies  the  same  rate  on  the  poor  lawyer  who  travels 
twenty  miles  for  a  fee  of  ten  dolhirs,  as  it  does  on  the  lawyer  of  the 
highest  rank  in  the  profession.  It  is  impossible  to  continue  this  system 
of  taxation  witliout  continuing  gross  inequality.  The  Finance  Com- 
mittee, therefore,  propose  to  repeal  tlie  whole  mass  <»f  these  taxes.  The 
result  will  be,  in  our  judgment,  to  dispense  with  the  services  of  nearly 
two  thirds  of  the  assistant  assessors  and  deputy  collectors,  diminishing 
largely  the  machinery  for  collection,  and  abolishing  at  one  stroke  nearly 
all  the  taxes  that  come  home  to  the  people  of  the  Ignited  States.  We 
propose,  also,  to  modify  the  income  tax,  Avhich  I  will  explain  more  fully 
hereafter. 

The  reduction,  according  to  the  plan  proposed  by  the  Committee  on 
Finance,  is,  upon  the  basis  of  last  year's  returns,  $43,597,774,  but  upon 
the  basis  of  the  actual  receipts  for  the  current  year  would  be  84f),0^^^^j^^^^- 
My  own  impression  is  that  to  this  there  ought  to  be  added  the  repeal 
of  the  tax  on  gas,  which  yielded  S2,000,000,  and  the  repeal  of  the  stamp 
tax  on  receipts,  and  various  forms  of  minor  stamps,  amounting  to  about 
two  milHon  dollars  more,  making  an  aggregate  reduction  of  about  tifty 
million  dollars.  This  would  then  sweep  out  of  existence  all  the  taxes 
levied  by  the  internal  revenue  service  upon  everything  except  spirits, 
tobacco,  fermented  liquore,  larger  stamps,  and  a  small  income  tax,  leav- 
ing unrepealed  taxes  to  the  amount  of  811^,441,000. 

The  tax  on  spirits  yields  us  about  850,000,000  a  year ;  and  in  my 
judgment  it  ought  to  be  made  to  yield  S^j* ',000,000,  and  gradually  in- 
crease as  frauds  are  cut  off  and  consumption  goes  on.  The  tax  on 
tobacco  is  constantly  increasing  in  its  yield  ;  it  is  now  830,000,000. 
And  these  two  taxes  on  spirits  and  tobacco,  together  with  the  tax  on 
fermented  liquors,  over  six  million  dollars,  are  paid  without  complaint 
in  every  part  of  tlic  United  States.  I  have  no  doubt  the  system  of 
collecting  these  taxes  can  be  simplified.  My  own  judgment,  after  care- 
ful examination  of  the  whole  subject,  is  that,  while  the  rate  of  taxation 
ought  not  to  be  increased,  the  manner  of  taxing  can  be  simplified  and 
changed  very  much  indeed.      But  at  any  rate  the  Committee  do  not 


296  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

propose  to  interfere  with  any  tax  now  levied  on  wliisky,  tobacco,  or 
beer,  leaving  them  to  stand  on  the  present  system  until  we  can  have 
time  to  make  a  careful  and  full  revision  of  the  whole  system. 

The  tax  on  spirits  is  now  levied  in  four  different  forms :  first,  a  tax 
of  fifty  cents  a  gallon ;  next,  a  tax  of  four  dollars  a  barrel ;  next,  a 
special  tax  on  sales ;  and  again,  on  liquor-dealers  ;  yielding  on  the 
average  about  seventy  cents  a  gallon.  It  may  be  that,  after  a  short 
exj^erience,  it  may  be  found  better  to  combine  all  these  taxes  and  levy 
them  at  once. 

The  bill  of  the  Committee  on  Finance  strips  the  revenue  service  of 
the  vast  machinery  which  in  the  nature  of  things  interferes  with  the 
daily  business  of  life,  and  it  disbands  or  removes  from  sight  the  army 
of  revenue  officers.  The  taxes  on  spirits  and  tobacco  will  be  collected 
at  the  distilleries  and  manufactories ;  the  stamp  tax  collects  itself  ;  and 
the  income  tax  is  an  annual  assessment,  similar  to  the  annual  tax  on 
personal  property  levied  by  the  States.  The  appearance  of  the  tax- 
collector  will  only  be  necessary  in  the  few  special  subjects  of  taxation 
still  retained.  The  income  tax  will  be  acquiesced  in  as  the  tribute  of 
property  for  the  services  and  sacrifices  of  the  brave  men  who  saved  our 
country. 

There  has  been  a  great  deal  of  clamor  against  the  income  tax.  It 
is  the  same  clamor  that  induced  the  Parliament  of  England  in  1810 
and  181 T  to  repeal  the  income  tax.  I  have  stated  that  when  the  proper 
time  came  I  would  show  that  this  tax  was  sustained  by  principle,  Ijy 
writers  on  political  economy,  by  the  experience  of  Great  Britain,  and 
that  it  was  the  most  just  and  equitable  tax  levied  by  the  United  States. 
I  propose  to  make  good  that  promise. 

Mr.  President,  what  is  the  basis  of  taxation  ?  As  laid  down  by  the 
great  author  of  political  economy,  Adam  Smith,  it  is  that  a  man  ought 
to  pay  exactly  according  to  his  income.  That  axiom  was  laid  down  be- 
fore the  income  tax  was  devised  by  William  Pitt.  Every  man  ought 
to  pay  according  to  his  income.  All  the  distinctions  that  are  endeavored 
to  be  made  now  were  then  pointed  out.  The  first  time  the  income  tax 
was  levied  in  England  was  in  1797.  William  Pitt,  when  driven  by  the 
sad  necessities  of  the  war  with  France,  was  called  upon  to  devise  new 
systems  of  taxation.  There  was  a  vast  deficit,  and  the  credit  of  that 
powerful  nation  was  staggering.  He  first  proposed  in  1797  what  is 
called  assessed  taxation,  taxes  on  land  and  property — to  take  what  a 
man  was  worth  and  levy  a  tax  on  that.  It  was  found  after  one  or  two 
years'  experiment  that  it  entirely  failed,  for  gross  frauds  were  com- 
mitted, and  it  was  impossible  to  ascertain  the  exact  value  of  a  man's 
property ;  and  the  system  was  abandoned. 

Then  it  was,  after  an  elaborate  si^eech,  which  meets  and  answers 
every  objection  that  has  since  been  made  to  the  income  tax  in  practice, 
that  he  proposed  a  tax  of  ten  per  cent,  on  all  the  incomes  of  Great 
Britain.  After  a  debate  running  through  days  and  weeks  the  income 
tax  was  adopted.  For  years  such  a  tax  was  levied  by  Great  Britain, 
falling  alone  upon  the  wealthy  people  of  that  kingdom.  For  two  years, 
I  believe,  it  was  maintained  at  that  rate,  and  then  lowered  about  the 
time  of  the  j)eace  of  Amiens,  and  then  raised  again ;  and  during  the 


t 
RECEIPTS  AND  EXPENDITURES.  297 

whole  war,  with  very  Httle  variation,  there  was  an  income  tax  levied  of  ten 
per  cent,  on  all  the  incomes  of  Great  Britain ;  and  during  that  time, 
as  history  shows,  there  was  vast  and  unequaled  prosperity  in  England. 

After  the  war  was  over,  a  great  clamor  for  the  repeal  of  the  income 
tax  came  from  the  property-holders  of  Great  Britain.  They  said  that 
during  the  war  they  had  paid  the  income  tax  wilHngly,  because  they 
feared  the  aggressions  of  the  French  democracy  more  than  taxation. 
They  were  willing  to  pay  an  income  tax  to  preserve  their  privileges 
and  immunities.  After  the  war  was  over,  they  insisted  upon  piling  all 
the  burdens  of  Government  on  consumption,  which  is  a  tax  on  the 
poor.  They  repealed  the  income  tax,  and  assessed  nearly  all  taxes  on 
excises  and  imports.  They  said  the  tnie  subject  of  taxation  was  not 
property  or  income,  but  consumption.  Well,  what  is  a  tax  on  con- 
sumption ?  Why,  sir,  you  or  I  use  as  much  tea,  coffee,  and  sugar  as 
the  wealthiest  man  in  the  United  States.  It  takes  just  as  mucli  to 
satisfy  our  wants  and  tlie  wants  of  the  poorest  of  our  citizens  as  those 
of  the  richest.  A  tax  on  consumption,  therefore,  is  in  its  nature  an 
unequal  tax  ;  you  can  not  make  it  ecpial.  It  takes  a  greater  pro])ortion 
of  the  earnings  or  income  of  the  poor  man  than  of  the  rich  man  to 
pay  taxes  for  the  absolute  necessaries  of  life. 

The  only  discrimination  in  our  tax  laws  that  will  reach  wealthy 
men,  as  against  the  poorer  classes,  is  the  income  tax.  There  is  no 
other  tax  on  property  levied  by  the  United  States.  The  tax  on  legacies 
and  successions,  which  was  in  the  nature  of  a  property  tax,  is  about  to 
be  repealed  by  the  agreement  of  the  committees  of  both  Houses  ; 
and  the  income  tax  is  the  only  tax  levied  by  us  that  bears  upon  prop- 
erty in  any  shape  or  manner.  All  the  rest  of  our  taxes,  both  internal 
and  external,  are  taxes  on  consumption. 

Now,  according  to  every  true  theory  of  taxation,  a  large  portion  of 
the  taxes  ought  to  fall  upon  property  or  income  derived  from  property. 
"We  can  not  lexj  a  property  tax  mider  our  system,  because  the  Consti- 
tution requires  the  property  tax  to  be  apportioned  among  the  States 
according  to  population.  As  this  would  be  grossly  and  manifestly  un- 
equal to  the  new  States  and  new  communities,  the  only  mode  in  which 
we  can  reach  property  is  by  an  income  tax  ;  and  therefore  it  is  that  the 
income  tax  is  paid  by  comparatively  few  persons  in  the  large  cities.  I 
do  not  find  fault  with  them  because  they  complain  of  it ;  but  if  they 
would  see  that  it  was  their  property  and  their  rights  and  their  income 
that  were  saved  by  the  operation  of  the  war,  and  that  most  of  the 
people  who  pay  the  taxes  on  consumption  necessarily  pay  nine  tenths 
of  all  the  taxes,  the  property-holders  and  wealthy  people  of  this  country 
ought  not  to  complain  if  we  deem  it  necessary  to  maintain  this  tax 
even  at  five  per  cent.,  instead  of,  as  we  propose,  at  three  per  cent. 

The  aggregate  of  our  taxes,  as  I  have  shown  you,  is  $393,000,000 ; 
and  we  levy  only  $37,000,000  of  that  upon  property,  or  the  income 
from  property.  We  levy  nine  tenths  of  all  our  taxes  upon  food  and 
clothing,  and  those  things  which  are  consumed  by  the  use  of  them. 
For  property-holders,  wealthy  people,  those  who  derive  a  large  income 
from  their  profession  or  employment,  from  their  brains  or  intellect,  to 
complain  of  this  tax,  it  seems  to  me,  is  very  unjust. 


298  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

It  has  already  been  decided  by  the  Supreme  Court  tliat  direct  taxes, 
within  the  meaning  of  the  Constitution,  are  taxes  upon  hind  and  slaves; 
so  that  I  say  an  income  tax,  although  always  in  the  books  laid  down  as 
a  direct  tax,  is,  in  the  language  of  our  Constitution,  an  indirect  tiix,  an 
"  excise." 

Now,  I  propose  to  read  a  few  extracts  from  some  of  the  debates  in 
Parliament,  and  these  extracts  will  be  a  sufficient  answer  to  the  alleged 
hardshi])s  of  the  income  tax,  and  what  are  called  its  inequalities  and 
difficulties  of  collection.  I  will  first  road  what  Mr.  Pitt  said  in  regard 
to  this  tax  when  he  first  proposed  it,  which  goes  back  to  the  very  origin 
of  it,  December  14,  1798  : 

As  to  tlic  criterion  of  the  general  tax,  it  lias  likewise  been  objected  to  the  details 
that  the  application  is  uncipial  in  respect  to  tlie  nature  of  income,  its  duration,  etc. 

The  honorable  f?entlenian  says  that  if  t\vo]>ersons  have  each  £'M0  per  annum, 
one  of  whom  derives  liis  income  Vroni  land  and  the  other  from  industry,  they  ought 
not  to  be  both  taxed  eiiually  at  £.jU.  [That  was  the  ten  percent.]  He  assumes  that, 
each  having  £450  a  year  left,  the  impost  is  unequal.  AVhat  does  the  new  tax  do? 
Are  they  not  left  in  relation  to  each  other  precisely  as  they  were  before?  The  tax 
creates  no  new  inequality.  The  justice  or  injustice  remains  precisely  as  it  was.  To 
complain  of  this  inequality  is  to  complain  of  the  distribution  of  property;  it  is  to 
complain  of  the  constitution  of  society. 

Again,  Mr.  Pitt  says : 

To  think  of  taxing  these  two  species  of  incomes  in  a  diflferent  ratio  would  be  to 
attempt  what  the  nature  of  society  will  not  admit,  what  has  never  been  practiced  in 
the  course  of  four  thousand  years.  But  on  what  foundation  does  this  princii'le, 
which  the  honorable  gentleman  has  broached,  rest  ?  Where  is  the  clear  inequality 
on  which  he  so  vehemently  insists  ?  Is  the  industry  of  the  artist,  the  manufacturer, 
the  mechanic,  less  the  creature  of  the  protection  of  law,  less  involved  in  the  great 
contest  in  which  we  are  engaged,  less  likely  to  be  overthrown  in  any  disasters  of 
the  State,  than  the  income  which  arises  from  land? 

Mr.  Pitt  further  says : 

It  is  objected  still  that  it  is  unjust  that  the  man  who  has  an  annuity,  or  an  income, 
the  fruit  of  his  labor,  should  ])ay  in  the  proportion  of  a  man  who  has  the  same  revenue 
from  tixed  property.  This  objection  is  altogether  a  fallacy.  A  permanent  estate, 
which  is  rei)resented  as  never  dying,  and,  as  it  weie,  the  property  of  a  man  after  his 
death,  contributes  on  every  exigency  which  may  occur.  The  income  from  labor  and 
industry  is  extinguished  ;  it  contributes  but  once ;  it  is  no  longer  the  property  of  the 
same  person ;  while  the  other,  which  is  considered  as  the  same  property,  is  subject 
to  renewed  demands. 

A  permanent  income  is  subjected  to  a  permanent  yearly  tax,  while 
a  perishable  income  is  only  subjected  to  one  tax. 

This  reasoning  may  be  thought  refined,  but  the  answer  is  justly  applicable  in 
the  case  where  the  reason  why  fixed  property  should  contribute  more  is  founded  on 
its  supposed  permanency  in  opposition  to  the  fleeting  character  of  the  other.  How, 
then,  is  it  possible  to  discriminate  between  the  various  kinds  of  property,  or  to  enter 
into  the  details  which  could  alone  enable  you  to  apply  any  scale  of  exemption  with- 
out an  investigation  more  oppressive,  a  disclosure  more  extensive  than  anything  which 
the  bill  permits?  How  much  safer  is  it  to  submit  to  those  inequalities  which  are  the 
lot  of  man,  and  which  it  is  not  the  business  nor  is  it  in  the  power  of  schemes  of  finance 
to  correct!  Could  we  even  indulge  the  wish  to  correct  these  inequalities  which  arise 
out  of  the  very  nature  of  society,  is  this  the  legislative  remedy  ?  Let  us  then  forbear 
to  attempt  Avhat  is  perhaps  beyond  the  power  of  human  legislation  to  correct. 

This  is  a  sufficient  answer  to  the  objection  made  that  the  income 
derived  from  professional  employment  ought  to  pay  a  less  tax  than  an 


RECEIPTS  AND  EXPENDITURES.  299 

income  derived  from  land.  Income  derived  from  land  is  perpetually 
taxed  year  after  year  in  the  land  itself,  "while  the  iucctme  derived  from 
personal  profits  or  from  professional  employment  perishes  by  the  pay- 
ment of  one  tax. 

I  stated  that  after  the  close  of  the  war  with  France  the  English  in- 
come tax  was  repealed ;  and  it  was  not  till  1842,  when  England  had 
been  drifting  always  to  leeward,  with  her  debt  always  increasing,  when 
there  was  an  actual  deficiency  of  some  £2,000,000,  and  it  became  neces- 
sary to  I'evise  the  whole  system  of  taxation,  that  Sir  Robert  Peel  had 
the  courage,  in  two  houses  of  Parliament  which  represented  nothing 
but  property  (for  property  is  enthroned  in  Parliament),  to  come  forward 
and  propose  an  income  tax,  and  stake  his  political  life  on  it.  He  turned 
his  back,  as  is  well  known,  on  his  political  friends,  and  proposed  a  re- 
newal of  the  income  tax,  in  order  to  relieve  the  masses  of  the  people 
from  the  weight  of  taxes  upon  consumption — corn,  food,  etc.  From 
the  speech  which  he  made  upon  that  occasion  I  will  read  brief  extracts. 
Sir  Robert  Peel  said  in  the  House  of  Commons,  March  11,  1842 : 

I  will  now  state  what  is  the  measure  wliich  I  propose,  under  a  sense  of  public 
duty  and  a  deep  conviction  that  it  is  necessary  for  the  public  interest,  and  impressed 
at  the  same  time  with  an  equal  conviction  that  the  present  sacrifices  which  I  call 
on  you  to  make  will  be  amj)ly  compensated  ultimately  in  a  pecuniary  point  of  view, 
and  much  more  than  compensated,  by  the  eft'ect  they  will  have  in  maintaining'  l)ub- 
lic  credit  and  the  ancient  character  of  this  country.  Instead  of  looking  to  ta.xation 
on  consumption,  instead  of  reviving  the  taxes  on  salt  or  on  sugar,  it  is  my  duty  to 
make  an  earnest  appeal  to  the  possessors  of  property  for  the  purpose  of  rei)airing 
this  mighty  evil.  I  propose,  for  a  time  at  least — and  I  never  had  occasion  to  make 
a  proposition  with  a  more  thorough  conviction  of  its  being  one  which  the  public 
interest  of  the  country  required — 1  propose  that,  for  a  time  to  be  limited,  the  income 
of  this  country  should  be  called  on  to  contribute  a  certain  sum  for  the  purpose  of 
remedying  this  mighty  and  growing  evil. 

Again  he  says : 

In  1798,  when  the  prospects  of  this  country  were  gloomy,  the  minister  had  the 
courage  to  propose  and  the  people  had  the  fortitude  to  adopt  an  income  tax  of  ten 
per  cent.  The  income  tax  continued  to  the  close  of  the  war  in  1802  ;  and  in  1803, 
after  the  rupture  of  the  peace  of  Amiens,  a  duty  of  five  per  cent,  was  placed  upon 
property.  It  was  raised  in  1805  to  six  and  one  quarter  per  cent.,  and  in  1806  again 
to  ten  per  cent. ;  and  so  it  continued  to  tlie  end  of  the  war.  I  propose  that  the 
duty  to  be  laid  upon  property  shall  not  exceed  three  per  cent.,  or,  as  1  said  before, 
exactly  £2  18s.  id.,  being  seven  pence  in  the  pound.  Under  the  former  tax  all 
incomes  below  £60  were  exempt  from  taxation,  and  on  incomes  between  £60  and 
£150  the  tax  was  on  a  reduced  rate.  I  shall  propose  that  from  the  income  tax  I 
now  recommend  all  incomes  under  £150  shall  be  exempt. 

The  objection  which  Sir  Robert  Peel  was  answering  at  the  close 
of  this  extract  was  that  the  income  tax  was  only  a  war  tax ;  and  he 
answered  it  precisely  as  I  answer  in  regard  to  our  tax,  that  the  income 
tax  is  still  a  war  tax.  But  for  the  war  no  internal  duties  would  be  ne- 
cessary. The  whole  of  them  are  war  taxes.  It  is  one  of  the  misfor- 
tunes of  war  that  taxation  continues  long  after  the  war  has  ended.  If 
the  property  of  this  country  would  simply  agree  to  pay  the  pensions 
incurred  by  the  war,  I  should  be  perfectly  willing  to  compromise  in 
that  way.  If  a  sufficient  income  tax  was  now  levied  on  property  to 
pay  what  is  paid  by  the  Government  to  the  maimed  and  diseased  sol- 
diers of  the  country,  their  widows  and  oi-phans,  it  would  be  the  least 


300  SPEECHES  AND   REPORTS   OF  JOHN  SHERMAN. 

that  the  property  of  the  country  couM  do.  The  answer  of  Sir  Tlobert 
Peel  in  tnat  case  was,  that  all  taxes  for  the  payment  of  the  interest  on 
the  ])ublic  debt  were  war  taxes.  Tlie  taxes  of  peace  are  very  light. 
Sir  Henry  Goulburn,  in  answer  to  that  objection,  said  in  the  itouse  of 
Commons,  March  18,  1842: 

But  the  right  honorable  pentleinan  said  the  income  tax  ought  never  to  be  im- 
posed except  under  the  condition  of  war.  "What,  however,  was  this  fanciful  dis- 
tinction as  to  war?  The  tax  was  not  imposed  because  they  were  at  war,  but  be- 
cause they  were  involved  in  difficulty  in  respect  to  raising  a  revenue,  because  they 
were  involved  in  debt,  and  because  they  were  bound  to  extricate  themselves  from 
debt. 

l)Ut  there  is  another  argument  often  nsed  against  the  income  tax, 
that  it  oj)erates  unjustly  upon  different  classes.  Upon  tliat  point  let 
me  read  another  extract  ftom  the  same  speech  of  Sir  Henry  Cxoulburn, 
whicli  I  think  covers  that  matter  very  well : 

Then  the  right  honorable  gentleman  had  talked  about  the  injustice  of  the  pro- 
posed tax,  as  not  pressing  in  the  same  way  on  ditierent  classes.  "  Unjust,  unequal," 
cried  tlie  right  honorable  gentleman.  Why,  this  was  tiie  very  language  which  he 
had  seen  in  tiie  streets  on  the  placards  of  some  low  weekly  papers.  "  No  income 
tax,  no  ineiiuality,  no  injustice."'  It  was  impossible  not  to  be  sensible  that  taxation 
nmst  be  necessarily  an  evil.  It  was  impos>il)le,  in  the  i)resent  state  of  society,  to 
impose  any  tax  (so  complicated  and  so  artificial  were  the  relations  and  the  interests 
of  the  community)  witliout  pressing  with  greater  force  on  one  class  or  on  another. 
Nor  Avould  he  s;iy  that  an  income  tax  was  exempt  from  this  objection,  applying  as 
it  did  ciiually  to  all  taxes.  But  look  at  the  articles  of  taxation  whicli  the  right 
honorable  gentleman  himself  proposed.  How  did  they  operate  ?  Did  they  press 
equally  on  all  classes?  Did  they  not  press  more  heavily  on  the  lower  and  the  mid- 
dle chis-ies,  to  whom  they  were  necessary?  AVas  it  not  in  the  power  of  the  higher 
and  richer  classes  often  to  relinquish  articles  which  their  inferiors  in  society  must 
consume  ?  Was  it,  then,  fair  to  tax  equally  articles  necessary  to  one  class,  luxurious 
to  another  ? 

The  excise  duties,  for  instance,  appeared  in  some  respects  oppressive  or  unequal 
in  their  operations,  with  a  considerable  degree  of  domestic  inquisition,  all  of  which 
had  been  and  would  be  characterized  as  exceedingly  vexatious.  All  the  eloquence 
which  the  right  honorable  gentleman  had  used  against  the  income  tax  had  been 
used  in  former  times  by  those  who  had  pointed  out  the  excise  duties  as  containing 
every  possible  vice ;  and  of  this  the  right  honorable  gentleman  might  be  assured, 
that  all  the  accusations  which  he  had  brought  against  the  property  tax  would  be 
repeated  from  time  to  time  against  any  tax  that  might  be  invented,  certain  as  it 
must  be  to  atfect  some  particular  interests.  Let  not  the  House  suppose  that  in 
bringing  this  measure  forward  as  essential  to  the  interests  of  the  country  the  Gov- 
ernment had  not  been  fully  sensible  of  the  difficulties  under  which  they  would  have 
to  labor,  had  not  been  quite  aware  that  when  they  struck  at  the  incomes  of  tlie 
country  they  should  excite  a  feeling  to  a  considerable  extent  against  the  measure 
and  the  administration.  But  they  knew  enough  of  the  patriotism  of  the  country 
to  believe  that,  whatever  might  be  the  feelings  of  individuals,  there  was  yet  abun- 
dantly sufficient  of  respect  for  national  honor,  of  affection  for  our  constitution,  and 
of  determination  to  uphold  it,  to  counteract  particular  objections,  and  to  induce  the 
people  to  sustain  cheerfully  a  tax  levied  on  the  principles  of  burdening  as  little  as 
possible  the  poorer  and  the  working  classes. 

I  will  now  read  another  extract  from  Sir  Robert  Peel's  second 
speech,  because  this  debate  is  memorable,  not  only  in  point  of  time, 
but  in  point  of  influence  upon  English  politics.  In  his  speech  of 
March  18,  1842,  he  said : 

If  in  a  time  of  peace — a  time  of  European  peace — you  have  a  large  deficiency 
to  supply,  and  consider  it  more  just  that  the  affluent  classes  shall  supply  it,  rather 


RECEIPTS  AND  EXPENDITURES.  301 

than  pressing  upon  tlio  poor  by  taxing  articles  of  consumption,  adopt  that  course, 
and  do  not  be  afraid  of  what  foreign  countries  may  tliiuk  of  your  resources. 

One  argument  against  the  income  tax  in  England  was  tliat  to^  levy 
it  would  be  a  confession  of  weakness  by  Great  Britain.     Again  he 

says : 

"With  such  a  deficiency  as  I  have  pointed  out,  is  it  better,  then,  to  call  upon  the 
income  of  the  country  to  supply  it,  or  to  tax  articles  of  general  consumption?  .  .  . 
Mr.  Pitt,  wishing  to  affect  tlie  property  of  the  country,  produced  a  plan  by  which 
the  assessed  taxes  paid  at  a  preceding  period  should  be  considered  the  tost  of  prop- 
erty. He  tried  to  obtain  a  ten  per  cent,  income  tax  by  that  criterion ;  but  he  was 
obliged  to  abandon  it,  and  my  belief  is  tiiat  a  house  tax  would  be  much  more  unjust 
in  its  operation  than  an  income  tax.  The  objection  to  the  income  tax  i>  that  it  is 
inquisitorial.  I  do  not  deny  tiie  objection  ;  but  apart  from  that,  I  feci  it  to  be  one 
of  the  best  taxes  that  can  be  imposed.  Three  per  cent,  in  the  present  condition  of 
the  country  is  absolutely  necessary  to  procure  the  supj)ly,  and  1  make  the  projiosi- 
tion  from  a  firm  conviction  that  it  will  be  infinitely  less  onerous  and  more  just  tlian 
any  other  tax.  .  .  .  My  settled  opinion  is  that  the  burden  will  be  less  than  that 
arising  from  any  other  tax  we  could  devise.  ...  I  do  trust,  however,  that  this  tax 
will  not  be  condemned  upon  individual  cases  of  hardship,  but  that  the  House  will 
rather  attend  to  general  results,  and  fairly  consider  whether  any  other  tax  eipially 
just  can  be  found  which  will  be  equally  effectual  in  raising  the  required  supply  for 
the  public  exigency.  ...  If  there  is  t()  bo  an  income  tax  at  all,  it  must  be  uniformly 
laid  upon  all  income,  and  in  no  case  whatever  can  I  allow  a  distinction  to  be 
drawn.  ... 

The  more  I  look  at  this  question,  the  more  I  consider  the  amount  ot  the  sum  to 
be  raised,  the  more  confident  am  I  that  the  best  measure  now  to  be  adopted  is  to 
resort  to  a  tax  upon  income,  ratlior  than  to  impose  a  tax  upon  tlioso  articles  of  excise 
and  customs  to  which  I  have  referred.  ...  I  believe  that  sucli  an  atteini)t  would  far 
more  disturb  the  application  of  cai)ital  and  the  operations  of  active  industry  than 
will  a  call  upon  each  individual  to  pay  throe  pounds  out  of  every  £100.  I  have  a 
strong  conviction  that  the  great  mass  of  the  lower  classes  will  consider  the  voluntary 
determination  of  Parliament  to  accept  for  themselves  and  to  impose  upon  the  wealth 
of  the  country  this  tax  for  the  purpose  of  relieving  its  burdens— I  have  a  strong  con- 
viction that  it  will  be  generally  hailed  on  the  part  of  the  country  as  a  strong  proof 
of  the  determination  of  the  upper  classes  to  bear  their  fair  share  of  taxation. 

Again,  Sir  Eobert  Peel  says : 

The  first  objection  of  that  honorable  gentleman,  the  member  for  Liskeard,  was  a 
curious  one.  He  objected  to  the  tax  because  the  people  would  be  enabled  to  see 
what  was  taken  out' of  their  pockets.  Now,  this  is  exactly  so.  An  income  tax  is 
very  sensibly  felt  in  its  operation.     Taxes  on  articles  do  not  come  home  so  directly. 

You  say 'that  income  derived  from  fixed  property  ought  to  be  made  subject  to 
the  tax  I  propose,  but  that  income  drawn  from  professional  exertion  and  the  opera- 
tions of  trade  ought  not  to  be  taxed,  partlv  owing  to  the  inquisitorial  nature  ot  the 
tax  itself  and  partlv  from  the  nature  of  such  property.  But  is  it  meant  that  the 
officer  on  half  pav  should  contribute  to  the  tax,  and  that  the  physician  of  £9,000  or 
£10,000  a  vear  should  not?  You  sav  that  terminable  annuities  ought  not  to  pay  tlie 
same  rate  as  landed  proprietors ;  but  would  you  say  that  a  widow  who  has  a  join- 
ture, a  fixed  sum  per  annum,  which  terminates  with  her  life,  would  you  say  tliat  she 
should  pav  the  same  amount  ?  .  .  .  .     ■,    ,  '^ 

Then,  'sir,  I  am  told  that  another  great  objection  to  this  tax  is  that  it  encourages 
perjurv  and  fraud  ;  but  I  should  like  to  know  what  is  the  tendency  of  indirect  taxa- 
tion. 'I  should  like  to  know  what  is  the  tendency  of  excise  duties  I  shouM  like  to 
know  what  is  the  tendencv  of  all  tbe  excise  regulations  as  to  distilleries,  laxation, 
I  take  it,  is  inevitable.  Taxes  we  must  have.  Sir,  I  perfectly  agree  with  the  hon- 
orable and  learned  member  for  Bath  that  nothing  can  be  more  Irivolous  or  absurd 
than  the  extreme  sensitiveness  as  to  what  a  man's  income  may  be.  1  believe  tliat  a 
very  good  estimate  is  usually  formed  of  the  state  of  men's  circumstances  by  those 
who  care  about  inquiring  into  other  men's  property  and  the  state  of  their  credit. 


302  SPEECHES  AND  REPORTS   OF  JOHN   SHERMAN. 

.  .  .  And  as  to  the  terrors  of  tlie  inquisition  wliich  I  propose  into  men's  private 
affiiirs,  it  is  mere  folly,  if  men  will  only  iict  lionestly  and  make  bona  Jideretuvuii.  .  .  . 

For  my  own  part,  I  entertain  a  liifriier  opinion  of  tlie  intcf^rity  and  fair  dealing 
of  the  people  of  this  eoiintry  than  to  suppose  tliat  an  advantaire  of  such  an  amouDt 
as  £2  18s.  in  the  £iOO  could  operate  as  a  temptation  to  perjury  and  fraud. 

The  measure  which  1  now  propose  is  founded  on  reason  and  justice. 

Again,  Sir  Kobert  Peel  said  tliat  "  a  tax  upon  income  M-as  tlie  basis 
of  his  financial  policy,  and  be  meant  to  defend  that  princii)le  to  the 
utmost." 

On  this  occasion  the  income  tax  was  again  renewed  at  three  per 
cent. ;  and  from  that  time  to  this,  a  period  now  of  nearly  thirty  years, 
the  income  tax  has  been  retained  by  a  vote  of  Parliament,  renewed 
from  time  to  time,  and  is  now  a  part  of  the  fixed  financial  policy  of 
Great  Britain.  Sir,  it  was  the  income  tax  imposed  at  the  time  by  the 
proposition  of  Sir  Robert  Peel  that  enabled  England  to  repeal  her  corn 
laws,  her  tax  on  food.  It  was  the  beginning  of  the  great  prosperity  she 
has  had  for  the  last  twenty  years.  This  tax  was  carried,  as  I  said  be- 
fore, in  the  House  of  Lords,  and  in  the  Ilonse  of  Commons,  where 
every  member  represented  property  rather  than  persons,  and  all  the 
members  of  which  were  elected  hy  about  one  million  voters,  instead  of 
as  in  this  country,  where  we  have  seven  million  voters. 

My  honorable  friend  from  California  referred  me  the  other  day  to 
Sir  Pobert  Peel  and  Mr.  Gladstone  as  being  against  the  income  tax ; 
and  yet  they  have  supported  it  and  maintained  it.  Sir  Robert  Peel 
and  Mr.  Gladstone,  being  at  the  head  of  the  British  Government  in 
different  periods  of  time,  have  sustained  it  throughout.  I  have  here 
copious  extracts  from  speeches  made  by  Mr.  Gladstone  on  the  subject. 
In  the  debate  in  the  House  of  Commons  on  the  23d  of  May,  1853,  Mr. 
Gladstone  said : 

I  only  wish  to  remind  the  committee  that  the  main  objects  which  the  Govern- 
ment have  in  view  in  proposing  the  renewal  of  the  income  tax  for  a  considerable 
time  are  these  two  :  in  the  tirst  place,  to  give  stability  to  our  system  of  linance  ;  and 
in  the  second  place,  to  put  the  tax  upon  such  a  footing,  and  so  regulate  its  provisions 
by  a  progressive  descent  of  the  rate,  as  may  bring  it  to  a  point  in  which  it  will  prob- 
ably be  in  the  power  of  Parliament  to  part  with  it  altogether,  if  so  disposed. 

Speaking  of  the  inequality  of  the  income  tax,  he  said  : 

In  the  main  I  admit  what  is  stated  with  respect  to  those  inequalities.  I  think, 
however,  that  upon  a  minute  and  careful  examination  we  shall  find  that  other  taxes 
have  likewise  many  gross  inequalities  in  their  operation,  which,  however,  are  veiled 
and  concealed  in  a  very  considerable  degree,  while  those  of  the  income  tax  have, 
at  any  rate,  the  merit  of  being  tolerably  patent  on  an  examination  of  the  case. 

Mr.  Gladstone  again  said,  as  to  the  idea  that  an  equal  rate  of  income 
tax  is  unjust : 

I  have  always  felt  that  that  sentiment  is  not  supported  by  reason ;  and  such  has 
been  the  opinion  of  much  greater  men  who  have  had  to  deal  with  this  tax. 

Mr.  Gladstone,  on  the  23d  of  April,  1863,  speaking  on  a  resolution 
to  the  effect  that  the  tax  on  precarious  incomes  should  be  lower  than 
that  on  permanent  incomes,  said : 

If  a  man  is  not  able  to  pay  his  income  tax,  neither  can  he  afford  the  duty  on  tea 
and  sugar.  The  two  stand  exactly  on  the  same  footing,  and  the  same  argument  ap- 
plies to  each.     The  tax  is  objectionable  because  it  leads  to  fraud,  a  charge  which,  I 


KECEIPTS  AXD  EXPENDITURES.  3O3 

am  sorry  to  say,  experience  convinces  me  can  not  be  exaggerated  in  its  gravity  and 
extent.  But  with  all  these  disadvantages  it  is  after  all  a  tax,  as  the  country  feels, 
which  is  founded  on  principle ;  and  the  fact  that  it  has  existed  so  long  with  equal 
rates  is  of  itself  a  great  advantage. 

Two  committees  of  the  House  of  Commons,  one  in  1850  and 
another  in  1861,  who  spent  a  long  time  in  investigations  of  proiDosi- 
tions  for  amending  the  income-tax  law,  made  no  report,  having  con- 
cluded that  the  law  as  it  stood  was  as  good  a  one  as  could  be  framed. 

In  1864  the  House  of  Commons  voted  down  the  following  resolu- 
tion : 

Besohed,  That  the  inequalities  and  injustice  attending  the  operation  of  the  ex- 
isting property  and  income  tax  disqualify  it  for  being  continually  reimposed  in  its 
present  form  as  one  of  the  means  for  levying  the  national  revenue. 

The  present  Chancellor  of  the  Exchequer,  Hon.  R.  Lowe,  said  in 
the  House  of  Commons,  March  16,  1869  : 

The  real  evil  of  the  income  tax,  in  my  judgment,  is  not  that  it  is  levied  in  a  par 
tial  manner  on  land  or  realized  property  or  profits  of  trade,  but  that,  from  the 
necessity  of  the  case,  persons  having  such  income  as  tiiat  included  in  schedule  D  are 
judges  in  their  own  cause,  and  that  this  in  many  instances  holds  out  a  temptation  to 
those  persons  to  give  too  favorable  an  interpretation  of  tlie  amount  of  their  liability. 
But  to  say  that  there  is  an  objection  to  income  tax  is  only  to  say  that  tliis  tax  is  "a 
tax  ;  for  the  ingenuity  of  the  human  mind  never  did  and  never  will  devise  a  tax  to 
which  there  are  not  objections  more  than  plausihle,  and  which  would  be  absolutely 
convincing  and  irresistible  if  taxation  were  not  a  necessity. 

Again,  in  presenting  to  the  House  of  Commons  the  budget  on 
Monday,  April  11,  1870,  he  said : 

I  have  received  many  deputations  respecting  the  income  tax,  and  I  concede  that 
a  good  deal  may  be  said  against  this  tax ;  but  as  I  am  not  prepared  witli  a  substi- 
tute for  it,  I  must  continue  the  tax  at  such  a  moderate  rate  as  will  make  it  tolerable 
to  those  who  pay  it,  preferring  to  give  them  a  little  uneasiness  and  discomfort  rather 
than  to  strike  out  so  great  and  useful  a  branch  of  revenue. 

I  might  also  read  from  various  writers  on  political  economy  on  this 
subject,  John  Stuart  Mill  among  the  rest.  In  the  second  volume  of 
his  "  Political  Economy,"  page  398,  speakmg  of  the  conditions  neces- 
sary for  making  this  tax  consistent  with  justice,  he  says  : 

1.  That  incomes  below  a  certain  amoimt  should  be  altogether  untaxed. 
We  exempt  $1,000. 

2.  That  incomes  above  the  limit  should  be  taxed  only  in  proportion  to  the  sur- 
plus by  which  they  exceed  the  limit. 

We  allow  the  same  deduction  of  $1,000  from  all  incomes. 

3.  That  all  sums  saved  from  income  and  invested  should  be  exempt  from  tax. 

That  also  is  provided  for  in  our  proposition.     Then  he  proceeds  : 

An  income  tax  fiurly  assessed  on  these  principles  would  be,  in  point  of  justice, 
the  least  exceptionable  of  all  taxes.  The  objection  to  it  in  the  present  low  state  of 
public  morality  is  the  impossibility  of  ascertaining  the  real  incomes  of  the  con- 
tributors. The  supposed  hardship  of  compelling  people  to  disclose  the  amount  of 
their  incomes  ought  not,  in  my  opinion,  to  count  for  umch.  .  .  .  Notwithstanding, 
too,  what  is  called  the  inquisitorial  nature  of  the  tax,  no  amount  of  inquisitorial 
power  which  would  be  tolerated  by  a  people  the  most  disposed  to  submit  to  it  could 
enable  the  revenue  officers  to  assess  the  tax  from  actual  knowledge  of  the  circum- 
stances of  contributors. 


304  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

Here  we  have  the  te.stiinoiiy  oi  tliis  distinguished  writer  on  politi- 
cal econoniy,  broadly  in  lavur  of  the  continuance  of  the  income  tax  ; 
and  he  has  repeatedly,  as  a  member  of  the  House  of  Commons,  voted 
for  it. 

But,  to  come  back  to  some  of  our  own  authors,  Mr.  Amasa  Walker, 
lecturer  on  political  e('f)noiny  in  Anihcrst  College,  has  written  a  very 
good  work  on  the  "  IScience  of  AVcaltli,''  in  which  he  says,  at  piige 
322: 

It  is  iinneoessary  to  say  tliat  this  tax  is  in  perfect  acconlanco  with  tlio  first 
maxim  laid  down  by  Adam  Siuitli,  '*  that  evi'ry  man  slioiild  he  taxed  aeeonlinp  to 
the  revenue  he  derives  under  the  State,"  and  also  consistent  with  every  other  prin- 
ciple we  liave  stated.  It  is  "  clear  and  plain '' to  tlie  contrihiitor  and  every  other 
person.  The  income-tax-payer  knows  wlan  and  how  nnieh  he  pays,  and  it  can  be 
collected  as  conveniently  and  economically  as  any  other.  ...  Of  nil  modes  of 
taxation  this  is  the  most  jnst  and  etpiitalde.  Every  man  can  atford  to  pay  according 
to  his  income,  and  ou^lit  to  i\o  so.  There  is  no  otiier  perfect  standard  of  taxation; 
none  other  wliich  does  not  inflict  more  or  less  hardship  and  injustice.  .  .  .  Were 
it  to  supersede  all  other  forms  of  taxation,  perfect  e<|uality  would  bo  established. 
Property  and  labor  would  bear  each  its  just  share  of  the  public  burdens. 

Sir,  if  we  could  devise  a  system  of  taxation  that  levied  npon  the 
aggregate  income  of  all  the  people  of  the  United  States  a  fair  and 
rightful  tax,  it  would  be,  as  Mr.  Walker  says,  the  best  of  our  taxes. 
lie  says  further : 

The  objection  to  tliis  form  of  taxation  is  the  difficulty  of  ascertaining  what  a 
person's  actual  income  is.  In  the  first  jdace,  it  is  said  tliat'many  do  not  know  their 
own  afl^iiirs  so  as  to  be  able  to  state  their  true  income.  There  is  doubtless  much  of 
truth  in  this;  but  the  very  fact  that  such  a  tax  is  certain  to  be  enforced  every  year 
will,  in  a  short  time,  remove  tliis  ditficulty  to  a  considerable  extent,  because  men 
will  be  compelled  so  to  keep  their  accounts  as  to  know  what  they  gain  or  lose.  The 
operation  of  the  law  in  tliis  respect  therefore  is  favorable  to  private  interest.  .  .  . 
Secondly,  it  is  said  that  some  men  will  be  dishonest  in  their  disclosures  and  state- 
ments, and  therefore  a  correct  result  can  not  be  reached.  That  many  men  are  dis- 
honest there  can  be  no  doubt;  but  when  the  law  taxing  incomes  is  regularly  en- 
forced from  year  to  year,  the  difficulty  of  concealment  on  the  part  of  the  tax-payer 
is  constantly  increasing.  His  neighbors  and  competitors  in  business  Iiave  an  eye 
upon  him  if  they  believe  he  is  making  false  statements,  and  lie  can  not  long  escape 
detection.  .  .  .  The  immense  difference  between  the  reported  incomes  of  the 
United  States  in  186-1  and  those  of  1863,  even  after  .'illowing  for  the  general  rise  of 
prices,  serves  to  give  an  idea  of  the  advance  that  will  naturally  be  made  in  the  ap- 
plication of  the  income  tax. 

And  I  may  say  here  that  under  the  same  law  every  year  the  income 
tax  is  increasing,  although  the  actual  income  of  the  country  is  dimin- 
ishing. Every  year  that  the  law  is  enforced  we  are  getting  nearer  to 
an  accurate  income  tax. 

Mr.  Walker  says  further  : 

The  third  objection  made  is  that  men  do  not  always  like  to  have  their  incomes 
known.  But  why  should  they  not  ?  We  have  already  said  that  in  the  matter  of 
taxation  all  are  copartners,  having  a  pro  rata  interest;  what  one  does  not  pay  an- 
other must.  All  therefore  may  rightfully  demand  such  information  as  shall  furnish 
the  means  of  assessing  a  correct  tax.  .  .  . 

Our  purpose  is  to  show  that  so  far  as  practicable  it  (the  income  tax)  is  the  most 
just  and  economical  mode  of  raising  a  revenue. 

Under  the  head  of  "  State  Taxation,"  Mr.  Walker  says : 


RECEIPTS  AND  EXPENDITURES.  305 

That  much  hardship  may  often  result  from  taxing  credits  as  well  as  property  is 
undoubtedly  true ;  but  that  only  atiurds  additional  evidence  that  the  income-tax 
principle  is  the  only  correct  one. 

And  again  : 

The  income-tax  principle,  if  universally  adopted,  while  it  would  doubtless  re- 
lieve poll-tax-payers  of  their  present  taxation,  would  at  the  same  time  bring  their 
interests  into  harmony  with  those  of  property-tax-payers,  and  thus  promote  the 
general  welfare  of  the  public. 

I  mi^lit  also  read  from  anotlier  author,  a  citizen  of  Massachusetts, 
Mr.  A.  L.  Perry,  professor  in  AV'illiams  College,  who  says,  in  his  "  Po- 
litical Economy,"  page  4-t-i  : 

An  income  tax,  if  the  exact  amount  of  income  could  in  all  cases  be  ascertained, 
would  be  a  perfectly  unexceptionable  lorm  of  taxation. 

Again  : 

The  income  law  at  present  in  force  in  the  United  States  has  perhaps  been 
subject  to  less  complaint  tiian  the  manufacturers'  tax  and  other  forms  of  indirect 
taxation  ;  and  it  is  becoming  more  and  more  productive  every  year,  as  the  forms 
are  perfected. 

Mr.  President,  if  Congress  now  repeals  the  only  tax  that  rests  upon 
property,  the  only  tax  that  is  drawn  from  the  income  of  the  rich,  if  we 
higgle  about  the  tax  that  is  paid  by  the  273,000  people  who  pay  our 
income  tax,  and  yet  keep  upon  the  people  the  taxes  u]Ktn  their  pales, 
the  special  taxes  upon  their  enjpkivments,  and  all  the  burdens  that  now 
rest  upon  every  article  consumed  by  the  poor,  it  will  be  a  eorry  spec- 
tacle. An  English  Parliament,  when  appealed  to  under  circumstances 
much  less  dithcult,  maintained*for  twenty  years  in  war  a  tax  approach- 
ing ten  per  cent,  on  incomes.  Afte^r  the  Avar  was  over  they  tried  the 
other  policy.  They  then  renewed  the  tax,  and  levied  it  at  the  rate  of 
from  one  to  three  or  four  ])er  cent,  for  nearly  thirty  years  more.  And 
now,  M'hen  we  are  paying  §3<>,000,000  to  our  pensioners,  when  we  are 
paying  $126,000,000  as  interest  upon  the  public  debt,  to  complain  of  a 
tax  of  three  per  cent,  upon  incomes  above  §il,000,  on  the  ground  that 
it  is  inquisitorial,  unjust,  and  unequal,  does  not  speak  well  for  the 
patriotism  of  those  who  do  it. 

Most  of  the  daily  papers  in  the  country  seem  to  be  united  in  ihe 
general  complaint  against  the  income  tax.  It  is  a  good  evidence  that 
they  are  doing  well  and  paying  well,  and  they  ought  to  be  willing  to 
pay  their  jjortion  of  the  tax. 

I  repeat  that  the  maintenance  of  the  income  tax  is  an  absolute 
necessity  for  any  system  of  internal  taxes.  If  the  Senate  and  House 
determine  after  full  consideration  to  repeal  the  income  tax,  I  shall 
favor  the  repeal  of  all  the  taxes  upon  consumption  that  bear  uj)on  the 
great  masses  of  the  people.  If  I  had  my  way,  I  would  retain  the  in- 
come tax  at  five  per  cent,  on  all  incomes  above  81,000,  making  such 
modifications  as  would  afford  the  proper  exemptions,  and  then  throw 
off  these  taxes  upon  consumption  that  oppress  the  poor,  and  take  cop- 
pers out  of  the  dollars  of  people  who  earn  them  by  their  daily  work. 

Complaints  have  been  received  from  widows  and  children  whose 
incomes  are  less  than  $1,000,  who  have  had  to  pay  an  income  tax  upon 
20 


306  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

the  dividends  and  interest  received  from  their  stocks  and  bonds.  Now, 
the  operation  of  the  hi w  in  this  resi3eet  is  unjust,  and  ought^  to  be  cor- 
rected by  the  proposed  measure.  The  operation  of  the  income  tax 
upon  Government  employees  is  unjust,  because  it  does  not  put  their 
income  on  the  same  footing  as  other  incomes.  The  income  derived 
from  corporations  is  now  subject  to  tax  without  the  deductions  allowed 
to  other  incomes.  Why  is  that  ?  It  is  because  it  is  more  convenient 
for  the  Govermnent  to  collect  the  tax  from  corporations,  and  yet  in 
that  way  we  do  levy  an  income  tax  u])on  the  income  of  the  widow  and 
the  poor  derived  from  corporations,  and  do  an  injustice.  If  the  Senate 
is  willing  to  go  that  fai*,  1  should  be  very  glad  to  see  this  corrected, 
and  to  allow  all  incomes,  whether  derived  from  corporations  or  from 
interest  on  bonds,  to  go  into  the  treneral  income  retuni  and  to  be  col- 
lected directly  from  the  person  who  receives  it,  giving  all  an  equal  ex- 
emption. 

It  is  proposed  in  the  House  bill  to  increase  the  exemption  from 
$1,000  to  $1,500.  I  do  not  think  that  is  right.  It  may  be  popular. 
There  are  now  270,000  people  who  pay  income  tax.  If  the  exemp- 
tion is  raised  to  $1,500,  only  about  170,000  will  pay  the  tax,  and  100,- 
000  people  will  probably  be  relieved  from  it.  I3ut  should  they  be  ? 
Is  it  just  ?  Is  it  right  i  There  is  no  reason  for  any  exemption,  except 
the  fact  that  the  incomes  of  those  who  receive  less  than  $1,000  per 
annum  are  necessary  for  their  daily  wants.  They  pay  taxes  on  con- 
sumption which  fully  make  up  their  share.  When  you  go  above 
$1,000  you  reach  a  region  where  persons  are  "  passing  rich,''  as  Gold- 
smith's vicar  says,  ''  on  £40  a  year."  They  are  independent  when 
they  have  $1,000  net  income,  after  paying  taxes  and  after  deducting 
the  exemptions  provided  by  the  income  law.  I  do  not,  therefore,  see 
any  justice  in  raising  the  exemption,  although  I  can  see  it  would  be 
very  popular  with  the  hundred  thousand  well-to-do  people  who  would 
thus  be  relieved,  throwing  the  whole  burden  upon  those  who  are  of 
the  wealthier  class. 

If  the  income  tax  is  maintained  at  the  rate  proposed  by  the  Com- 
mittee, of  three  per  cent,  on  all  incomes  al)ove  81,000,  including  in- 
comes derived  from  corporations  and  from  all  other  sources,  the  people 
will  gradually  become  accustomed  to  the  tax,  and  those  who  are  called 
upon  to  pay  it  will  pay  it  cheerfully.  It  will  be  a  mode  of  equalizing 
incomes  from  different  som-ces,  and  will  yield  us  from  thirty  to  forty 
million  dollars  annually,  probably  enough  to  pay  the  pensioners  who 
are  now  dependent  upon  our  bounty. 

I  have  thus  stated,  I  know  very  imperfectly,  the  general  ideas  that 
influenced  the  Committee  on  Finance  in  reporting  this  bill.  The  sub- 
stance of  the  whole  is  contained  in  the  table  which  has  been  laid  on 
the  desks  of  Senators,  and  which  I  vrill  add  to  my  remarks.  We  pro- 
pose to  repeal  about  two  thirds  of  the  number  of  internal  taxes,  leav- 
ing nothing  but  the  taxes  on  wliisky,  tobacco,  fennented  liquoi-s,  in- 
come, and  stamps  ;  repealing  all  the  rest,  and  modifying  the  income 
tax  and  reducing  it  $14,000,000.  This  will  leave  in  force  about  one 
hundred  and  fifteen  millions  of  internal  revenue,  which  will  be  ample, 
with  the  amount  we  collect  from  the  duties  on  imported  goods,  to 


COINAGE  LAWS.  307 

carry  on  the  operations  of  the  Government,  pay  the  sinking  fund,  and 
leave  ns  a  surplus  of  from  twenty-five  to  thirty  millions  annually. 

This  is  margin  enough  for  an  equal  reduction  in  other  taxes  during 
the  next  session  of  Congress,  and  this  process  of  reduction  will,  I 
trust,  continue  until  all  the  burdens  of  the  w^ar  are  lifted  from  the 
industry  of  our  people  ;  and  all  that  will  be  left  of  a  painful  stniggle 
will  be  tlie  increased  strength  and  power  and  glory  of  our  country, 
compared  with  its  condition  before  the  war,  when  internal  faction  con- 
tinually threatened  its  overthrow. 


COINAGE  LAWS. 

7iV  THE  SENATE,  JANUARY  9,  1S71. 

The  bill  (S.  No.  859)  revising  tlie  laws  relative  to  tne  mints,  assay  ofiBces,  and 
coinage  of  the  United  States,  being  before  the  Senate  as  in  Committee  of  the  Whole, 
on  the  amendment  of  the  Committee  on  Finance  to  charge  three  tenths  of  one  per 
cent,  for  coinage,  Mr.  Sherman  said  : 

On  a  question  of  this  kind,  which  involves  rather  a  matter  of  busi- 
ness detail,  it  is  somewhat  ditheult  to  secure  the  attention  of  the  Sen- 
ate, but  I  hope  I  shall  secure  it  sufficientlv  to  show  that  tliis  amend- 
ment is  vital  to  the  passage  of  this  bill.  Without  this  amendment  I 
certainly  would  not  vote  for  it,  and  I  imagine  that  a  majority  of  the 
Senate  would  not  if  they  understood  the  subject  as  thoroughly  as  most 
of  the  Committee  on  Finance,  who  have  examined  it. 

The  original  bill,  introduced  by  me  at  the  last  session  of  Congress, 
retained  the  old  mintage  charge  of  one  lialf  of  one  per  cent,  on  the 
gold  coin  of  the  United  States.  That  bill  was  submitted  to  all  the 
experts  of  the  United  States  on  the  subject  of  mintage,  and  received 
the  hearty  approval  of  nearly  every  one  of  them,  and  generally  (I  think 
without  any  exception  but  the  officers  of  the  mint  in  San  Francisco) 
they  were  in  favor  of  retaining  the  minting  charge,  as  it  is  called.  I 
have  before  me  the  testimony  of  Mr.  Patterson,  who,  I  presume,  is 
regarded  as  the  best  expert  in  the  United  States  in  the  minting  busi- 
ness, and  he  speaks  of  the  retention  of  the  mintage  charge  in  the  bill 
introduced  at  the  last  session  of  Congress  in  these  w^ords  : 

The  present  one  half  per  cent,  coinage  charge  is  retained.  The  only  mint  where 
coinage  is  free  is  the  British,  and  the  political  economists  and  statesmen  are  so 
unanimous  in  recommending  a  seigniorage  that  the  Chancellor  of  the  Exchequer 
proposes  to  introduce  it  into  Great  Britain.  It  would  be  strange  if  we,  by  retro- 
grading, while  she  is  advancing,  should  become  the  solo  exemplars  of  an  exploded 
system.  It  would,  in  view  of  an  international  coinage,  be  especial 'y  inopportune 
to  abandon  a  seigniorage,  for  it  is  recognized  on  all  hands  tliat  under  such  a  code 
there  must  be  a  tax,  and  a  uniform  tax  for  coinage.  (See  section  25  of  revised  bill ; 
also  Enghsh  coinage  act,  1879,  section  8,  Stnate  Miscellaneous  Document  132,  Forty- 
first  Congress,  second  session,  page  34.) 

The  theory  of  the  coinage  charge  is  this:  that  every  process  of 


308  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

minting  should  be  self-sustaining ;  that  the  mints  of  the  United  States 
are  established  for  the  benefit  of  the  people,  to  stamp  the  coin,  and 
that  the  owners  of  the  metal  whicli  is  coined  should  pay  the  expense 
of  minting.  Tliat  has  been  the  theory  upon  which  the  Mint  of  the 
United  States  has  always  existed,  and  the  theory  that  has  been  adopted 
also  in  every  other  country  except  Great  Britain,  wliere  it  was  departed 
from  for  a  special  reason.  Therefore,  in  the  original  bill  introduced 
last  session,  the  mintage  charge  was  maintained  at  one  half  of  one 
per  cent. 

In  the  amended  bill,  which  was  sent  to  us  by  the  Department  after 
examination,  this  mintage  charge  was  omitted  ;  not  for  the  purpose  of 
expressing  an  opinion  against  the  mintage  charge,  but  for  the  purpose 
of  submitting  that  question  again  to  the  Committee  on  Finance  and 
the  Senate  of  the  United  States.  The  Committee  on  Finance,  after  a 
careful  consideration  of  the  question,  decided  to  restore  it,  but  to 
reduce  it  to  three  tenths  of  one  per  cent.,  for  the  following  reason : 
Under  the  old  system,  when  tlie  amount  of  gold  coinage  was  nmch  less 
than  it  is  now,  the  expense  of  coining  gold  was  about  one  half  of  one 
per  cent.,  and  therefore  for  many  years  the  mintage  charge  was  retained 
at  that  rate ;  but  now,  on  account  of  the  largely  increased  quantity  of 
gold  to  be  manufactured  into  coin,  and  also  on  account  of  the  cheapen- 
ing of  the  various  processes  of  the  Mint,  the  cost  of  minting  is  much 
less.  I  ascertained  as  nearly  as  possible  the  actual  cost  of  converting 
standard  bars  into  gold  coin,  and  the  concurrent  testimony  of  nearly 
all  is  that  it  is  about  three  tenths  of  one  per  cent.  At  that  rate  we 
propose  to  leave  the  mintage  charge. 

Mr.  President,  there  are  two  questions  that  must  be  considered  in 
deciding  this  matter  :  first,  a  question  of  revenue.  It  is  proposed  now 
by  the  Senator  from  California  that  the  wliole  expense  of  the  Mint,  as 
far  as  gold  coinage  is  concerned,  sliall  be  thrown  on  the  Government 
of  the  United  States  ;  that  the  owners  of  the  gold,  whose  property  is 
to  be  benefited  by  passing  through  the  Mint,  shall  bear  no  portion 
of  it. 

As  a  question  of  revenue,  I  submit  to  you,  sir,  whether,  when  wc 
are  taxing  almost  everything  that  is  consumed,  when  our  system  of 
taxation  has  extended  further  than  ever  before,  it  is  now  wise  to 
abolish  a  charge  which  yields  us  at  the  present  rate  $150,000  a  year, 
and  which  will  yield  us  at  the  rate  proposed  by  this  amendment  about 
one  hundred  thousand  dollars  a  year  ?  Is  it  worth  while  for  us  now, 
when  we  are  seeking  objects  of  taxation,  to  do  this  duty  without  any 
charge  whatever,  and  thus  render  it  necessary  to  make  up  the  defi- 
ciency of  revenue  from  other  sources  ? 

But  this  is  not  all.  It  must  be  viewed  as  a  question  of  political 
economy.  Now,  as  a  question  of  political  economy,  the  testimony  in 
its  favor  is  overwhelming.  I  could  produce  here  every  writer  on 
political  economy  in  England  and  in  the  United  States  to  show  that 
the  coinage  charge  is  defensible  and  it  is  maintained  by  every  one  of 
them  as  j)roper  in  itself.  The  general  proposition  may  be  made  that 
the  Government  ought  not  to  confer  additional  value  upon  the  prop- 
erty of  individuals  without  receiving  compensation.      This    Govern- 


COINAGE  LAWS.  309 

ment  is  not  established  for  the  purpose  of  promoting  the  interests  of 
private  individuals  simply,  and  the  mintage  system  is  not  established 
for  the  mere  purpose  of  inducing  people  to  go  into  the  manufacture  or 
digging  of  gold.  The  mints  are  established  for  the  purpose  of  secur- 
ing the  coin  of  the  country  from  debasement  and  deterioration ;  and 
we  charge  to  those  persons  whose  coin  is  stamped  with  our  insignia 
only  the  mere  cost  of  the  process,  seeking  to  make  no  money  out  of 
them,  but  not  giving  them  a  benefit  at  the  expense  of  the  people  of 
the  United  States. 

No  country  in  the  world  has  ever  established  a  system  of  free  coin- 
age but  England,  and  England  has  maintained  it  for  one  hundred  and 
fifty  3'^ears  against  the  judgment  of  every  writer  on  political  economy 
that  has  written  during  that  time  ;  and  within  the  last  year  a  proposi- 
tion has  been  made  in  Parliament  to  restore  the  charge  on  coinage, 
which  has  been  postponed  for  the  present  on  the  ground  that  negotia- 
tions are  in  progress  to  establish  an  international  coinage,  on  the  estab- 
lishment of  which  all  nations  will  probablv  adopt  a  common  rule  of 
seigniorage.  I  have  here  the  debates  in  Parliament  a  year  ago  last 
summer  on  this  subject.  The  Chancellor  of  the  Exchequer,  Mr.  Lowe, 
in  referring  to  the  peculiar  position  of  England  on  the  subject,  quotes 
the  opinions  of  several  well-known  writers  on  political  economy  ;  and 
I  will  read  some  of  them.     Sir  Dudley  North  says  : 

The  free  coinage  13  a  perpetual  motion  found  out,  whereby  to  melt  and  coin 
■without  ceasing,  and  so  to  feed  goldsmiths  and  coiners  at  the  public  charge. 

Adam  Smith,  the  founder  of  the  science  of  political  economy,  says  : 

When  the  tax  upon  a  commodity  is  so  moderate  as  not  to  encourage  smuggling, 
the  merchant  who  deals  in  it,  though  he  advances,  does  not  properly  pay  the  tax, 
as  he  gets  it  back  in  the  price  of  the  commodity.  The  tax  is  finally  paid  by  the  last 
purchaser  or  consumer.  But  money  is  a  commodity  with  regard  to  which  every 
man  is  a  merchant.  Nobody  buys  it  but  in  order  to  sell  it  again,  and  with  regard  to 
it  there  is  in  ordinary  cases  no  last  purchaser  or  consumer.  When  tlie  tax  upon  coin- 
age, therefore,  is  so  moderate  as  not  to  encourage  false  coining,  tliough  everybody 
advances  the  tax,  nobody  finally  pays  it,  because  everybody  gets  it  back  in  the  ad- 
vanced value  of  the  coin. 

Our  mintage  charge  is  simply  the  net  cost  of  the  process,  no  more. 
Again,  Adam  Smith  says  : 

The  Government,  when  it  defrays  the  expense  of  coinage,  not  only  incurs  some 
small  expense,  but  loses  some  small  revenue,  which  it  might  get  by  a  proper  duty; 
and  neither  the  bank  nor  any  other  private  persons  are  in  the  smallest  degree  bene- 
fited by  this  useless  piece  of  public  generosity. 

So  Mr.  McCuUoch,  a  well-known  English  writer  on  political  econ- 
omy, says : 

Coins  charged  with  a  seigniorage  equal  to  the  expense  of  coinage  do  not  pass  at 
a  higher  value  than  what  naturally  belongs  to  them,  but  at  that  precise  value ; 
whereas,  if  the  expense  of  coinage  be  defrayed  by  the  State,  coins  pass  at  less  than 
their  real  value. 

Because  it  only  passes  at  the  value  of  bullion. 

A  sovereign  is  of  greater  utility  and  value  than  a  piece  of  pure  unfashioned  gold 
bullion  of  the  same  weight ;  because,  while  it  is  as  well  fitted  as  bullion  for  being 
used  in  the  arts,  it  is,  owing  to  the  coinage,  better  adapted  for  being  used  as  money, 


310  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

or  in  the  exchange  of  commodities.  On  what  principle,  then,  should  Government 
decline  to  charge  a  seigniorage  or  duty  on  coins  equal  to  the  expense  of  coinage ; 
that  is,  to  the  value  which  it  adds  to  the  coins  ? 

Ricardo  expresses  his  opinion  in  still  stronger  terms.  So  Mr.  Mill, 
in  liis  "Principles  of  Political  Economy,''  at  great  length  comments 
upon  it.     I  will  read  a  short  extract  from  Mr.  Mill : 

If  Government,  however,  throws  the  expense  of  coinage,  as  is  reasonable,  upon 
the  holder,  by  making  a  charge  to  cover  the  expense  (which  is  done  by  giving  back 
rather  less  in  coin  than  has  been  received  in  bullion,  and  is  called  levying  a  seignior- 
age), the  coin  will  rise  to  the  extent  of  the  seigniorage  above  the  value  of  the  bul- 
lion. If  the  mint  kept  back  one  per  cent,  to  pay  the  expense  of  coinage,  it  would 
be  against  the  interests  of  tlie  holders  of  bullion  to  have  it  coined  until  the  coin  was 
more  valuable  than  the  bullion  by  at  least  that  fraction.  The  coin,  therefore,  would 
be  kept  one  per  cent,  higher  in  value,  which  could  only  be  by  keeping  it  one  per 
cent,  less  in  quantity  than  if  its  coinage  were  gratuitous. 

So  I  might  go  on  through  the  whole  catalogue.  "While  England  is 
the  only  nation  which  has  ever  coined  the  gold  of  private  individuals 
at  the  expense  of  the  public,  every  writer  on  political  economy  in  Eng- 
land has  always  denounced  the  system  as  unwise ;  and  Mr.  Lowe  says 
that  when  international  coinage  is  accomplislied  Great  Britain  will  un- 
doubtedly charge  the  same  seigniorage  that  is  charged  by  other  nations. 
In  France  the  seigniorage  is  one  fourth  of  one  per  cent. ;  in  Germany  it 
is  rather  more  tlian  our  own  ;  it  varies  in  different  countries,  depending 
on  the  cost  of  minting ;  and  we  propose  now  to  reduce  the  coinage 
charge  from  one  half  to  three  tenths  of  one  per  cent. 

Mr.  President,  what  do  we  gain  by  throwing  away  this  revenue  ? 
Kotliing  whatever.  Suppose  we  convert  all  the  bullion  made  in  the 
United  States  into  coin,  into  twenty-dollar  gold  pieces,  and  it  is  put  up 
in  packages  and  exported  in  coin  instead  of  in  bullion,  do  we  gain  any- 
thing ?  \¥lien  it  reaches  Great  Britain  it  at  once  goes  to  the  mint 
there  and  is  melted  into  English  sovereigns,  and  we  gain  nothing ;  but 
we  lose  our  labor.  When  bullion  is  changed  into  coin,  its  exporta- 
tion is  not  prevented ;  it  is  more  convenient  to  export ;  and  the  very 
object  wtich  the  Senator  from  California  wishes  now  to  attain  is  de- 
feated by  his  proposition.  He  says  he  wishes  to  prevent  our  gold  coin 
from  being  exported.  "Well,  sir,  if  he  makes  the  gold  into  coin  with- 
out cost,  so  that  it  represents  simply  the  value  of  so  much  bullion,  it 
will  be  exported  in  coin  and  will  be  remelted  in  foreign  mints,  because 
foreign  coin  never  passes  current  at  its  full  value ;  the  United  States 
will  therefore  lose  the  expense  of  coinage  of  this  bullion  Mathout  bene- 
fiting any  one.  It  is  no  advantage  to  us  to  give  additional  value  to 
gold  coin  to  be  exported,  and  remelted  in  the  mints  of  foreign  coun- 
tries. We  get  the  full  value  of  the  gold  in  our  foreign  commerce  when 
it  is  exported  in  the  form  of  bullion,  and  to  convert  it  into  coin  will 
not  prevent  its  going  abroad.  On  the  contrary,  the  charge  that  we 
make  for  minting  prevents  it  from  going  abroad,  because  it  makes  the 
coin  a  little  more  valuable  than  bullion.  The  United  States,  in  assay- 
ing gold,  charges  for  the  expense  of  assaying  and  refining  gold.  This 
very  bill  provides  that  from  time  to  time  the  Secretary  of  the  Treasury 
shall  regulate  the  amount  of  these  expenses,  and  shall  charge  the  owners 
of  the  gold  deposited  with  the  net  cost.     We  propose  to  apply  the  same 


COINAGE  LAWS.  311 

rule  to  coinage  that  we  do  to  assaying  or  any  other  process  in  the 
Mint. 

I  do  not  think  it  is  necessary  for  me  to  pnrsue  this  argument.  The 
subject  has  been  critically  examined.  The  officers  of  the  mint  at  Phila- 
delphia, and,  as  far  as  I  know,  the  officers  connected  with  this  subject 
generally,  are  in  favor  of  retaining  this  charge,  except  only  the  officers 
of  the  mint  at  San  Francisco,  who  desire  to  enlarge  their  business  at 
the  expense  of  the  people  of  the  United  States. 

This  bill  has  been  carefully  framed.  It  considerably  increases  the 
expense  of  the  mints  of  the  United  States,  and  it  lowers  the  mintage 
charge.  I  believe,  on  the  whole,  it  is  a  careful  and  safe  revision  of  the 
mintage  laws ;  and  even  though  the  Senator  from  California  and  per- 
sons who  are  interested  in  the  question  are  not  satisfied  with  the  large 
benefits  conferred  on  their  particular  remon  by  its  terms,  I  do  not  think 
it  is  wise  for  the  people  of  the  United  States  to  assume  what  they  have 
never  assumed  heretofore,  the  expense  of  coinage.  The  mints  are  not 
entirely  self-supporting  under  the  present  law,  although  nearly  so,  and 
probably  will  not  be  under  this  Ijill ;  but  we  may  make  enough  profit 
in  coining  nickel  and  silver  to  cover  the  expenses  of  the  mints.  Further 
than  that  we  should  not  go. 

"We  do  not  caiTy  people's  letters  for  nothing,  althouo;li  that  would 
be  a  great  convenience  and  would  increase  the  number  of  letters  to  be 
carried.  We  do  not  coin  silver  without  charging  for  it ;  on  the  con- 
trary, we  get  a  profit  of  about  two  per  cent.,  and  on  the  nickel  coinage 
we  get  a  much  larger  profit.  We  do  not  propose  to  do  anything  for 
private  citizens  unless  we  are  reimlmrsed  for  the  expenses ;  and  there 
is  no  justice,  no  propriety  in  taxing  the  farmers  of  the  United  States, 
or  the  merchants  of  the  United  States,  or  the  people  of  the  United 
States  generally,  for  this  expense  of  one  hundred  or  one  hundred 
and  fifty  tliousand  dollars  for  maintaining  our  mints,  merely  for  the 
purpose  of  giving  a  fancied  benefit  to  the  diggers  of  gold  in  Cali- 
fornia. I  think  it  could  be  easily  demonstrated,  if  time  would  al- 
low and  the  interest  in  the  subject  would  justify  the  attempt,  that  the 
miners  themselves  would  not  receive  a  particle  of  benefit  from  this 
abolition  of  the  coinage  charge,  and  that  the  only  result  would  be  that 
all  the  gold  of  California  would  be  forced  into  the  Mint  of  the  United 
States,  there  to  go  through  an  expensive  process  at  the  cost  of  the  peo- 
ple, without  conferring  "on  it  any  additional  value  for  exportation  or 
use.  I  think  the  Senators  from  the  Pacific  coast  ought  to  be  satisfied 
with  the  liberality  of  the  terms  of  this  bill,  and  I  hope  they  will  not 
press  their  resistance  to  this  amendment,  because  I  assure  them  its  de- 
feat, by  throwing  upon  the  United  States  the  cost  of  minting  gold, 
would  unquestionably  defeat  the  bill. 

I  have  but  very  few  observations  to  make  in  reply  to  the  arguments 
that  have  been  made  for  the  abolition  of  the  coinage  charge.  The 
Senator  from  California  [Mr.  Casserly],  in  common  with  his  colleague 
[Mr.  Cole],  has  fallen  upon  the  idea  that  the  coinage  charge  is  a  tax. 
Nothing  is  more  absurd  than  this.  The  coinage  charge  is  simply  a 
charge  by  the  Government  of  the  United  States  for  a  service  actually 
performed  to  a  particular  citizen.     The  Government  of  the  United 


312  SPEECHES  AND  REPORTS   OF  JOHN   SHERMAN. 

States  should  not  undertake  to  do  this  service  for  nothing,  and  it  sim- 
ply asks  a  reimbursement  of  the  cost.  This  coinage  tax,  as  gentlemen 
now  call  it,  was  imposed  in  the  administration  of  Mr.  Pierce,  in  1853, 
when  it  was  no  object  to  seek  new  sources  of  taxation.  It  was  then 
put  at  one  half  of  one  per  cent.,  not  for  the  purpose  of  taxation,  but 
for  the  purpose  of  reimbursing  to  the  United  States  the  expense  of 
coinage.  Up  to  1848  the  United  States  produced  no  considerable 
amount  of  gold  or  silver  bullion.  We  were  then  importers  of  the  pre- 
cious metals,  instead  of  exporters.  In  1853,  however,  after  several 
years'  Avorking  of  the  mines  in  California,  this  matter  was  fully  dis- 
cussed by  some  of  the  most  eminent  men  then  members  of  the  Senate 
of  the  United  States ;  among  the  rest  by  Mr.  Hunter. 

Why  was  this  one  half  of  one  per  cent,  tax,  as  it  is  now  called,  or 
charge,  put  upon  coinage  ?  It  was  simply  done  to  prevent  the  expor- 
tation of  the  gold  coin  of  the  United  States.  That  was  the  main  and 
leading  object.  It  was  argued,  with  a  great  deal  of  force,  by  eminent 
gentlemen  then  in  this  Chamber,  that  if  a  charge  was  put  upon  the 
coinage,  as  was  done  by  all  the  nations  of  the  world  except  England, 
gold,  which  would  then  be  more  valuable  as  coin  than  as  bullion,  would 
not  be  exported  until  the  balances  of  trade  were  settled  by  our  com- 
modities ;  that  until  bullion,  wheat,  cotton,  and  all  the  other  products 
of  nature  were  exported,  gold  and  silver  coin  would  not  be  exported, 
because  they  were  more  valuable,  made  so  by  their  greater  cost.  The 
prevention  of  their  exportation,  and  not  the  imposition  of  a  tax,  was 
the  object  of  levying  a  charge  of  one  half  of  one  per  cent,  upon  gold 
coinage.  A  much  higher  rate  is  levied  on  silver  and  other  coinage,  but 
one  half  of  one  per  cent,  was  the  tax  levied  on  gold  coinage,  for  this 
reason  :  a  reason  of  political  economy,  justified  by  the  history  of  other 
nations. 

My  friend  from  Oregon  [Mr.  Williams]  speaks  of  Great  Britain  as 
having  derived  a  great  advantage  from  free  coinage.  On  the  contrary, 
it  can  be  demonstrated  by  the  clearest  figures  that  Great  Britain  has 
lost  largely.  Whenever  money  is  coined  in  France,  where  the  seignior- 
age is  only  one  fifth  of  one  per  cent.,  it  never  leaves  France,  because  if 
it  should  leave  France  that  one  fifth  of  one  per  cent,  would  become 
dead  capital ;  it  can  not  be  exported  to  England  for  recoining,  and  there- 
fore there  is  now  more  than  five  times  as  much  French  coin  in  existence 
as  there  is  of  English  coin ;  the  statistics  show  that  there  is  between 
five  and  six  times  as  much.  The  British  sovereign  is  exported  from 
England  because  the  British  Government  puts  labor  on  gold  bullion 
without  charge,  and  the  result  is  that  the  most  convenient  form  to  ex- 
port gold  from  Great  Britain  is  in  British  sovereigns.  They  go  off  to 
different  nations,  and  are  recoined  by  other  governments,  which  charge 
a  seigniorage.  The  result  is  that  there  is  now  less  than  one  fifth  as 
much  English  coin  in  existence  as  there  is  of  French  coin.  The  coin 
of  Germany  in  existence,  I  believe,  also  largely  exceeds  the  amount  of 
English  coin. 

Now,  Mr.  President,  I  say  that  as  a  question  of  political  economy 
it  is  not  wise  for  us  to  put  additional  labor  upon  bullion  and  convert  it 
into  coin  free  of  charge  without  regard  to  the  revenue ;  because  the 


COINAGE  LAWS.  313 

unavoidable  effect  of  thus  bestowing  labor  on  gold  bullion,  and  putting 
it  in  a  more  convenient  shape  for  exportation,  is,  at  the  very  first  re- 
versal of  trade,  to  cause  our  coin  to  flow  abroad,  instead  of  other  com- 
modities. That  is  the  experience  of  nations,  and  has  been  for  more 
than  a  hundred  years. 

But  it  is  said  that,  notwithstanding  all  the  arguments  and  opinions 
of  political  economists,  England  has  insisted  upon  free  coinage.  I  have 
already  sufficiently  explained  the  reason  of  that.  They  adopted  it,  I 
believe,  in  the  reign  of  King  "William  III. ;  and,  having  adopted  it,  they 
have  kept  to  it  with  the  natural  tenacity  of  the  English  people,  while 
their  writers  have  condemned  the  policy.  I  read  here  from  Adam 
Smith,  from  McCulloch,  from  Mill,  from  nearly  all  those  men  who  are 
recognized  authorities  the  world  over  on  questions  of  political  economy, 
who  have  said  over  and  over  again  that  it  was  a  foolish  system.  Here 
is  the  opinion  of  the  present  Chancellor  of  the  Exchequer,  a  man  of  great 
ability,  who  quotes  these  authorities,  reads  them  to  tlie  British  Parlia- 
ment, and  says  that  England  has  persisted  in  tliis  thing  too  long,  and  to 
her  injury.  It  is  true  also  that  he  said  at  the  time  when  they  were 
codifying  the  mint  laws,  that  it  was  better  to  postpone  a  change  until 
the  question  of  international  coinage  should  be  settled. 

Now,  there  is  one  thing  to  be  considered  by  our  friends  from  the 
Pacific  coast.  This  is  a  bill  to  codify  the  mintage  laws  of  the  United 
States.  It  does  not  adopt  new  principles ;  it  makes  but  few  changes 
in  the  general  laws,  except  in  transferring  the  head  of  the  Minting  Bu- 
reau to  Washington,  instead  of  leaving  the  system  in  the  incongruous 
position  of  making  the  Director  of  the  Mint  in  Philadelphia  the  super- 
intendent of  all  the  mints  in  the  United  States.  This  bill  is  rather  a 
codification  of  the  existing  laws ;  and  the  Committee  on  Finance  have 
therefore  refused  to  ingraft  on  it  many  ideas  that  they  have  developed 
and  would  like  very  well  to  see  in  the  form  of  law.  For  instance,  we 
are  strongly  in  favor  of  an  international  coinage,  of  assimilating  our 
coinage  to  that  of  other  nations,  and  making  a  common  metric  standard 
of  international  coins  by  which  the  gold  dollar,  the  sovereign,  and  the 
franc  may  be  interchangeable  without  recoinage.  We  have  not  ven- 
tured to  put  our  opinion  on  that  point  into  this  bill,  because  it  is  not  in 
the  existing  law,  but  would  be  a  radical  change. 

Now,  I  ask  Senators  whether  it  is  wise  in  this  bill  to  repeal  the  ex- 
isting law  which,  for  reasons  of  political  economy,  has  fixed  a  mintage 
charge  upon  gold  coin,  and  to  make  an  effort  to  make  this  codification 
bill  carry  such  important  changes?  I  agree  with  the  Senator  from 
California,  that  it  is  not  necessary  to  look  at  this  m.atter  as  a  question 
of  tax.  The  law  now  levies  upon  the  labor  done  for  the  miner  of  Cali- 
fornia the  trifling  charge  of  one  half  of  one  per  cent.,  a  little  more  than 
the  cost.  We  charge  the  national  banks  one  per  cent,  for  printing  their 
bank  notes ;  we  charge  every  citizen  three  cents  for  carrying  letters  in 
the  mail ;  and  we  levy  taxes  in  every  form  upon  various  articles  of  con- 
sumption— on  tea,  coffee,  sugar,  and  the  other  necessaries  of  life.  Now, 
I  say  that  even  if  we  were  about  to  throw  off  these  charges,  whether 
you  caU  them  taxes  or  not,  we  ought  not  to  throw  off,  first,  that  which 
IS  not  a  tax  at  all,  but  is  only  a  charge  for  a  service  actually  rendered. 


314  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

I  trust  that  this  effort  to  force  through  this  proposition  to  abohsh 
the  mintage  charge,  in  a  bill  to  codify  the  mint  laws,  to  simplify  and 
make  consistent  the  laws  which  regulate  the  various  mints  of  the  United 
States,  will  be  abandoned ;  because  Senators  must  perceive  that  the  at- 
tempt to  make  any  radical  change  in  the  existing  system  in  this  bill 
will  only  endanger  it.  It  is  necessary  to  pass  the  bill  promptly  in  the 
Senate  in  order  that  it  may  receive  the  necessary  attention  in  the  other 
House  before  adjournment.  It  is  perfectly  manifest  that  the  attempt 
to  make  an  utter  change  of  our  policy  on  the  question  of  the  mintage 
charge,  and  to  follow  the  example  of  Great  Britain,  would  simply  de- 
feat the  bill,  which  has  already  been  so  long  delayed. 

The  whole  debate  in  England  upon  this  subject,  which  I  now  have 
before  me,  shows  that  every  person  who  participated  in  the  discussion, 
without  exception,  agreed  that  the  system  of  free  coinage  was  wrong 
in  principle  and  in  theory,  and  ought  to  be  abolished ;  but  in  the  re- 
vision of  the  law — it  M-as  then  under  the  charge  of  Mr.  Lowe  as  Chan- 
cellor of  the  Exchequer — the  matter  was  left  as  it  stood,  and  the  reason, 
as  stated  by  Mr.  Lowe  himself,  was  that  it  was  better  to  postpone  any 
change  as  to  the  rate  of  seigniorage  until  the  settlement  of  the  question 
of  international  coinage,  w^hen,  as  a  matter  of  course,  the  laws  of  the 
different  nations  would  have  to  conform  to  it.  Mr.  Lowe,  in  his 
speech  advocating  his  views  on  the  subject,  quoted  all  the  authorities 
from  which  I  read  yesterday,  and  a  great  many  others,  showing  that  ex- 
perience, political  economy,  and  philosophy  had  concurred  in  establish- 
ing the  necessity  of  a  seigniorage. 

Let  me  state  another  fact.  It  is  shown,  I  think,  in  the  debate  in 
Parliament,  that  while  England  possesses  nearly  twice  the  wealth  of 
France,  and  certainly  nearly  twice  the  commerce,  yet  the  gold  and  sil- 
ver coinage  in  England  is  only  about  one  fifth  of  that  in  France  ;  and 
this  was  attributed  in  a  great  measure  to  the  fact  that,  as  Great  Britain 
coined  gold  without  charge,  therefore  gold  was  the  cheapest  product  to 
export,  while  the  French  coin,  which  secured  a  local  habitation  by  a 
seigniorage  of  only  one  fifth  of  one  per  cent,,  remained  in  France  ;  and 
so  of  Germany. 

]^ow,  sir,  I  will  add  another  fact,  and  that  will  be  all  I  desire  to  say 
in  reply  to  the  letter  of  Mr.  Ralston,  who  is  cashier  of  the  Bank  of  Cal- 
ifornia. I  have  read  that  letter.  It  contains  nothing  new,  except  one 
very  remarkable  statement,  which  he  did  not  make  with  a  full  knowl- 
edge of  the  facts,  or  certainly  he  would  not  have  made  it.  He  says 
our  profit  on  coinage  is  four  million  and  some  hundred  thousand  dol- 
lars ;  that  is,  that  the  difference  between  the  cost  of  our  nickel  or  sub- 
sidiary coinage  and  its  actual  nominal  value  is  $4,000,000.  That  is 
very  true ;  but  we  must  redeem  that  coinage  at  par,  and  this  bill  pro- 
vides for  its  redemption.  We  might  just  as  weU  say  that  on  the  green- 
backs which  we  publish  and  print  we  make  a  profit  of  $340,000,000, 
because  it  costs  us  only  $1,000,000  to  print  $341,000,000.  But  we 
must  redeem  them  at  par  in  gold ;  so  that  all  the  profit  from  our  sub- 
sidiary coinage  disappears  when  the  day  of  redemption  comes,  and  that 
is  coming  nearer  constantly,  day  by  day. 

There  is  one  other  fact.     A  great  deal  of  stress  was  laid  by  the  Sen- 


COINAGE  LAWS.  315 

ator  from  California  [Mr.  Casserly]  on  the  fact  tliat  the  mint  cnarge  in 
this  country  was  a  recent  one.  Well,  sir,  np  to  1849,  I  think  it  vras, 
the  Mint  of  the  United  States  bought  gold  of  foreign  countries  in  the 
form  of  bullion,  precisely  like  any  other  commodity,  and  coined  it  at 
the  Mint.  Having  a  monopoly  of  the  coinage,  it  practically  had  a  mo- 
nopoly of  the  bullion  trade  of  this  country.  The  discovery  of  gold  in 
California  changed  the  whole  condition  of  things,  and  this  country  be- 
came the  great  gold-producing  country  of  the  world.  Then  the  Con- 
gress of  the  United  States  first  turned  its  attention  to  the  necessity  of 
establishing  a  seigniorage  charge,  and  regulating  the  difference  between 
the  value  of  gold  and  silver ;  and  I  have  here  the  report  of  the  Secre- 
tary of  the  Treasury,  Mr.  Corwin,  under  Fillmore's  administration,  call- 
ing attention  to  the  large  loss  suffered  by  the  United  States  by  this 
changed  condition  of  affairs,  and  by  the  fact  that  bullion  was  presented 
for  coinage  at  the  mints,  not  imported  from  abroad  as  a  commodity  and 
purchased  at  the  market  j^rice,  but  presented  by  our  own  miners,  and 
that  the  law  made  no  provision  at  all  for  the  disposition  and  manage- 
ment of  this  gold  bullion  or  coinage.  He  therefore  recommended  that 
a  change  be  made  in  the  relative  value  of  gold  and  silver  bullion  and 
coin,  so  as  to  conform  to  the  standards  adopted  in  England  and  in 
France,  and  recommended  that  a  seigniorage  be  i3ut  upon  gold  coinage 
sufficient  to  pay  the  expense  of  it.  -That  recommendation  was  referred 
to  the  Committee  on  Finance  of  this  body,  of  which  Mr.  Hunter  was 
then  chairman.  I  hold  in  my  hand  a  very  elaborate  and  interesting  re- 
port, of  many  pages,  made  by  Mr.  Hunter,  in  which  the  subject  is  lully 
discussed,  giving  many  tables.  The  conclusion  arrived  at  after  tw^o 
years'  discussion,  by  the  unanimous  vote  of  both  Houses,  was,  first,  that 
on  account  of  the  discovery  of  gold  in  California  it  was  necessary  to 
change  the  relative  value  between  gold  and  silver,  by  reducing  the  pro- 
portion of  silver  to  gold,  and,  second,  that  it  was  necessaiy  to  establish 
a  seigniorage  charge  on  gold.  There  had  always  been  a  seigniorage 
charge  on  silver  in  this  country,  but  as  gold  was  not  produced  to  any 
considerable  extent — I  believe  nowhere  except  a  little  in  North  Caro- 
lina— there  was  no  seigniorage  charge  upon  it.  A  seigniorage  charge 
was  then  established  of  one  half  of  one  per  cent.  Mr.  Hunter  states 
the  case  very  strongly.  He  says  :  "  K  we  do  not  establish  a  seigniorage 
charge,  the  United  States  may  be  compelled,  at  an  enormous  expense, 
to  convert  the  whole  gold  produced  in  this  country  into  coin,  merely 
to  enable  people  to  export  that  coin  ;  and  we  shall  have  to  go  through 
the  same  process  with  other  nations."  The  subject  was  then  fully  con- 
sidered, fully  debated  and  acted  upon,  and  that  seigniorage  was  adopted. 
The  result  is  that  since  that  time  about  one  half  of  the  gold  produced 
in  this  country  has  been  converted  into  coin. 

I  will  allude  to  a  remark  made  by  the  Senator  from  Delaware  [Mr. 
Bayard]  a  while  ago,  which  shows  that  upon  one  point  he  is  mistaken 
in  regard  to  the  relative  value  between  bullion  and  coin.  I  have  stated 
the  fact  that  a  charge  of  one  half  of  one  per  cent,  was  put  upon  gold 
coinage.  By  the  gradual  improvement  of  machinery  we  find  that  gold 
can  be  coined  for  less,  and  the  concurring  authority  of  all  with  whom 
I  have  conversed  upon  the  subject  is  that  three  tenths  of  one  per  cent. 


316  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

will  pay  tlie  mere  cost  of  making  the  requisite  assay,  refining,  and  re- 
ducing it  to  standard  gold,  and  stamping  it  as  Government  coin.  Three 
tenths  is  the  lowest ;  and  even  then  there  is  upon  the  Government  the 
expense  of  the  officers  of  the  mint,  the  expense  of  building  mints,  and 
a  large  amount  of  other  expenses. 

But  the  Senator  says  it  will  not  be  exported  in  the  form  of  coin, 
but  rather  in  the  form  of  bullion. 

On  the  contrary,  there  is  no  form  in  which  gold  can  be  put  so  con- 
venient for  exportation  as  in  rouleaux  of  twenty  pieces  of  twenty  dol- 
lars each,  both  for  purposes  of  exchange  and  for  purposes  of  merchan- 
dise ;  because  when  reduced  to  gold  coin  of  the  standard,  it  is  nine 
tenths  fine  precisely,  and  is  in  the  shape  that  it  is  used  by  every  nation 
in  Europe,  except  England,  for  recoining,  while  bullion  may  be  in 
various  fonns  and  conditions,  and  of  various  finenesses.  The  Govern- 
ment of  the  United  States  is  called  upon,  without  cost,  at  its  own  ex- 
pense, to  convert  the  whole  gold  product  of  the  United  States,  at  the 
expense  of  the  people  of  the  United  States,  into  a  form  most  conve- 
nient for  the  goldsmiths  and  mints  of  foreign  countries.  In  England, 
gold  coin  is  ninety-two  hundredths  fine,  and  all  that  is  necessary  to 
convert  our  gold  coin  into  English  sovereigns  is  to  add  one  two-hun- 
dredth part  of  refined  gold,  melt  it  in  a  cmcible,  and  stamp  it  with  the 
British  insignia.  The  result  is  that,  if  the  balance  of  trade  should  turn 
against  us,  the  most  valuable  form  in  which  gold  could  be  exported 
abroad  would  be  in  the  form  of  coin. 

The  reason  why  I  oppose  the  abolition  of  this  charge  so  strenuously 
is  not  because  it  involves  the  loss  of  $100,000  a  year,  although  there  is 
no  reason  why  we  should  put  this  labor  on  the  gold  product  of  private 
individuals,  at  our  own  cost ;  but  it  is  because  I  believe  it  will  have  an 
injurious  effect  in  regulating  the  balance  of  trade,  and  take  from  us,  at 
the  time  when  it  is  most  needed,  the  actual  coin,  the  life-blood  of  the 
country,  instead  of  bullion.  The  exportation  of  bullion  has  an  effect 
upon  our  commercial  relations  very  different  from  the  effect  of  the 
expovtation  of  our  coin. 

The  immediate  result  of  the  abolition  of  this  charge  will  be  to  force 
all  the  gold  produced  in  this  country  into  the  mint  at  San  Francisco, 
to  be  there  reduced,  at  the  expense  of  the  United  States,  to  nine  tenths 
standard  fine  in  the  form  of  gold  coin. 

The  gold  will  flow  into  the  nearest  mint.  Why  should  it  not  be 
left  to  be  governed  like  the  trade  in  other  commodities  ?  This  bullion 
is  not  the  bullion  of  the  United  States.  It  is  the  property  of  private 
persons.  Mr.  Ralston,  whose  letter  has  been  read  here,  handles  more 
of  this  bullion  than  probably  all  the  people  of  two  of  the  greatest  States 
of  the  Union — I  believe  he  is  cashier  of  the  Bank  of  California.  And 
yet  we  are  required,  at  the  expense  of  the  United  States,  to  reduce  all 
the  gold  product  of  this  country  into  a  convenient  form  for  exporta- 
tion, so  that  the  mints  of  foreign  countries  may  take  our  gold  coin  and 
melt  it  over  without  cost,  loss,  or  wastage. 

It  seems  to  me  that  this  will  be  a  bad  commercial  operation.  It 
may  be  of  some  benefit  in  a  local  way,  by  building  up  a  large  manufac- 
ture in  one  locality,  but  in  its  effect  upon  the  commerce  of  this  country 


INCOME  TAX.  31Y 

it  must  be  injurious.  It  has  been  injurious  in  England.  The  opposite 
policy  has  been  beneficial  in  France.  We  have  tried  the  opposite  policy 
for  twenty  years,  and  no  complaint  has  been  made  except  as  to  the  rate. 
Mr.  Knox,  who  sent  this  bill  to  us,  complained  only  of  the  rate  of  seign- 
iorage as  being  too  high ;  and  I  think  myself  it  was  too  high.  As  far 
as  I  was  concerned  I  was  willing  to  adopt  the  French  standard  of  one 
fifth,  or  the  German  standard,  which,  I  believe,  is  one  fourth ;  but  the 
Committee  thought  it  was  better  to  cover  the  cost,  which  is  three  tenths 
of  one  per  cent. 


mCOME  TAX. 

IN  THE  SEN-ATE,  JANUARY  S5,  1871. 

The  Senate  having  under  consideration  the  bill  (S.  Fo.  1083)  to  repeal  so  much 
of  the  act  approved  July  14,  1870,  entitled  "An  act  to  reduce  internal  taxes,  and 
for  other  purposes,"  as  continues  the  income  tax  after  the  31st  day  of  December, 
A.  D.  1869,  Mr.  Sherman  said  : 

Mr,  PREsroENT  :  The  proposed  repeal  of  the  income  tax  necessarily 
involves  the  consideration  of  our  whole  financial  policy,  and  can  not 
be  hurried  through  upon  the  interested  clamor  of  the  comparatively 
few  persons  affected  by  it.  Nothing  is  more  j^leasing  than  to  rejDeal 
taxes,  and  it  would  be  easy  to  show  that  the  repeal  of  any  tax  now 
levied  would  give  relief.  The  income  tax  is  now  only  levied  upon 
those  whose  good  fortune  it  is  to  enjoy  large  property,  or  whose  sala- 
ries or  profits  lift  them  far  above  the  pressing  wants  that  rest  upon  the 
great  mass  of  our  peo23le.  The  possession  of  large  property  and  the 
ability  to  earn  large  income  necessarily  give  to  those  enjoying  this  in- 
come great  influence  over  public  opinion.  They  speak  through  the 
daily  press,  from  high  oflScial  stations,  from  great  corporations,  from 
cities  where  wealth  accumulates,  and  with  the  advantage  of  social,  per- 
sonal, and  delegated  influence.     I  know  the  power  of  this  influence. 

Besides,  the  income  tax  is  subject  to  some  objections  which  touch 
the  pride  and  feelings  of  the  influential  class  upon  whom  it  is  levied. 
From  the  nature  of  the  tax  it  must  authorize  some  espionage  into  the 
private  affairs  of  individuals,  especially  if  fraud  is  suspected  ;  but  in 
this  respect  it  has  been  greatly  modified.  It  now  stands  as  a  tax  of 
two  and  a  half  per  cent,  on  gross  incomes  over  two  thousand  dollars. 
If  this  income  is  capitalized  at  $33,333,  which  at  six  per  cent,  would 
yield  $2,000,  it  stands  as  the  equivalent  of  a  property  tax  on  one  and 
a  half  mill  on  the  dollar  on  property  in  excess  of  $33,333.  It  is  the 
only  tax  levied  by  the  United  States  that  falls  upon  property  or  ofiice, 
or  on  brains  that  yield  property,  and  in  this  respect  is  distinguished 
from  other  taxes  levied  by  the  United  States,  all  of  which  are  upon 
consumption,  the  consumption  of  the  rich  and  the  poor,  the  old  and 
the  young.  I  make  this  the  simplest  division  of  taxes — taxes  upon 
possessions  and  taxes  upon  consumption.  As  the  income  tax  now 
stands,  it  is  estimated  that  it  will  yield  $12,833,000  out  of  an  aggre- 


318  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

gate  revenue  of  $320,000,000,  or  about  four  per  cent,  or  one  twenty- 
tifth  part  of  our  aggregate  revenue.  And  it  must  be  remembered  that 
the  income  tax  by  its  terms  expires  in  two  years,  while  we  can  not 
hope  that  tlie  other  taxes  will  be  either  short-Kved  or  greatly  dimin- 
ished. 

And  now,  sir,  it  is  proposed  to  single  out  this  tax  from  all  others 
• — this  tax  that  bears  most  severely  upon  us  and  upon  those  best  able 
to  pay — and  to  repeal  it,  leaving  undisturbed  all  the  taxes  that  bear 
upon  the  consumption  of  the  necessaries  of  life.  N'ow,  sir,  if  I  con- 
sulted my  own  interest,  my  own  ease,  my  own  advancement,  I  would 
yield  without  resistance  to  what  is  the  evident  current  of  opinion  here, 
and  let  the  income  tax  go  ;  I  would  yield  to  the  impulsive  feeling  of 
the  Senator  from  Massachusetts  [Mr.  Sumner],  who,  when  the  subject 
was  mentioned  on  Friday,  demanded  that  the  income  tax  be  repealed 
that  night,  before  we  went  home  ;  I  would  no  longer  contend  with 
personal  friends  who  regard  this  tax  as  odious  and  oppressive  ;  but  my 
own  conviction  is  so  clear  that  its  repeal  now  is  wrong,  both  in  policy 
and  justice,  that  it  becomes  my  imperative  duty  to  state  the  facts  and 
reasons  fully  and  clearly  upon  which  this  opinion  is  founded. 

And,  sir,  it  is  due  to  the  Committee  on  Finance,  to  whom  this  bill 
was  referred,  and  who  fully  and  fairly  considered  it,  to  submit  to  the 
Senate  the  considerations  which  induced  them  to  report  against  it. 
That  committee  is  charged  with  the  broad  subject  of  our  public  finances, 
embracing  in  its  range  not  only  this  tax  but  all  the  other  taxes  levied 
by  the  National  Government,  and  the  still  more  inlportant  subject  of 
our  currency  and  public  debt.  They  are  expected  to  look  with  more 
care  than  others  into  the  effect  of  a  proposed  measure  upon  our  gen- 
eral financial  system.  The  cries  of  the  few  who  complain  of  the  in- 
come tax  easily  reach  the  ears  of  all  of  us  ;  but  we  must  inquire  wheth- 
er we  can  grant  their  wish  without  doing  injustice  and  wrong  to  the 
whole  mass  of  our  people  ;  whether  we  can  disturb  the  present  adjust- 
ment of  the  burdens  of  taxation  without  danger  to  other  interests  more 
important,  or  by  shifting  the  load  upon  others  less  able  to  bear  it. 

The  members  of  that  committee  are  no  more  in  favor  of  taxes  than 
other  Senators  ;  but  we  have  to  keep  our  eyes  constantly  on  the  ex- 
penditures of  the  Government,  and  when  you  direct  these  expenditures 
taxes  must  follow  upon  the  track  of  your  appropriations  with  as  much 
certainty  as  the  waves  of  the  ocean  seek  their  level.  And  not  only 
must  we  follow  your  appropriations,  but  must  constantly  consider  the 
effect  of  a  surplus  or  deficient  revenue  upon  the  value  of  the  cun'ency 
and  the  public  debt.  If  it  is  of  primary  importance  to  approach  specie 
payments  and  fund  the  debt  at  a  lower  rate  of  interest,  we  must  main- 
tain our  revenue  and  our  reserves  on  a  stronger  basis  than  if  we  had  only 
to  meet  our  current  expenditure.  In  the  debates  we  have  had  on  this 
income  tax  Senators  seem  to  think  that  we  could  save  enough  in  some 
way  to  enable  us  to  repeal  it ;  and  perhaps,  if  the  Committee  on  Finance 
had  power  to  limit  appropriations,  it  could  be  done.  We  take  your 
action  as  the  basis  of  our  labor,  propose  taxes  only  as  demanded  to 
meet  your  appropriations  and  the  laws  relating  to  the  j)ublic  debt,  and 
only  seek  to  maintain  such  a  margin  and   such  reserves  as  are  de- 


INCOME  TAX.  319 

manded  by  tlie  highest  considerations  of  public  policy.  "When  those 
objects  are  secured  we  are  glad  to  be  able  to  repeal  taxes,  and  especially 
those  that  bear  most  heavily  upon  the  people.  No  man  elected  by  the 
people  is  likely  to  retain  taxes  when  unnecessary,  while  many  may  be 
tempted  to  repeal  them  when  prudence  forbids  it. 

I  think  I  can  demonstrate  : 

First.  That  it  is  not  wise  to  disturb  the  financial  measures  of  the  last 
session,  except  to  remove  ambiguities  or  meet  new  facts  developed  since 
then. 

Second.  That  the  state  of  our  revenue  and  expenditures  will  not  now 
justify  the  repeal  of  any  taxes. 

Third.  That  the  modification  or  repeal  of  the  income  tax  should  be 
postponed  until,  by  a  general  revision  of  our  whole  revenue  system,  we 
can  determine  what  taxes  bear  most  heavily  upon  the  people,  and  dis- 
tribute the  reduction  so  as  to  give  them  the  greatest  relief. 

Fourth.  That  the  repeal  of  this  tax  will  affect  injuriously  the  higher 
objects,  namely,  the  funding  of  the  public  debt  and  the  resumjDtion  of 
specie  payments. 

I  know,  Mr.  President,  that  this  is  a  broad  task  ;  but  I  believe  that 
if  Senators  will  give  attention  to  the  facts  I  shall  submit  to  them,  1  can 
make  at  least  an  honest  effort  to  demonstrate  each  of  these  proposi- 
tions. 

The  income  tax  was  an  essential  element  of  the  financial  legislation 
of  the  last  session.  It  was  fully  debated  in  both  Houses,  and  formed 
a  part  of  a  series  of  measures  that  was  and  ought  to  be  regarded  as  a 
whole.  I  insist  that  we  should  not  disturb  these  financial  measures 
except  to  remove  ambiguities  or  to  meet  new  facts  developed  since  they 
were  adopted.  The  facts  now  submitted  to  us  by  the  Secretary  of  the 
Treasury  show  that  our  estimates  last  summer  were  accurate.  Some 
portions  of  these  measures  are  not  yet  in  force.  The  entire  reduction 
of  taxes  made  will  not  occur  until  after  May  1st.  Why  then  exhibit  the 
feebleness  of  uncertainty  ? 

Not  only  were  these  measures  fully  discussed  here,  but  they  were 
approved  by  our  constituents  at  the  last  election.  Wherever  the  Re- 
publicans succeeded,  it  was  in  consequence  of  these  measui'es  and  of  the 
general  financial  policy  of  the  Administration.  Wherever  we  lost,  it 
was  in  s]3ite  of  them,  and  mainly  by  local  dissensions.  Our  financial 
measures  strengthened  us  everywhere,  and  were  a  weakness  nowhere. 
These  measures  were  the  currency  biU,  the  funding  bill,  and  the  bill  to 
reduce  taxation.  The  currency  bill,  by  enlarging  the  limit  of  banking 
circulation,  satisfied  a  local  grievance,  by  giving  to  the  West  and  South 
an  opportunity  to  establish  banks  upon  the  same  footing  as  in  the  East- 
ern States.  And  yet  a  little  time  has  proven  that  there  is  no  great 
demand  for  new  banks,  no  idle  capital  to  invest  in  them,  and  no  need 
of  more  circulation.  A  right  withheld  is  a  grievance,  even  if  when 
granted  it  is  not  used ;  and  I  trust  that  this  right  will  be  reserved  to 
the  States  in  the  West  and  South  until  they  can  absorb  the  circulation 
granted.  I  consider  it  fortunate  that  it  is  not  too  rapidly  absorbed ; 
but  this  could  not  be  the  pretext  for  enlarging  the  circulation  in  other 
States  until  we  reach  specie  payments.     In  a  short  time  I  hope  the 


320  SPEECHES   AND  KEPORTS  OF  JOHN"  SHERMAN. 

specie  sections  of  iliat  bill  will  be  the  basis  of  our  whole  banking  sys- 
tem, needing  only  one  center  of  redemption  and  a  prohibition  against 
the  payment  of  interest  on  deposits,  to  make  it  the  best  banking  sys- 
tem in  the  world. 

The  funding  bill,  had  it  been  promptly  passed  in  the  form  reported 
to  the  Senate,  would  have  led  to  the  conversion  of  at  least  live  hundred 
millions  of  our  six  per  cent,  bonds  into  five  per  cent,  bonds  before  the 
war  in  Europe,  thus  saving  $5,000,000  per  annum.  But  the  refusal 
of  the  Senate  to  grant  the  Secretary  of  the  Treasury  indispensable 
facilities  in  negotiating  the  exchange  greatly  impaired  the  bill,  and  the 
delay  in  the  House,  and  their  limitations  on  the  rate  of  interest,  so 
crippled  the  loan  that,  even  if  the  war  in  Europe  had  not  occurred, 
its  success  must  have  been  partial.  The  enlargement  of  the  five  per 
cent,  loan  to  $500,000,000,  authorized  at  this  session,  may  enable  the 
Secretary  of  the  Treasury  to  take  advantage  of  a  favorable  state  of  the 
money  market  to  redeem  the  first  loan  of  five-twenties  with  new  bonds, 
and  thus  save  $5,000,000  of  annual  interest.  The  funding  bill  is  now 
very  much  as  the  Senate  passed  it,  but  without  the  sections  as  to  the 
banks. 

The  bill  to  reduce  taxation  was  the  largest  measure  of  relief  from 
taxes  ever  passed  in  a  single  measure  by  any  legislative  body  in  the 
history  of  mankind.  It  was  a  rejjeal  of  taxes  to  the  amount  of  $81,- 
266,748.  It  swept  away  the  taxes  on  employments  and  sales — the 
most  indefensible  and  unequal  of  all  taxes — and  it  reduced  to  one  third 
the  tax  on  income,  and  to  one  half  the  taxes  on  such  prime  necessaries 
of  life  as  are  imported  from  tropical  countries.  Every  tax  that  was 
retained  was  carefully  scrutinized,  and  only  one  of  them,  the  tax  on 
income,  is  a  tax  on  the  property  of  the  rich,  as  distinguished  from  the 
consumption  of  the  poor.  The  precise  effect  of  that  act  can  only  be 
tested  by  time.  It  is  not  yet  in  full  force.  And  now  we  are  met,  in 
season  and  out  of  season,  with  a  demand  that  the  only  tax  on  property, 
estimated  to  yield  $13,000,000,  shall  be  repealed.  "^No  new  facts  are 
given  US ;  no  petitions  are  presented ;  no  ofiicial  sta''3ment  is  made ; 
no  other  tax  is  complained  of ;  but  we  are  urged  to  repeal  the  only  tax 
that  bears  hardly  upon  each  of  us.  I  submit  whether  it  is  not  better 
to  leave  well  enough  alone,  and  bear  as  well  as  we  may  our  share  of 
taxes  ;  to  stand  by  the  measures  so  lately  adopted  by  us,  and  turn  our 
attention  to  the  measures  before  us  that  affect  the  great  mass  of  our 
people. 

IS'ow,  Mr.  President,  after  these  preliminary  observations,  I  come 
to  test  this  question  by  sober  facts  and  figures ;  and  I  shall  not  rely 
upon  mere  cursory  estimates  made  as  the  Senator  from  Pennsylvania 
made  his,  but  upon  official  documents,  each  one  of  which  is  printed 
and  laid  on  our  tables.  Now,  for  the  first  time  for  many  years,  we  are 
able  to  present  exact  estimates  of  our  expenditures.  On  account,  in 
the  old  mode  of  keeping  the  books  in  the  Treasury  Department,  of 
lapping  and  transferring  appropriations,  we  were  not  enabled  to  state 
specifically  what  sum  was  needed  for  the  expenditures  of  the  Govern- 
ment within  a  given  year ;  but  now  fortunately  the  law  of  the  last 
session  is  in  full  ojDeration,  by  which  all  the  old  balances  are  transferred 


INCOME  TAX.  321 

to  the  general  funds  in  the  Treasury.  The  Secretary  of  the  Treasury 
now  gives  us  a  statement  by  departments  of  the  probable  expenditures 
of  the  Government  for  the  next  fiscal  year,  ending  the  30th  of  June, 
1872,  which  is  as  follows  : 

Legislative  establishment $3,263,966  34 

Executive  establishment 17,238,165  50 

Judicial  establishment 2,348,750  00 

Military  establishment 28,488,194  00 

Naval  establishment 20,045,417  77 

ludian  affairs 5,021,569  03 

Pensions 30,000,000  00 

Public  works 22,338,278  37 

Postal  service 4,694,383  00 

Miscellaneous 14,305,428  60 

Permanent  appropriations 132,528,234  00 

Sinking  fund 24,500,000  00 

Interest  upon  the  capital  of  the  sinking  fund 4,866,933  00 

Total , $309,639,319  61 

Thus  the  statement  of  total  estimates  of  expenditure  is  $309,639,- 
319.61 ;  but  it  must  be  remembered  that  of  these  estimates  the  greater 
part,  nearly  two  thirds  of  them,  are  beyond  our  control  to  limit.  There 
is  provided  in  the  nature  of  permanent  and  fixed  ajipropriations,  for 
the  payment  of  interest  on  the  public  debt  and  the  expenses  of  collect- 
ing the  customs,  $132,528,234.  There  is  provided  for  the  sinking  fund 
and  interest  on  it,  under  the  act  of  February  25,  1862,  and  the  act  of 
the  last  session,  $29,366,933.  There  is  also  provided  for  pensions 
$30,000,000,  making  an  aggregate  of  $191,865,167  that  is  beyond  our 
reach,  leaving  a  balance  of  $117,744,152  to  cover  all  the  expenses  of 
the  Government.  That  includes  the  army,  the  navy,  and  the  legisla- 
tive and  judicial  establishments.  All  the  departments  of  the  Govern- 
ment must  be  maintained  out  of  the  $117,000,000. 

It  must  be  remembered  that  the  Secretary  of  the  Treasury  expects 
us  to  carry  out  our  pledges  of  economy  to  reduce  the  expenses  of  the 
Government,  If  the  Government  can  be  conducted  upon  an  expendi- 
ture of  $117,000,000,  it  will  be  an  economical  administration ;  it  will 
be  no  more  per  head  than  in  the  time  of  James  Buchanan.  If  you 
make  a  due  allowance  for  the  difference  between  gold  and  paper,  it 
will  reduce  the  expenses  of  our  Government  to  less  than  they  were  be- 
fore the  war.  But  in  order  to  maintain  these  estimates  we  have  to 
keep  our  expenditures  within  the  limit  allowed  us  of  $117,000,000.  I 
ask  you,  sir,  with  your  familiarity  with  the  course  of  legislation  this 
winter,  whether  tliis  is  likely  to  be  done  ?  We  can  not  reduce  this 
amount  in  any  item  except  one.  This  $117,000,000  includes  appropri- 
ations for  public  works  amounting  to  $22,338,000.  That  may  be  dimin- 
ished by  the  action  of  Congress ;  but  is  there  much  probability  of  it  ? 
That  covers  all  the  class  of  expenditures  called  public  works,  filling 
some  thirty  pages  of  our  annual  estimates,  including  the  harbor  and 
river  improvements,  fortifications,  arsenals,  navy-yards,  custom-houses, 
court-houses,  and  an  infinite  variety  of  expenditures. 

If  this  item  is  reduced  to  a  considerable  extent,  it  will  be  more  than 
made  up  by  other  causes  of  expenditure.  Already  the  session  has  de- 
21 


322  SPEECHES  AND  REPORTS   OF  JOHX  SHERMAN. 

veloped  a  tendency  to  embark  in  new  enterprises,  or  rather  to  carry  on 
old  schemes  now  renewed.  It  has  been  proposed  to  increase  tlie  pen- 
sion list  by  $6,000,000,  and  the  bill  for  that  purpose  passed  the  Senate 
with  scarcely  any  debate.  AVe  have  also  passed  a  bill  increasing  the 
expenses  of  the  mints  $150,000,  or  throwing  away,  as  I  tliink  canseless- 
ly,  about  one  hundred  thousand  dollars.  This  does  not  include  any 
amount  for  claims  that  may  be  allowed  by  the  Committee  on  Claims, 
and  the  various  committees  of  Congress.  There  is  a  bill  for  the  pay- 
ment of  interest  to  the  States,  whicli  can  not  cost  less  than  $7,000,000 
if  it  should  pass.  Objection  was  made  to  my  postponing  the  Sutro 
Tunnel  bill  until  a  more  favorable  opportunity.  This  is  a  scheme  to 
bore  through  the  mountains  under  the  Comstock  lode  at  an  expense  of 
$3,000,000.  We  have  subsidies  proposed  for  every  conceivable  object 
in  the  world — building  telegraphs  and  railroads,  and  assisting  steam- 
ships— now  pending  on  tlie  calendar.  We  have  San  Domingo,  which 
at  any  rate,  if  it  is  acquired,  will  take  from  fifteen  hundred  thousand 
to  two  million  dollars,  perhaps  more.  We  have  innumerable  plans  for 
the  increase  of  salaries.  We  have  propositions  to  add  to  the  expenses 
of  the  Government  as  multifarious  as  the  plagues  of  Eg}^3t,  but  not  a 
single  proposition,  so  far  as  I  know,  to 'reduce  the  estimates  made  by 
the  Secretary  of  the  Treasury. 

If,  therefore,  I  assume  that  this  Congress  will  not  increase  the  esti- 
mates proposed  by  the  Secretary,  I  assume  a  very  doubtful  proposition. 
I  should  be  very  glad  indeed  to  compromise  on  a  moderate  increase 
upon  his  estimates  of  expenditure.  Here  is,  therefore,  the  sum  of 
$309,000,000  that  must  be  raised.  How  can  you  do  it  ?  How  is  this 
money  to  be  collected  from  the  people  but  by  taxes  ?  Let  us  look  at 
our  sources  of  revenue  and  see  where  they  stand.  In  the  same  report 
I  find  the  receipts  estimated  by  the  Secretary  of  the  Treasury,  as  fol- 
lows : 

Estimated  receipts  for  the  year  ending  June  30,  1872  : 

From  customs $175,000,000 

From  internal  revenue 126,41 8,000 

From  sales  of  public  lands 3,000,000 

From  miscellaneous  sources 16,000,000 

Total §320,418,000 

Including  the  income  tax,  which  is  a  part  of  this  aggregate,  the 
Secretary  estimates  that  we  may  receive  from  all  sources  $320,418,000. 
Now,  let  us  look  at  that  for  a  moment.  How  are  these  estimates  made 
up  ?  The  estimates  from  customs  are  made  up  first  by  taking  the  re- 
ceipts of  the  last  fiscal  year,  allowing  for  a  reasonable  increase,  about 
three  or  four  per  cent.,  which  experience  shows  the  gradual  growth  of 
our  country  would  authorize  to  be  added  to  the  former  returns,  and 
then  deducting  from  that  aggregate  the  amount  of  duties  that  have 
been  repealed  ;  that  gives  the  basis  of  the  estimate,  $175,000,000. 

It  must  be  remembered  that  this  estimate  was  made  on  the  basis  of 
receipts  in  a  very  fortunate  and  happy  year,  under  circumstances  which 
favored  the  increase  of  our  commerce  and  trade.  Any  fluctuation  in 
that  trade  will  at  once  reduce  the  receipts.     I  remember  that  we  were 


INCOME  TAX.  323 

legislating  in  1857  in  the  House  of  Representatives  to  scatter  the  money 
in  the  Treasury,  and  the  very  next  year  there  came  a  revulsion  which 
swept  away  our  surplus,  and  we  were  compelled  to  borrow  money,  be- 
fore we  got  through  with  it,  at  the  rate  of  ten  per  cent,  per  annum.  I 
take  the  estimate  from  customs  to  be  practically  correct.  This  month 
the  receipts  are  largely  in  excess  of  the  estimate,  simply  because  large 
numbers  of  cargoes  have  been  landed,  and  put  in  warehouse,  to  be  re- 
tained there  till  the  new  law  takes  effect,  in  order  to  obtain  the  benefit 
of  lower  duties.  But  the  most  sanguine  can  not  expect  that  the  estimate 
of  the  Secretary  can  be  increased,  and  I  doubt  very  much  whether  now, 
in  the  present  stringent  state  of  the  money  market,  his  estimate  would 
be  maintained  by  any  officer  of  the  Government. 

In  regard  to  the  internal  revenue,  I  have  here  an  official  statement 
showing  the  items  of  the  probable  receipts  for  the  next  fiscal  year,  and 
we  will  see  how  they  are  likely  to  be  affected  by  the  present  condition 
of  trade : 

Treasuky  Department,  Office  of  Internal  Eevenue, 
Washington,  December  27,  1870. 

Estimated  annual  receipts  from  the  several  sources  of  revenue  under  act  of  July 
14,  1870,  on  the  basis  of  the  returns  of  the  fiscal  year  ended  June  30,  1870: 

Spirits $55,582,000 

Tobacco 31,351,000 

Fermented  liquors 6,319,000 

Banks  and  bankers 3,020,000 

Income 12,833,000 

Gas 2,313,000 

Stamps 15,000,000 

Total $126,418,000 

Even  these  estimates,  made  by  the  Department,  are  now  within  the 
last  two  months  overthrown.  They  allow  here  for  an  increase  of  the 
income  from  spirits.  I  have  now  the  official  statement,  made  within  a 
few  days,  showing  that  the  manufacture  of  spirits  has  fallen  off  nearly 
one  third.  I  have  a  statement  showing  the  number  of  distilleries,  their 
capacity,  and  their  production  on  the  1st  of  January,  1870  and  1871. 
It  shows  that  the  number  of  distilleries  in  operation  on  the  1st  of  Janu- 
ary, 1870,  was  410 ;  the  number  in  operation  on  the  1st  of  January, 
1871,  231.  The  daily  capacity  for  consumption  of  grain  on  the  1st  of 
January,  1870,  was  87,351  bushels  of  corn ;  the  daily  producing  capa- 
city in  1870  was  293,858  gallons  of  whisky.  That  has  now  fallen  off 
60  that  the  corn  daily  consumed  is  55,271  bushels,  and  the  daily  capacity 
of  whisky  production  is  192,169  gallons,  showing  a  falling  off  of  nearly 
one  third. 

I  have  also  another  elaborate  table,  showing  that  the  amount  of 
whisky  on  hand  in  the  market,  of  which  some  is  in  bond  and  some  has 
already  paid  tax,  amounts  to  45,637,933  gallons,  showing  an  overstock 
on  hand;  and  that  probably  explains  the  depression  of  the  price  of 
whisky.  Most  of  this  has  already  paid  the  tax,  and  is  now  in  the  mar- 
ket as  whisky  on  hand.  The  whole  amount  of  it  is  45,637,000  gallons, 
of  which  about  two  million  gallons  are  foreign  and  the  remainder  do- 
mestic spirits. 

The  Senator  from  Pennsylvania  seems  to  think  that  this  is  a  very  flat- 


324:  SPEECHES   AND   REPORTS   OF   JOHN   SHERMAN. 

tering  statement,  because  if  the  quantity  of  wliisky  consumed  diminislies 
tlie  other  taxes  will  increase.  So  they  will,  if  you  do  not  repeal  them ; 
but  they  are  nearly  all  repealed,  and  now  we  have  no  internal  revenue 
tax,  except  on  spirits,  tobacco,  fermented  liquors,  gas,  and  a  few  other 
articles ;  and  you  propose  to  repeal  the  great  item  of  the  income  tax. 

Upon  this  statement  of  our  receipts  and  expenditures,  which  is  cer- 
tainly as  favorable  as  any  man  engaged  in  business  would  make,  is  it 
wise  for  us  either  to  increase  our  expenses  or  diminish  our  revenue  ? 

The  difference  upon  this  showing  would  be  a  surplus  in  the  Trea- 
sury of  $10,Y78,680,  with  the  chances  all  against  us  that  the  estimate 
on  spirits  is  too  high,  with  a  certainty  that  the  expenditures  we  have 
to  meet  Avill  be  increased  ;  and  now,  with  a  margin  only  of  $10,778,680, 
you  ask  us  to  repeal  a  tax  which  yields  $12,833,000,  and  to  face  the 
new  Congress,  and  perhaps  the  peoj^le  in  a  presidential  election,  with 
an  absolute  deficit. 

Mr.  President,  as  a  matter  of  course,  when  these  facts  and  figures 
were  presented  to  the  Committee  on  Finance,  we  said,  even  those  of  us 
who  were  in  favor  of  repealing  the  income  tax,  that  we  certainly  would 
not  vote  in  favor  of  its  repeal  until  we  could  substitute  some  other. 
This  is  upon  the  plain  showing  of  our  expenses  for  the  next  fiscal  year. 
I  think  myself  these  facts  ought  to  settle  this  controversy  as  far  as  the 
income  tax  is  concerned  now.  But  I  wish  to  go  a  little  further.  I 
promised  to  show  the  effect  of  this  repeal  upon  other  financial  ques- 
tions of  deep  and  abiding  interest. 

I  say  that  the  repeal  of  the  income  tax  ought  to  be  considered  in 
connection  with  the  revision  of  our  whole  system  of  taxation ;  that 
you  should  not  single  out  such  a  tax  as  this,  the  only  one  that  bears 
upon  the  wealthy  as  against  the  poor,  upon  property  as  against  con- 
sumption, upon  sixty  thousand  people  rather  than  upon  thirty  or  forty 
millions.  You  must  revise  the  whole  system  of  taxation  with  a  view, 
if  you  have  surplus  revenue,  of  distributing  the  saving  so  that  all  may 
have  the  benefit  of  some  little  relief.  It  must  be  remembered  that  of 
this  income  tax,  which  was  levied  during  and  since  the  war,  we  have 
repealed  two  thirds,  taking  off  a  larger  proportion  than  we  have  of 
other  taxes.  We  could  only  afford  to  throw  off  one  third  of  the  taxes 
upon  the  necessaries  of  life,  but  we  have  relieved  the  income  tax  from 
over  two  thirds  at  least  of  its  burdens.  Kow  we  are  called  upon  to 
revise  our  work  in  this  particular,  and  sweep  away  this  tax  without  con- 
sidering the  effect  upon  other  classes  of  citizens  who  are  compelled  to 
pay  taxes. 

Mr.  President,  when  I  come  to  contrast  the  income  tax  with  other 
taxes,  while  I  concede  that  there  are  objections  to  it — and  I  will  state 
them  presently — I  must  say  that  there  are  other  taxes  which  the  National 
Government  is  now  levying  that  are  far  more  oppressive.  Take  the 
tax,  for  instance,  on  the  necessaries  of  life,  sugar,  tea,  and  coffee. 
What  objection  can  be  made  to  the  income  tax  that  does  not  apply  to 
this  tax,  except  one,  and  that  is,  that  the  income  tax  is  from  its  nature  a 
tax  of  espionage,  while  the  tax  on  tea,  coffee,  and  sugar  is  not  ?  But 
the  tax  on  tea,  coffee,  and  sugar  takes  from  the  little  lump  of  sugar 
dealt  out  in  charity,  or  to  penury,  as  well  as  from  the  confections  of 


INCOME  TAX.  325 

the  ricli.  There  is  no  argument  of  injustice  or  hardship  that  can  be 
mentioned  against  the  income  tax  to  be  compared  to  the  tax  npon  tea, 
coffee,  and  sugar.  Take  also  the  tax  on  salt,  an  article  of  prime  neces- 
sity ;  and  yet  we  levy  on  that  article  $2,000,000.  So  upon  lumber. 
So  on  the  stamps,  which  reach  every  man's  business  and  every  man's 
transactions,  and  yet  nobody  proposes  to  repeal  the  stamp  tax.  That 
yields  about  the  sum  the  income  tax  does,  and  a  little  more.  Take  the 
special  tax  on  beer  shops.  We  collect  $1,Y00,000  by  a  special  tax  on 
the  sale  of  spirits  and  beer,  and  the  collection  of  that,  as  I  will  show 
you  hereafter,  costs  about  one  third  as  much  as  the  collection  of  the 
income  tax,  yielding  seven  times  the  amount. 

Kow,  when  you  are  compelled  to  levy  such  taxes  as  these,  is  it  hard, 
is  it  unjust  that  the  wealthier  men  of  our  community  should  at  least 
be  required  to  pay  twice  as  much  as  the  drinkers  of  beer,  as  much  as 
the  people  who  drink  tea,  one  third  of  the  tax  levied  upon  sugar,  as 
much  as  that  which  is  levied  on  coffee  ?  Is  there  something  so  in- 
herently vicious  in  the  income  tax  that,  after  we  have  gone  over  this 
whole  subject,  have  reduced  the  taxes  to  the  extreme  limit,  have  dared 
to  take  off  $82,000,000,  we  should  now  at  the  closing  hours  of  this  ses- 
sion go  back  to  reconsider  our  action  and  single  out  this  tax  alone,  leav- 
ing undisturbed  the  others  I  have  mentioned?  I  do  not  think  so. 
With  all  the  desire  I  have  had  to  approach  this  subject  without  being 
influenced  by  my  previous  views,  with  every  desire  to  remove  com- 
plaint, I  can  not  say,  as  a  Senator,  that  it  is  politic  or  right  to  relieve  the 
few  comparatively  who  pay  this  income  tax  while  we  are  compelled  to 
levy  these  other  taxes.  And,  sir,  when  this  question  was  debated  year 
after  year  in  the  British  Parliament,  where  every  man  was  the  repre- 
sentative of  property,  the  income  tax,  after  a  suspension  of  twenty 
years,  was  restored  ;  and  it  has  been  maintained  from  that  time  to  this, 
and  will  be  maintained  until  the  English  people  can  repeal  the  taxes 
upon  the  prime  necessaries  of  life. 

Many  objections  have  been  made  against  the  income  tax.  I  have 
not  often  sought  to  answer  them,  because  I  thought  they  would  answer 
themselves.  But  let  us  look  at  them.  I  think  I  have  grouped  them 
fairly ;  but  if  I  omit  any,  I  am  willing  to  pause  and  consider  it. 

The  first  objection  is  that  it  authorizes  espionage  into  a  man's  busi- 
ness. Well,  sir,  so  do  all  taxes.  Your  whisky  tax  authorizes  the  most 
searching  espionage,  and  assumes  that  fraud  is  inevitable  in  the  produc- 
tion of  whisky.  Ah,  but  the  answer  is,  a  man  who  makes  whisky  must 
be  judged  by  a  very  different  rule  from  a  man  who  has  a  large  income. 
Why?  Whisky  is  a  lawful  trade,  although  whisky  produces  a  great 
deal  of  misery ;  and  yet  no  one  complains  that  we  send  a  ganger,  a  de- 
tective, a  spy  to  watch  the  whisky-distiller ;  but  if  we  send  a  man  of 
respectable  presence  to  inquire  into  a  rich  man's  income,  it  is  espion- 
age ! 

Mr.  President,  we  must  not  refine  too  greatly  upon  these  things. 
So  take  the  case  of  tobacco.  Take  the  case  of  custom-house  duties. 
On  landing  at  the  city  of  l^ew  York,  as  I  have  done  once  or  twice, 
what  is  the  first  thing  you  meet  ?  A  custom-house  ofiicer.  What  does 
he  demand  ?     He  wants  to  look  at  your  trunks  ;  he  wants  to  spy  into 


326  SPEECHES  AND  REPOETS  OF  JOHN  SHERMAN. 

* 

your  baggage.  The  fii'st  feeling  is  one  of  resentment.  I  think  no 
man  can  arrive  at  a  2)oi*t  from  a  foreign  country  where  he  first  meets 
the  custom-house  officers  without  feeling  angry  that  the  law  authorizes 
a  private  inspection  of  his  coats  and  pantaloons.  But  no  custom-house 
laws  can  be  enforced  unless  this  espionage  is  allowed.  It  is  not  allowed 
for  the  purpose  of  interfering  with  men  or  women  engaged  in  ordinary 
travel,  but  the  espionage  must  extend  to  them  in  order  to  reach  the 
fraudulent  importer  or  the  smuggler. 

Another  thing.  There  is  not  a  State  in  this  Union  which  does  not 
authorize  more  espionage  into  a  man's  private  affairs  than  the  income- 
tax  law  of  the  United  States.  In  reframing  that  law  we  stnick  out 
nearly  all  its  offensive  provisions,  and  perhaps  somewhat  weakened  its 
force  by  this  anxiety  to  avoid  the  charge  of  espionage ;  but  even  yet  it 
does  authorize  an  inquiry  into  a  man's  income.  If  the  assessor  has 
reason  to  believe  that  a  man  is  fraudulently  concealing  his  income,  he 
has  a  right  to  take  measures  to  ascertain  it,  the  mildest  that  were  ever 
put  into  a  customs  or  a  tax  law,  and  yet  you  complain  of  that  espionage. 
Why,  sir,  every  State  does  it.  The  State  in  which  I  live  authorizes 
espionage  into  a  man's  property  ;  they  compel  him  to  swear  how  much 
personal  property  he  has,  what  it  is  composed  of,  and  they  put  a  long 
list  of  questions  to  ascertain  it.  Is  there  any  complaint  made  about 
that  ?  And  yet  it  is  done  in  every  State,  and  the  espionage  under  this 
income-tax  law  will  not  compare  to  that  authorized  by  the  laws  of  most 
of  the  States  with  which  I  am  familiar. 

Another  objection  has  been  made,  that  the  income-tax  law  does  not 
distinguish  between  income  from  land  and  income  from  trades  or  pro- 
fessions. It  is  said,  with  a  good  deal  of  plausibility,  that  where  an 
income  is  derived  from  a  permanent  source,  it  may  properly  pay  an  in- 
come tax ;  but  when  it  is  derived  from  a  trade  or  proiession,  the  in- 
come perishes  with  its  consumption,  and  ought  not  to  be  taxed.  That 
is  rather  more  plausible  than  real,  because,  after  all,  the  permanent  in- 
come coming  in  year  in  and  year  out  is  taxed  year  in  and  year  out, 
while  the  income  that  comes  but  once  and  perishes  in  its  use  is  taxed 
only  once. 

Sir,  this  subject  has  been  carefully  analyzed  in  the  British  Parlia- 
ment for  more  than  forty  years  past.  They  commence  by  analyzing  or 
classifying  incomes  into  five  great  divisions,  and  making  deductions 
from  certain  classes.  For  instance,  incomes  derived  from  professions 
were  put  upon  a  certain  list,  and  a  deduction  was  made  from  them  be- 
fore the  tax  was  applied,  while  permanent  incomes  were  taxed  at  their 
full  amount.  Experience,  however,  after  a  number  of  years  of  experi- 
ment, showed  that  this  was  not  founded  upon  correct  principles.  This 
subject  is  discussed  in  tomes  in  the  British  debates,  and  also  in  their 
works  on  political  economy,  until  finally  they  settled  down  substantial- 
ly upon  the  ground  that  there  was  only  one  rule  of  equity,  and  that 
was  the  rule  of  equality,  to  put  the  same  tax  upon  the  same  amount  of 
income,  however  derived,  and  however  brief  might  be  its  duration  ; 
on  the  principle  that  an  income  derived  from  a  profession  like  that  of 
a  lawyer  was  taxed  once  and  perished,  unless  it  was  invested  in  real 
estate  and  became  the  foundation  of  other  income.     We  have  followed 


INCOME  TAX.  327 

in  this  country  not  the  original  idea  of  the  English  law,  but  its  linal 
idea. 

But,  sir,  we  are  told  that  this  is  an  odious  and  unpopular  tax.  I 
never  knew  a  tax  that  was  not  odious  and  unpopular  with  the  people 
who  paid  it.  I  think  if  the  Senator  from  Pennsylvania  would  go  into 
some  places  in  Philadelphia  lie  would  find  that  the  whisky  tax,  which 
is  so  popular  with  us,  is  unpopular  there.  I  know  that  in  Brooklyn 
people  have  organized  armed  resistance  to  the  collection  of  the  whisky 
tax,  and  we  have  had  to  call  out  nine  hundi*ed  troops  of  the  United 
States  to  go  there  and  enforce  it.  Those  people  denounce  it  as  unjust 
and  unequal.  "We  do  not  think  so.  Sir,  if  you  would  levy  only  taxes 
which  in  the  opinion  of  everybody,  or  even  of  a  majority,  are  not  un- 
equal and  unjust,  you  would  have  such  a  tax  law  as  I  have  never  yet 
seen. 

When  you  come  to  examine  the  income  tax  you  will  find  that  it  ap- 
plies, it  is  true,  to  only  about  sixty  thousand  people ;  but  they  do  not 
pay  their  proper  share  of  other  taxes.  Why  ?  Can  a  rich  man  with 
an  overflowing  revenue  consume  more  sugar  or  coffee  or  tea,  or  drink 
more  beer  or  whisky,  or  chew  more  tobacco,  than  a  poor  man  ?  You 
tax  tobacco  at  the  same  rate  per  pound,  whether  it  is  tobacco  for  the 
wealthiest  or  for  the  poorest.  Here  is  a  case  of  inequality  admitted 
by  all ;  and  so  all  taxes  produce  inequality.  But  when  in  a  system  of 
taxation  you  are  compelled  to  reach  out  to  many  objects,  you  must  en- 
deavor to  equalize  your  general  result  by  reaching  all  sources  of  taxa- 
tion, and  do  the  best  you  can  to  equalize  in  that  way. 

Therefore,  when  it  is  comj)lained  that  the  tax  on  an  article  con- 
sumed is  unjust  upon  the  poor,  because  the  poor  have  to  consume  a 
greater  proportion  of  their  income  in  its  purchase  than  the  rich,  we 
answer  that  to  countervail  that  we  have  levied  a  reasonable  income  tax 
upon  such  incomes  as  are  above  the  wants  and  necessaries  of  life.  That 
is  the  only  answer,  and  it  is  a  complete  answer ;  because,  if  you  leave 
your  system  of  taxation  to  rest  solely  upon  consumption,  without  any 
tax  upon  property  or  income,  you  do  make  an  unequal  and  unjust 
system. 

I  admit  that  there  are  isolated  cases  of  hardship.  My  friend  from 
Pennsylvania  stated  very  strongly  the  worst  of  them,  which  is  that  by 
our  tax  laws  we  levy  the  tax  upon  the  whole  income  of  the  corporation 
without  allowing  a  deduction ;  and  as  a  corporation  is  but  the  repre- 
sentative of  a  great  many  persons,  it  may  be  that  we  levy  that  tax 
upon  the  income  of  a  poor  widow  who  has  not  had  the  benefit  of  the 
exemption.  That  is  something  that  can  not  be  helped.  We  levy  the 
income  tax  upon  a  corporation  as  upon  a  single  body,  because  that  is 
the  legal  nature  and  character  of  a  corporation.  It  is  true  that  the  tax 
is  deducted  from  the  interest  and  dividend  paid  to  the  individual.  If 
it  was  practicable  to  follow  the  income  derived  from  a  corporation  to 
the  various  beneficiaries  of  the  income,  every  man  would  say  that  in 
justice  each  of  them  should  be  entitled  to  the  exemption ;  but  it  is  not 
practicable.  I^o  tax  law  can  be  so  framed  as  to  do  exact  justice. 
Therefore  we  regarded  these  corporations,  precisely  as  the  law  regards 
them,  as  persons,  and  levied  the  tax  on  them,  and  authorized  them,  in 


328  SPEECHES  AND  REPORTS  OF  JOHX  SHERMAN. 

the  adjustment  of  the  tax  among  their  stock-holders,  to  deduct  the 
proper  proportion  from  each  one.  The  very  difficulty  of.  adopting  any 
other  scheme  comj)elled  us  to  pursue  that  course.  The  idea  that  every 
stock-holder  ought  to  have  the  right  to  deduct  this  from  his  income  is 
impracticable,  known  to  us  all  when  tried. 

But  it  is  said  this  tax  is  unconstitutional,  and  an  opinion  has  been 
produced  here  which  I  have  before  me,  signed  by  one  lawyer  that  I 
know  and  another  that  I  do  not  know.  If  I  could  not  get  a  better 
opinion  than  this,  one  that  showed  more  consideration,  for  hfty  dollars, 
from  the  best  lawyer  in  the  United  States,  I  should  consider  him  ex- 
orbitant in  his  charges.  I  do  not  question  the  reputations  of  these 
gentlemen  at  all ;  but  it  is  the  first  time  I  ever  heard  in  the  Senate  of 
the  United  States  a  paid  opinion  of  an  attorney — and  we  all  like  the 
profession  very  well — quoted  upon  a  question  of  constitutional  law  in 
regard  to  a  law  that  has  been  upon  the  statute  book  seven  years. 

It  is  enough  to  say  that  the  income  tax  has  been  levied  by  the 
United  States  since  18(33  ;  and  there  is  no  court,  so  far  as  I  know,  that 
has  pronounced  the  law  unconstitutional — certainly  no  United  States 
court.  No  decision  has  been  made  of  that  kind.  l!^o  dictum  of  a 
judge  can  be  quoted  to  that  effect,  so  far  as  I  know.  The  fact  that 
the  question  has  not  been  presented,  and  that  we  have  collected  under 
this  tax  $150,000,000  from  all  kinds  of  people,  is  a  pretty  good  evi- 
dence that  there  is  not  much  in  the  point ;  but  if  you  look  at  the 
Constitution  of  the  United  States,  I  think  that  settles  it  clearly.  The 
Constitution  gives  to  Congress  more  power  over  the  subject  of  taxa- 
tion than  almost  any  other.  We  have  the  power  to  levy  taxes  almost 
without  limit.  The  only  limit  is  that  we  dare  not  levy  "  a  capitation 
or  other  direct  tax  "  except  in  a  particular  way,  and  we  can  not  levy  a 
tax  on  exports.  I^ow,  is  an  income  tax  a  capitation  tax  ?  It  falls  upon 
some  individuals,  but  is  not  levied  by  the  head,  and  therefore  it  is  not 
a  capitation  tax.  Is  it  a  direct  tax  ?  I  think  the  decision  of  the  Su- 
preme Court  in  the  early  case  of  the  carriage  tax — I  have  forgotten 
the  name  of  the  case — practically  settles  the  question.  The  only  direct 
tax  is  a  tax  on  real  estate  and  slaves.  But  it  is  not  necessary  for  me 
to  discuss  a  question  of  this  kind  which  is  thrown  in,  as  almost  every 
law  that  is  proposed  is  said  to  be  unconstitutional. 

Kow  let  us  go  a  little  further.  The  opinion  of  the  present  Com- 
missioner of  Internal  Revenue  is  quoted  as  favoring  a  repeal  of  this 
tax.  There  is  no  officer  of  the  Government  to  whom  I  would  more 
willingly  yield  on  a  mere  question  as  to  the  mode  and  machinery  of 
collecting  the  internal  revenue  taxes  ;  he  has  had  great  experience,  and 
so  far  as  I  know  has  considerable  ability  in  that  way ;  but  if  he  ever 
expressed  an  opinion  to  a  committee  of  this  body  or  of  the  other 
House  as  to  the  necessity  of  this  tax,  it  certainly  was  extra-official  and 
extra-judicial.  If,  as  it  is  said  by  some  of  the  newspapers,  he  stated 
that  this  tax  was  totally  unnecessary,  that  is  only  his  opinion  ;  it  is  not 
the  opinion  of  the  officer  of  the  Government  charged  with  our  finances. 
As  to  tlie  mode  of  collecting  specific  internal  taxes,  his  opinion  is  en- 
titled to  the  respect  due  to  that  of  any  gentleman.  As  to  what  money 
W3  want,  how  much  we  want,  how  much  other  sources  of  revenue 


INCOME  TAX.  329 

will  yield,  wliat  our  expenditures  are  or  are  likely  to  be,  I  should  be 
ashamed  to  say  that  every  member  of  the  Senate  has  not  more  ample 
facilities  of  ascertaining  than  he. 

This  is  a  question  not  as  to  whether  the  income  tax  is  just  or  not. 
If  the  newspapers  report  correctly  that  he  said  it  was  not,  I  think  we 
can  judge  of  that  better  than  he  can,  because  we  have  a  broader  view, 
with  greater  responsibility.  I  suppose  the  whole  of  it  was  that  he  said 
that  he  would  be  glad  to  see  the  income  tax  repealed,  and  I  have  no 
doubt  he  is  in  favor  of  its  repeal ;  but  that  he  undertook  to  say  what 
the  newspapers  reported  of  him  I  do  not  believe  at  all.  Besides,  these 
newspapers  make  him  speak  in  behalf  of  and  in  the  name  of  the  Presi- 
dent. That  certainly  can  not  be  true.  The  President  of  the  United 
States  has  two  modes  of  communicating  with  us,  either  directly  by  his 
Secretary,  or  indirectly  by  the  Secretary  of  the  Treasury ;  and  he  never 
undertook,  and  never  sought,  I  am  quite  sure,  to  influence  Congress  or 
any  committee  by  his  private  opinion,  conveyed  in  this  informal  way, 
and  no  man  was  authorized  to  speak  for  him  in  that  w^ay. 

But  the  Senator  from  Pennsylvania  seems  to  follow  in  the  line  of 
the  newspaper  argument,  that  this  is  a  very  expensive  tax  to  collect. 
Sir,  the  income  tax,  from  its  very  nature,  is  the  cheapest  tax  levied, 
except  one.  I  have  here  a  statement  made  even  by  so  creditable  a 
paper  as  the  'New  York  "  Evening  Post,"  in  which,  speaking  of  this 
tax  and  urging  its  repeal,  it  says  :  "•  Add  to  all  this  that  the  Commis- 
sioner of  Internal  Revenue  himself  is  convinced  that  the  collection  of 
the  tax  will  do  no  good  to  the  Treasury,  because  it  will  cost,  under  the 
present  law,  almost  as  much  as  it  will  yield."  Such  a  wild  statement 
as  that  was  made  in  an  editorial  article  in  one  of  the  most  excel- 
lent papers  in  the  United  States.  I  have  here  also  an  extract  from 
the  "  Brooklyn  Union,"  making  the  same  general  statement.  The 
"  New  York  Tribune "  has  made  the  same  statement.  If  it  w^ere 
necessary  to  reply  to  so  foolish  a  statement,  I  could  do  it  in  a  moment. 
Why,  sir,  the  whole  expense  of  collecting  the  internal  revenue,  whisky 
tax  and  all,  is  estimated  at  only  between  five  and  six  million  dollars. 
It  is  only  about  an  average  of  four  per  cent.,  or  a  little  more  ;  while 
this  income  tax  as  now  reduced  will  yield  $12,833,000. 

Instead  of  this  being  an  expensive  tax,  it  is  the  cheapest  tax  col- 
lected by  the  National  Government  from  internal  revenue,  except  the 
tax  on  banks.  The  tax  on  banks  is  collected  from  sixteen  hundred 
corporations  by  the  Treasury  of  the  United  States  without  costing  the 
Government  one  cent.  The  income  tax,  from  its  very  nature,  is  the 
next  cheapest  tax  on  the  list.  This  fact  is  shown  in  an  official  report 
made  by  the  Secretary  of  the  Treasury  three  years  ago.  While  the 
general  average  of  collecting  taxes  was  then  between  three  and  four 
per  cent.,  the  estimated  expense  for  collecting  the  income  tax  was  not 
over  two  per  cent.  Why  is  that  ?  The  income  tax  is  collected  from 
corporations  in  large  masses.  Take,  for  instance,  the  Pennsylvania 
Railroad  Company.  The  income  tax  on  their  dividends  is  collected  in 
a  single  sum,  in  great  masses,  at  a  cost  of  comparatively  nothing.  All 
the  tax  on  corporations  is  collected  with  scarcely  any  perceptible,  ex- 
pense, except  by  swelling  the  sum  paid  to  the  assessors  and  collectors. 


330  SPEECHES  AND   EEP0RT3   OF  JOHN  SHEPvMAN. 

The  tax  on  salaries  is  collected  without  cost  by  disbursing  officers ; 
and  the  personal  tax  on  incomes  is  collected  from  a  few  prominent, 
well-known  persons,  to  whom  any  assessor  can  go.  It  is  collected  only 
in  wealthy  districts. 

The  Senator  from  Pennsylvania  himself  said  that  it  was  collected 
mainly  in  twenty-three  districts  ;  that  all  the  income  tax  collected  out- 
side of  twenty-three  districts  amounted  to  an  inconsiderable  sum.  It 
is  collected  in  districts  where,  from  the  nature  of  the  case,  we  must 
have  revenue  officers  to  collect  other  special  taxes,  on  whisky  and  beer 
shops,  and  various  other  taxes.  The  income  tax  is  collected  in  weal- 
thy communities  where,  as  long  as  our  internal  revenue  system  stands, 
we  must  necessarily  have  assessors  and  collectors.*  Why,  sir,  the  rej^eal 
of  the  income  tax  would  not  result  in  the  dismissal  of  a  single  assist- 
ant assessor,  because  there  is  no  district  in  which  the  income  tax  is 
paid  to  any  considerable  amount  where  there  are  not  whisky  and  beer 
shops,  and  where  tlie  whisky  and  tobacco  and  other  internal  taxes  are 
not  levied.  By  law  you  must  establish  in  every  county  of  the  United 
States  a  place  where  stamps  can  be  sold  ;  and  the  actual  commission  or 
cost  of  selling  stamps,  although  the  most  convenient  form  of  revenue, 
is  five  per  cent,,  while  the  collection  of  the  income  tax  costs  only  from 
two  to  four  per  cent.  In  my  judgment  the  whole  of  this  $12,833,000 
will  be  brought  into  the  Treasury  at  an  expense  not  to  exceed  three  or 
four  hundred  thousand  dollars,  or  from  two  to  three  per  cent. 

There  is  only  one  other  topic  in  this  connection  to  which  '1  wish  to 
allude.  While  those  who  have  large  incomes  complain  of  this  tax — 
and  I  know  they  have  complained  of  it  to  me  bitterly — it  must  be  re- 
membered that  the  result  of  the  war  has  enormously  increased  the  value 
of  all  investments.  I  have  now  in  my  mind  a  single  corporation,  the 
stock  of  which  before  the  war  might  have  been  bought  for  from  twenty 
to  forty  cents  on  the  dollar,  and  now  it  is  worth  two  hundred.  Why 
this  increase  in  values?  Because  of  the  strength  of  our  country. 
Every  man  buys  and  sells  land  in  the  United  States  with  confidence  in 
its  value.  The  holders  of  property,  those  whose  good  fortune  it  is  to  en- 
joy large  incomes,  have  been  benefited  by  the  effect  of  the  war,  not  only 
in  enhancing  business,  in  furnishing  us  paper  money  and  facilities  for 
negotiating  business,  but  in  the  actual  addition  to  the  value  of  all  the 
real  estate  in  the  land  ;  and  this  is  a  reason  why  they  should  aid  by  a 
small  income  tax  to  raise  the  necessary  money  to  meet  the  expenses 
growing  out  of  the  war.  This  income  tax  is  just  as  much  a  war  tax 
now  as  when  it  was  levied  during  the  war,  because  it  is  now  levied  to 
pay  expenses  incurred  in  the  war.  I  think,  therefore,  that  in  wl^atever 
way  you  view  the  income  tax,  whether  as  a  question  of  right  and  jus- 
tice in  the  distribution  of  taxes  among  men,  or  on  grounds  of  principle, 
the  property-holders  of  this  country  ought  to  be  willing  that  it  should 
stand  upon  the  statute  book  until  we  can  make  a  general  review  of  the 
whole  subject  of  taxation ;  and  then,  if  we  find  that  we  can  receive 
from  other  sources  the  money  that  is  now  provided  by  the  income  tax, 
let  us  repeal  it,  giving  at  the  same  time  relief  to  other  classes. 

Perhaps  the  most  difficult  subject  that  the  next  Congress  will  have 
to  meet  is  the  subject  of  the  general  reduction  and  revision  of  taxation. 


INCOME  TAX.  331 

I  know  that  in  speaking  one  year  in  advance  of  the  time  I  am  liable  to 
commit  many  errors,  which  I  will  not  consider  myself  to  be  bound  by. 
My  argument  as  to  this  bill  exhausts  itself  in  the  simple  proposition 
that  we  ought  not  to  deal  with  the  income  tax  now  as  a  separate  propo- 
sition, but  leave  it  to  be  settled  when  we  come  to  revise  and  systema- 
tize our  whole  system  of  taxation.  That  at  the  next  session  of  Congress 
it  will  be  necessary  to  bring  about  a  general  reduction  of  taxation  is 
admitted  on  all  hands ;  and  if  the  state  of  our  finances  then  authorizes 
us  reasonably  to  hope  for  a  surplus,  I  for  one  shall  be  wiUing  to  direct 
my  attention,  and  join  with  others  in  directing  the  general  attention, 
to  the  entire  revision  of  the  whole  system.  This  can  only  be  brought 
about  by  adoj)ting  certain  general  principles : 

First.  By  a  searching  reduction  of  expenses. 

Second.  By  availing  ourselves  of  our  experience  in  administering 
the  tax  on  whisky  and  tobacco,  and,  if  possible,  increasing  the  revenue 
from  those  sources. 

Third.  By  a  reduction  of  the  interest  of  the  public  debt,  which  can 
result  only  after  we  have  raised  the  value  of  our  five-twenty  bonds 
above  par  in  gold. 

The  principles  upon  which  this  reduction  is  to  be  founded  must  in- 
clude : 

1.  A  comprehensive  review  of  our  internal  and  customs  taxes  as  an 
entire  system,  with  a  view  to  rej)eal  or  modify  those  that  bear  most 
heavily  upon  the  people. 

2.  We  must  dispense  as  far  as  practicable  with  internal  taxes,  and 
confine  them  solely  to  articles  the  consumption  of  which  is  not  neces- 
sary or  useful,  and  to  such  surplus  income  as  will  tend  to  equalize  taxes 
between  capital  and  consumption.  My  conviction  is  that  after  this 
year  we  may  and  ought  to  repeal  every  internal  tax  except  on  sj)irits, 
tobacco,  and  beer,  and  such  a  modified  income  tax  as  will  reach  only 
the  product  of  capital  not  needed  for  the  necessaries  of  life. 

3.  Such  a  reduction  of  the  duties  on  imported  goods  as  will  cheapen, 
as  far  as  is  consistent  with  the  absolute  wants  of  the  Government,  the 
price  of  such  goods  as  can  not  be  produced  in  this  country,  and  are  in 
general  use  as  necessaries  of  life,  or  as  the  basis  of  our  domestic  indus- 
try. Upon  such  goods  as  enter  into  competition  with  domestic  industry 
I  would  levy  specific  duties  equal  to,  but  no  more  than,  the  average 
rate  of  duty  demanded  by  our  financial  wants  upon  imported  goods. 
This  is  ample  protection  to  all  domestic  industry  not  unnatural  or  forced 
by  a  hot-house  process. 

I  have  carefully  studied  the  application  of  this  rule,  and  have  noAV 
on  my  table  the  result  of  it,  showing  the  application  of  it  to  all  the 
great  domestic  productions  of  cotton,  wool,  iron,  copper,  and  steel,  and 
can  show  that  this  rule  of  equity  and  equality  will  give  to  all  these  in- 
dustries the  measure  of  protection  that  they  can  reasonably  ask,  and 
with  which  I  know  most  of  them  will  be  content.  It  is  the  only  rule 
that  will  give  our  home  industry  such  stable  and  incidental  protection 
as  will  enable  them  to  compete  with  foreign  labor.  If  under  it  any 
branch  of  industry  can  not  survive  foreign  competition,  that  is  the 
highest  evidence  that  such  industry  is  forced  and  foreign  to  our  soil, 


332  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

climate,  or  condition.  Sucli  a  rule  fairly  applied,  without  yielding  to 
local  or  interested  clamor,  and  witliout  making  distinctions  between  the 
productions  of  different  forms  of  industry,  would  remove  the  details  of 
our  tariff  laws  from  the  demagogism  of  party  politics,  would  give  them 
stability,  and  tempt  capital  and  labor  into  those  fields  of  industry  where 
we  can  compete  with  all  nations. 

As  to  articles  known  as  luxuries,  such  as  spirits,  cigars,  jewelry,  and 
some  fabrics  of  silk,  the  only  limit  in  the  rate  of  duty  should  be  the 
limit  which  experience  may  show  will  prevent  smuggling.  Whatever 
increased  revenue  we  may  be  able  to  derive  from  these  sources  above 
the  average  should  be  applied  to  the  reduction  of  duties  on  necessaries 
of  life  and  on  raw  j^roducts. 

There  is  a  topic  introduced  here  very  often  by  the  honorable  Sen- 
ator from  Illinois.  It  has  rather  been  a  favorite  of  his.  He  is  con- 
tinually talking  to  us  about  the  enormous  mass  of  gold  in  the  Treasury. 
Whenever  an  effort  is  made  either  to  prevent  the  repeal  of  a  tax  or  to 
caution  the  Senate  against  any  extravagant  ajDpropriation,  we  are  always 
told  that  there- is  a  great  mass  of  gold  in  the  Treasury,  and  we  can 
draw  on  that  to  make  good  any  deficiency.  In  my  opinion,  that  mass 
of  gold,  of  which  I  shall  now  show  the  precise  nature  and  purpose, 
ought  not  to  be  considered,  in  this  connection  ;  but  as  the  subject  is 
brought  in  by  others,  it  becomes  necessary  for  me  to  answer  them. 

We  are  told  that  the  surplus  of  gold  in  the  Treasury  will  make 
good  all  deficiencies  in  the  revenue.  The  surplus  gold  ought  not  to 
be  considered  in  the  question  of  the  repeal  of  taxes,  but  should  be 
maintained  as  the  basis  of  the  resumption  of  specie  payments,  as  the 
steadying  governor  of  our  finances,  and  ultimately  for  the  payment  of 
such  of  our  notes  as  may  be  presented  for  redemption.  The  resump- 
tion of  specie  payments  should  be  the  result  of  the  gradual  apprecia- 
tion of  the  public  credit  without  a  forced  contraction  of  the  currency, 
and,  above  all,  should  not  be  hastened  by  a  forced  and  unforeseen  sale 
of  the  gold  in  the  Treasury. 

The  immediate  effect  of  the  sale  of  gold  on  business  is  to  decrease 
the  price  of  the  gold.  As  a  matter  of  course,  the  more  of  this  commodity 
you  throw  upon  the  market  the  lower  the  price  will  be.  The  effect  of 
that  at  once  is  to  disturb  values,  as  between  the  creditor  and  debtor. 
If  an  officer  of  the  Government,  without  reflecting  upon  the  conse- 
quences, were  to  throw  upon  the  market  a  large  amount  of  gold,  he 
would  bear  the  market  down,  and  perhaps  bring  ruin  and  devastation 
upon  the  debtors  of  the  country  by  changing  the  value  of  the  standard 
in  which  their  debt  was  contracted ;  and  if  this  amount  of  gold  is 
diminished  to  too  great  a  degree,  the  other  effect  is  produced.  Un- 
doubtedly the  Secretary  of  the  Treasury  might  force  down  gold  nearly 
to  par  in  paper,  and  might  in  thirty  days  compel  the  resumption  of 
specie  payments  by  the  exhaustion  of  all  the  gold  on  hand ;  but  what 
would  be  the  effect  ?  If  the  resumption  of  specie  payments  is  forced 
by  the  depletion  of  the  Treasury,  by  the  sale  of  all  the  gold  in  the 
Treasury,  how  can  specie  payments  be  maintained  ?  The  whole  weight 
and  burden  of  specie  payments  will  fall  upon  the  Government  when- 
ever the  Government  resumes.     Why  ?    Because  the  greenbacks  them- 


INCOME  TAX.  333 

selves  are  the  basis  of  our  bank  circulation ;  and  if  this  gold  is  forced 
into  sale,  the  effect  of  that  forced  sale  may  bring  the  price  of  gold  to 
the  paper  standard ;  but  the  inevitable  result  would  be  that  we  could 
not  for  a  moment  maintain  the  resumption  of  sj)ecie  payments,  because 
we  would  have  no  specie  on  hand  to  redeem  the  notes  that  would  be 
presented. 

Now,  Mr.  President,  there  is  a  very  exaggerated  idea  of  the  amount 
of  gold  in  the  Treasury.  I  have  here  an  ofhcial  statement  made  within 
a  day  or  two,  which  shows  the  precise  nature  and  character  of  this 
"  enormous  mass  of  gold."  If  Senators  will  look  at  the  last  statement 
of  the  public  debt,  they  will  find  that  on  the  1st  of  January,  1871,  the 
coin  in  the  Treasury  amounted  to  $107,802,280.95,  and  there  were  out- 
standing coin  certificates  to  the  amount  of  $26,149,000 ;  showing  a  re- 
mainder, the  actual  property  of  the  Government,  of  $81,653,280.95. 
The  gold  certificates  are  merely  deposits  of  private  individuals,  and  by 
the  very  terms  of  the  certificates  the  gold  must  be  kept  on  hand.  There 
was  a  coin  liability  at  that  date  (January  1, 1871),  for  interest  pre\dously 
due  and  impaid,  of  $6,327,196.16 ;  and  the  interest  becoming  due  on 
that  day  amounted  to  $28,479,635.  There  remained  unpaid  and  due 
on  the  1st  of  January,  1871,  on  the  principal  of  the  loan  of  1860,  $4,- 
119,000,  and  interest  thereon  amounting  to  $107,775 ;  showing  a  net 
balance  in  the  Treasury  of  $42,619,674.79.  That  is  the  precise  amount. 
This  does  not  include  either  accniing  interest  or  notes  and  bonds.  It 
is  complained  that  while  this  $42,000,000  of  gold  is  lying  idle  in  the 
Treasury  we  lose  the  interest  on  it.  So  we  do ;  but  why  is  it  main- 
tained tliere  ?  If  it  was  not  there,  we  would  soon  find  out  the  reason. 
That  gold  is  the  only  steadying  balance-wheel  of  our  whole  financial 
system.  It  is  remarkable  that  our  paper  money  now  varies  scarcely  the 
shadow  of  a  shade.  The  gradual  appreciation  in  the  value  of  our  paper 
money  has  been  almost  imperceptible,  but  as  sure  as  the  falling  of  the 
snow  upon  the  earth.  Suppose  that  $40,000,000  of  surplus  gold  had 
not  been  on  hand ;  the  bulls  and  bears  of  I^ew  York  could  at  any  mo- 
ment toss  the  value  of  all  commodities  upon  the  waves  of  speculation. 
There  is  no  power  in  the  Government  to  prevent  at  any  moment  a 
combination,  either  for  the  hoarding  of  greenbacks  or  for  forced  sales 
of  gold,  except  that  fulcrum  resting  in  the  vaults  of  the  Treasury,  by 
which  any  attempt  to  interfere  with  the  natural  order  of  things  and 
the  business  of  this  country  may  at  once  be  put  a  check  to. 

"Why,  sir,  the  Secretary  of  the  Treasury  saved  more  to  this  country 
in  September,  1869,  by  the  mere  threat  to  sell  $3,000,000  of  gold,  than 
all  the  gold  in  the  Treasury.  The  business  men  of  this  country  and 
its  business  interests  would  have  been  sacrificed  by  that  speculation  to 
a  greater  extent  by  far  than  all  the  gold  in  the  Treasury.  It  is  only 
that  great  balance-wheel  that  enables  the  Secretary  to  keep  those  spec- 
ulators in  check. 

But  it  is  said  we  lose  the  interest  on  this  gold.  So  we  do.  Does 
not  a  bank  lose  interest  on  its  reserves  ?  It  is  illogical  for  us  to  com- 
plain of  the  loss  of  interest  on  this  gold  when  we  are  by  means  of  that 
gold  maintaining  at  a  reasonable  price  over  three  hundred  and  ninety 
million  dollars  of  forced  paper  money.     The  only  reserve  now  on  hand 


334  SPEECHES  AKD  REPORTS  OF  JOHN  SHERMAN. 

to  maintain  the  credit  of  that  $390,000,000  is  the  gold  in  the  Treasury, 
after  paying  tlie  balances  that  are  chargeable  against  it.  We  require 
of  every  bank  in  the  United  States  to  maintain  a  reserve  of  from  fif- 
teen to  twenty-five  per  cent.,  not  only  on  its  circulation  but  on  its 
deposits.  Why  do  we  do  that  ?  Why  do  we  compel  them  to  hoard 
idle  in  their  vaults  one  fourth  of  their  entire  capital,  deposits,  and  cir- 
culation ?  Merely  in  order  that  they  may  be  able  to  redeem,  if  they 
are  called  upon  for  redemption.  There  is  no  right  to  maintain  paper 
money  in  circulation,  either  by  banks  or  individuals,  unless  there  is  an 
absolute,  demonstrable  ability  at  any  time  to  redeem  that  circulation. 
The  only  reserve  that  has  been  retained  by  the  Government  to  steady 
the  market  price  of  this  paper  money,  to  appreciate  its  value,  and  ulti- 
mately to  reach  specie  payments,  is  that  $42,000,000  of  gold  lying  idle 
in  the  Treai^ury  ;  and  that  gold  does  not  bear  so  large  a  proportion  to 
our  circulation  as  the  feeblest  and  most  insignificant  bank  in  the  most 
remote  Western  State  is  compelled  to  maintain  day  by  day,  to  guard 
against  the  uncertainty  of  the  redemption  of  its  notes,  although  they 
may  be  secured  by  United  States  bonds.  Therefore,  I  say  it  is  illogi- 
cal to  complain  about  the  hoarding  of  this  gold  merely  because  we  lose 
interest  on  it,  when  we  gain  interest  on  $390,000,000  of  paper  money. 
We  gain  $32,000,000  and  we  lose  $2,500,000. 

The  true  policy  of  specie  payments,  in  my  judgment,  is  to  offer  in 
exchange  for  our  notes  such  a  bond  as  can  probably  be  maintained  at 
par  with  gold,  and  with  such  an  ample  reserve  of  gold  that  dissentients 
can  be  paid  in  coin  if  demanded.  In  this  way  the  United  States  can 
cease  to  make  money,  except  the  standard  coin  at  the  mints,  and  the 
business  of  banking,  like  any  other  business,  may  be  left  to  private  in- 
dividuals under  general  law.  The  United  States  can  protect  the  note- 
holder with  the  most  absolute  security,  and  the  amount  of  paper  money 
may  be  left  to  the  laws  which  limit  the  amount  of  other  productions  ; 
and  each  producer  and  consumer  will,  in  an  imperceptible  way,  affect 
its  quantity  just  as  he  does  the  quantity  of  wheat,  corn,  or  cotton  pro- 
duced and  consumed.  The  vast  benefit  conferred  upon  the  United 
States  by  the  national  banking  system  will  then  be  fully  realized.  It 
combines  private  capital  and  enterprise  with  Government  security  and 
uniform  value,  and  will  never  be  jeopardized  by  State  banks  or  the 
impracticable  idea  of  an  exclusive  metallic  currency. 

Mr.  President,  the  financial  success  of  tliis  Administration  has  been 
wonderful  indeed,  and  we  who  are  its  agents  to  some  extent  can  with 
pride  congratulate  ourselves  upon  the  beneficial  effects  of  the  Adminis- 
tration upon  the  finances  of  our  country.  Let  us  look  at  it  for  a  mo- 
ment. When  General  Gi'ant  came  into  power  a  paper  dollar  was  worth 
only  seventy-one  cents  in  gold  ;  to-day  it  is  worth  ninety-one  cents  in 
gold,  or  an  advance  of  nearly  twenty-seven  per  cent.,  without  any  dis- 
tress and  without  any  contraction.  The  same  amount  of  greenbacks  is 
now  afloat,  and  yet  the  steady,  advancing  credit  of  our  country  has 
appreciated  their  value  twenty-seven  per  cent.  Our  five-twenty  bonds 
when  General  Grant  came  into  power  were  worth  eighty-three  cents 
in  gold  ;  now  they  are  worth  ninety-seven  in  gold,  without  any  con- 
siderable diminution  of  their  amount,  and  by  the  simple  appreciation 


INCOME  TAX.  335 

of  our  pnblic  credit ;  and,  in  my  judgment,  within  a  very  short  time 
they  will  be  at  par,  and  will  be  paid  off. 

The  banks  have  not  been  disturbed  in  their  loans  to  the  people,  but 
have  increased  them.  Everybody  believed  that  when  we  approached 
specie  payments  the  banks  would  be  compelled  to  contract ;  and  yet, 
during  all  this  time,  while  we  are  aj^proaching  specie  payments  so 
rapidlv,  the  banks'  have  enlarged  their  loans.  On  the  1st  of  March, 
1869,  they  were  $658,000,000,  and  now  they  are  $712,000,000. 

Not  only  that ;  the  debt  has  been  reduced,  not  by  an  increase  of 
taxes,  but  by  a  saving  in  expenditures  of  nearly  two  hundred  million 
dollars.  I  admit  that  much  of  the  expenditure  incurred  during  Mr. 
Johnson's  administration  was  for  floating  and  unsettled  debts  of  the 
late  war.  I  am  not  now  making  any  political  allusion  at  all,  nor  seek- 
ing to  arraign  that  Administration.  I  only  speak  of  it  as  a  fact  that, 
with  diminished  taxes,  increased  value  of  our  paper  money,  and  in- 
creased value  of  our  bonds,  yve  have  paid  off  nearly  two  hundred  mil- 
lion dollars  of  indebtedness,  and  are  now  within  a  few  cents  of  specie 
payments. 

While  this  process  was  going  on  we  were  able  at  the  last  session  to 
reduce  our  taxes  over  eighty-two  miUion  dollars  a  year,  by  a  carefully 
adjusted  system,  in  which  nearly  all  the  obnoxious  taxes,  and  two  thirds 
of  the  income  tax,  about  which  we  are  now  talking,  were  swept  away. 
"We  confidently  expect  at  the  next  session  not  only  again  largely  .to  re- 
duce taxes,  but  to  so  adjust  them  that  those  that  remain  will  fall  more 
.lightly  on  our  people.  These  things  may  play  but  a  small  part  in  the 
political  debates  of  the  day,  but  they  are  the  strength  of  this  Adminis- 
tration. 

This  tax  affects,  it  is  trae,  about  eight  hundred  offiee-holders  of  the 
United  States — certainly  not  over  a  thousand,  including  officers  of  the 
army.  It  is  said  that  it  affects  some  officers  in  some  of  the  States. 
How  many  ?  How  many  officers  of  States  have  salaries  of  over  $2,000 
after  their  taxes  and  other  things  are  paid  ?  Yery  few  indeed.  If  they 
want  to  appeal  to  the  constitutionality  of  the  law,  let  them  do  it,  and  I 
have  no  fear  of  the  result.  It  affects  some  fifty  or  sixty  thousand 
people  who  are  able  to  pay  it.  To  say  that  this  is  a  discriminating  tax 
against  them,  is  to  say  that  the  English  Government,  in  the  adjustment 
of  their  taxes,  have  levied  upon  themselves  the  same  kind  of  tax  since 
the  time  of  Sir  Robert  Peel. 

Mr.  President,  I  have  been  threatened  in  every  way  about  this  mat- 
ter. I  will  read  what  the  "  Brooklyn  Union  "  has  to  say  about^  those 
who  insist  on  maintaining  the  income  tax — a  paper  published  in  the 
very  town  where  the  population  is  in  arms  against  the  whisky  tax,  I 
am  told.  Here  is  what  the  editor  of  the  "  Brookljm  Union  "—who  is 
also  the  editor  of  the  Kew  York  "  Independent,"  and  no  doubt  has  an 
excellent  income,  and  I  am  glad  of  it — says  :  "  The  people  mean  to  have 
this  tax  out  of  the  way,  even  if  they  have  to  put  the  men  out  of  the 
way  who  are  responsible  for  its  continuance." 

"^Sir,  there  are  sixty  thousand,  all  told,  who  have  to  pay  this  tax. 
"We  are  all  in  that  favored  sixty  thousand,  because  the  people  of  the 
United  States  give  us  over  $2,000  a  year.     We  are  compelled  to  pay 


336  SPEECHES   AND  REPORTS   OF  JOHN  SHERMAN. 

this  tax.  And  now  ev^eiy  man  who  thinks  it  is  better  to  retain  this  tax 
a  while  longer  is  threatened  with  the  indignation  of  the  people.  I  am 
inclined  to  think  that  we  shall  be  able  to  endure  and  survive  it. 

Sir,  the  same  threats  were  made  against  Sir  E-obert  Peel  when  he 
proposed  to  renew  the  income  tax.  _  The  politicians  of  that  day  de- 
nounced him,  and  were  able  after  a  while  to  punish  him  to  some  extent ; 
but  it  did  not  deter  him.  It  was  the  reorganization  and  reinstitution 
of  the  income  tax  in  England  that  led  to  that  revision  of  taxes  which 
changed  the  whole  current  of  affairs  in  England ;  and  I  believe  now 
that  if  the  property-holders  of  this  country,  who  are  compelled  to  pay 
the  income  tax,  will  bear  with  it  a  little  while  longer,  for  the  two  years 
during  which  it  is  to  exist,  they  will  never  have  cause  to  regret  it. 

So  far  as  my  own  State  is  concerned,  I  am  impartial  in  this  matter. 
The  State  of  Ohio  pays  her  full  proportion  of  the  income  tax  according 
to  her  population,  I  have  here  the  statement.  Most  of  the  Western 
States  pay  but  little  income  tax,  but  Ohio  pays  dollar  for  dollar,  accord- 
ing to  her  poi)ulation.  The  old  tax  was  just  about  a  dollar  an  inhabi- 
tant. Ohio  pays  her  share ;  and  I  have  it  to  say,  for  the  men  of  Ohio 
who  pay  this  income  tax,  that,  with  very  rare  exceptions,  such  as  I  do 
not  wish  to  name,  they  have  not  complained  of  the  tax,  but  are  willing 
to  bear  their  share  of  it.  But,  impelled  by  a  sense  of  duty,  in  the  in- 
terest of  the  whole  people,  I  feel  bound,  without  any  regard  either  to 
my  own  interest  or  that  of  my  State,  to  maintain  this  and  all  other 
taxes  until  I  can  see  daylight  ahead  and  a  better  tiuie  to  repeal  them. 


INTERNAL  TAXES  AND   TARIFF. 

ly  THE  SENATE,  MARCH  15,  1873. 

The  Senate,  as  in  Committee  of  the  Whole,  having  resumed  the  consideration  of 
the  bill  (H.  R.  No.  173)  to  repeal  the  duties  on  salt,  Mr.  Sherman  said: 

Me.  PKEsroENT:  I  am  sorry  that,  even  for  a  moment,  the  evil 
shadows  of  our  long  political  debates  are  cast  upon  a  purely  business 
discussion,  which  aifeets  the  interests  of  all  the  people  of  the  United 
States,  and  yet  need  not  excite  any  political  feeling,  or  any  division 
of  opinion  except  upon  questions  of  dry  political  economy.  I  take  it 
that  it  will  be  most  agreeable  to  Senators  if  I  confine  my  remarks  this 
morning  to  a  general  statement  of  the  condition  of  the  country,  to  such 
facts  as  in  my  judgment  authorize  us  to  enter,  for  the  sixth  time  since 
the  close  of  the  war,  upon  a  repeal  of  taxes,  and  also  to  state  the  gen- 
eral principles  upon  which  this  reduction  is  proposed,  rather  than  to 
burden  you  with  elaborate  details.  These  wiU  be  more  properly  stated 
as  the  debate  progresses. 

The  taxes  already  repealed  yielded  $233,000,000.  But  our  revenues 
still  largely  exceed  our  expenditures,  and  we  are  justified  by  several 
reasons  in  continuing  the  repeal  of  taxes.     Those  which  remain  yield 


li^TERNAL  TAXES  AND  TARIFF.  337 

largely  more  tlian  in  former  years,  and  more  than  was  estimated  by 
the  most  sanguine  person.  The  production  of  the  country  has  greatly 
increased.  Industry  in  alm"ost  every  department  has  been  actively  em- 
ployed. The  consumption  of  our  people,  which  under  our  system  of 
revenue  is  chiefly  the  basis  of  taxation,  has  by  the  prosperity  of  our 
industry  been  also  largely  increased.  At  the  same  time  the  national 
exj^enditures  are  diminishing.  Our  financial  condition  is  improving  in 
every  particular.  We  are  slowly  but  sm-ely,  without  contraction  or  ex- 
pansion, but  by  the  increasing  uses  of  our  paper  money,  approaching  a 
specie  standard.  The  interest  of  our  debt  is  daily  diminishing,  through 
the  diminution  of  the  principal  and  the  reduction  of  the  rate  on  that 
which  remains.  All  these  favorable  circumstances  enable  us  to  ap- 
proach the  question  of  the  further  reduction  of  taxes  with  more  system 
and  better  inforaiation  than  formerly,  and,  I  trust,  with  the  sincere 
desire  to  make  the  reduction  in  such  manner  as  to  yield  the  largest 
possible  relief  to  our  people. 

The  only  questions  to  be  considered  are,  how  much  and  what  taxes 
ought  to  be  repealed '{ 

Let  me  first  state  how  tjie  subject  now  comes  before  us.  On  the 
34th  of  March,  1871,  the  House  of  liepresentatives  passed  three  bills: 
A  bill  to  repeal  the  duty  on  coal ;  a  bill  to  repeal  the  duty  on  salt ; 
and  one  to  repeal  the  duty  on  tea  and  coffee.  The  duties  thus  proposed 
for  repeal  yielded  last  year  §21,000,000.  The  Committee  on  Finance 
was  of  the  opinion  that  it  was  not  wise  to  consider  these  bills,  except  in 
connection  with  the  whole  subject  of  revenue  reduction.  On  the  12th 
of  April,  1871 ,  the  Senate  passed  the  following  resolution  : 

Besolred,  That  the  Committee  on  Finance  is  hereby  instructed,  during  the  re- 
cess of  Congress,  to  carefully  examine  the  existing  system  of  taxation  by  the  United 
States,  with  a  view  to  propose  such  amendments  to  the  bills  of  the  House  of  Repre- 
sentatives repealing  certain  taxes,  now  pending  in  the  Senate,  as  will  simplify,  re- 
vise, and  reduce  both  the  internal  taxes  and  the  duties  on  imported  goods  now  in 
force ;  and  so  that  the  aggregate  of  such  taxes  shall  not  exceed  the  sums  required 
to  execute  the  laws  relating  to  the  public  debt,  and  to  pay  the  current  expenditures 
of  the  Government,  administered  with  the  strictest  economy;  and  so  that  such 
taxes  may  be  distributed  as  to  impose  the  least  possible  burden  upon  the  people. 

In  obedience  to  these  instructions  the  Committee  on  Finance  did 
during  the  recess  examine  in  detail  the  laws  imposing  taxation,  and 
agreed  upon  amendments  to  both  the  tariff  and  internal  revenue  laws. 
But  in  reporting  to  the  Senate  our  action,  we  had  to  consider  the  power 
of  the  Senate  over  revenue  bills.  The  powers  of  the  two  Houses  in 
this  respect  are  regulated  by  article  one,  section  sev^en,  clause  one,  of 
the  Constitution  of  the  United  States,  as  follows : 

All  bills  for  raising  revenue  shall  originate  in  the  House  of  Representatives,  but 
the  Senate  may  propose  or  concur  with  amendments,  as  on  other  bills. 

This  provision  has  often  been  the  subject  of  controversy  between 
the  two  Houses.  We  had  before  us  three  bills  of  the  House,  with  the 
unquestioned  power  to  propose  amendments  to  either  of  them.  It  was 
clear  that,  if  the  House  proposed  to  repeal  or  modify  certain  taxes,  the 
Senate  could  propose  instead  to  repeal  or  modify  other  taxes.  But  as 
all  the  taxes  proposed  for  repeal  by  the  House  were  customs  duties, 
22 


338  SPEECHES  AND  REPOPwTS  OF  JOHN  SHERMAN. 

the  qiiestion  arose  whether  we  coiikl,  in  the  way  of  amendment,  pro- 
pose the  repeal  of  internal  taxes.  The  parliamentary  law,  as  well  as 
the  practice  heretofore,  settled  this  qnesticm  in  the  affirmative.  The 
subjects  are  germane  to  each  other.  They  are  both  '"  l)ills  for  raising 
revenue."  The  distinction  is  only  as  to  the  subjects  and  mode  of  taxa- 
tion. The  House  has  itself  repeatedly  connected  the  two  in  one  bill, 
and  notably  so  in  the  act  passed  two  years  ago.  The  modification  of 
one  compels  the  modification  of  the  other.  The  logic  of  the  subject 
matter  compels  us  to  consider  the  whole  revenue,  when  proposing  to 
reduce  either  form  of  taxes.  Still,  to  avoid  all  possible  disjnite,  the 
Committee  on  Finance  thought  it  advisable,  while  considering  the 
whole  subject  of  taxation,  to  confine  their  amendments  to  customs 
duties,  and  to  offer  these  amendments  to  one  bill  rather  than  to  three. 
The  amount  of  customs  revenue  proposed  fur  repeal  by  the  House  sub- 
stantially conforms  to  that  ])roposed  by  the  Senate.  The  House  will 
no  doubt  in  due  time  pass  a  bill  to  reduce  internal  taxes,  when  the  Senate 
can  propose  its  amendments.  In  debate,  however,  we  must  consider 
the  subject  as  a  whole,  and  nnist  therefore  consider  how  much  revenue 
w^e  can  dispense  with,  and  what  taxes  ougl\t  to  be  repealed  or  modified. 

Since  the  close  of  the  war  it  has  been  the  highest  public  policy  to 
maintain  our  revenue  at  a  point  hirgely  in  excess  of  our  expenditures ; 
for  a  large  surplus  revenue  has  been  not  only  useful  in  ]iaying  unliqui- 
dated debt,  but  also  of  great  importance  in  reestablishing  the  public 
credit,  in  improving  our  currency,  and  in  reducing  the  rate  of  interest 
to  be  paid.  But  the  time  has  now  arrived  when  we  can  safely  reduce 
our  revenues  to  barely  enough  to  pay  the  expenses  of  the  Govern- 
ment, economically  administered,  the  interest  on  the  public  debt,  and 
such  additional  sum  as  it  may  seem  to  be  good  policy  to  apply  on  the 
principal. 

The  expenditures  during  the  fiscal  year  ending  June  30,  1871, 
including  interest,  were  8292,177,188.25  ;  for  the  current  fiscal  year 
(partly  estimated),  $293,403,382.92  ;  for  the  next  fiscal  year  (estimated), 
$273,025,773.99.  These  sums  exclude  the  sinking  fund  and  all  pay- 
ments on  the  principal  of  the  debt.  The  net  receipts  of  the  Govern- 
ment during  the  last  fiscal  year  were  $383,323,91:4.89  ;  for  the  current 
fiscal  year  (partly  estimated),  $305,198,374.00  ;  for  the  next  fiscal  year 
(estimated),  $359,000,000.  The  actual  surplus  revenue  for  the  year 
ending  June  30,  1871,  was  $91,146,776.64  ;  for  the  current  fiscal  year 
(partlv  estimated),  $71,794,991.68  ;  for  the  next  fiscal  year  (estimated), 
$85,974,226. 

The  question  arises,  how  far  the  estimates  of  expenditure  will  be 
increased  by  additional  appropriations  by  Congress.  It  is  not  probable 
that  any  material  change  will  be  made  in  the  aggregate  appropriations 
for  the  current  fiscal  year,  while  our  current  receij^ts  are  largely  in 
excess  of  the  estimates.  The  increase  is  caused,  to  some  extent,  by  the 
importation  of  goods  in  place  of  duty-paid  goods  destroyed  by  the  fire 
at  Chicago.  The  estimate  of  the  Secretary  of  the  Treasury  contem- 
plates a  reduction  of  expenditure  for  the  next  fiscal  year,  as  compared 
with  this  year,  of  more  than  twenty  million  dollai*s,  or,  as  compared 
with  last  year,  of  more  than  nineteen  million  ;  but  this  is  explained, 


INTERNAL  TAXES   AND   TARIFF.  339 

mainly  by  the  exclusion  from  tlie  estimates  of  the  preminm  paid  on 
bonds  and  the  premium  received  on  gold,  which  balance  each  other. 

The  estimates  are  based  npon  appropriations  required  by  existing 
laws.  They  can  be,  and  ought  to  be,  diminished  in  several  important 
branches  of  the  public  service.  The  abolition  of  the  franking  privilege, 
the  reduction  of  public  printing,  the  reduction  of  the  internal  revenue 
service,  a  close  scrutiny  of  the  pension  list,  a  careful  limitation  of  ap- 
propriations for  public  buildings,  and  a  general  cutting  off  of  expendi- 
tures that  grew  out  of  the  war,  Init  which  have  survived  the  war, 
would  enable  us  to  repeal  other  taxes  without  injury  to  the  public  service. 

On  the  other  hand,  the  wants  of  a  great  and  growing  country  like 
ours,  exercising  new  powers,  extending  daily  its  influence  into  new 
regions  within  our  own  linaits,  and  into  far-distant  countries  whose 
civilization  is  more  and  more  influenced  by  commerce  with  us — all 
these  compel  a  gradual  increase  of  just  and  proper  expenditure.  Such 
an  increase  does  not  indicate  extravagance,  but  it  does  indicate  growth, 
health,  and  strength. 

There  is  another  cause  of  a  nominal  increase  of  expenditure,  which 
operates  slowly  and  silently,  but  as  surely  as  the  march  of  invention 
and  civilization.  It  is  in  tlie  changing  purchasing  power  of  money. 
The  dollar  of  to-day  may  contain  as  many  grains  of  gold  as  does  the 
dollar  of  a  year  ago,  but  its  purchasing  power  is  diminishing  year  by 
year,  at  a  rate  not  less  than  one  per  cent,  per  annum.  This  change 
is  partly  caused  by  the  increased  productir)n  of  the  precious  metals, 
and  by  the  diminution  of  labor  required,  and  the  new  inventions  ap- 
plied, to  produce  them.  But,  mnre  than  by  all  else,  it  is  caused  by  the 
new  device  of  modern  finance  which  substitutes  paper  and  credit,  in 
innumerable  forms,  in  the  place  of  gold  and  silver ;  so  that  tliese  met- 
als are  not  now,  as  formerly,  the  active  agencies  of  commerce,  either 
foreign  or  domestic,  but  the  mere  standard  or  gauge  of  value.  J^ven 
paper  money,  so  called,  the  greenback  and  bank  note,  are  crowded  from 
their  old  use,  and  the  check,  draft,  acceptance,  and  bill  are  the  coin 
of  exchanges,  great  and  small,  foreign  and  domestic,  to  an  extent  never 
before  kno^vn.  These  facts  make  less  coin  necessaiy  than  foimerly, 
and,  coupled  with  the  actual  increase  of  gold  and  silver,  slowly  and 
surely  depress  their  purchasing  power,  and  make  a  greater  sum  neces- 
sary, not  only  to  buy  marketing  or  pay  for  labor,  but  to  conduct  a 
government. 

This  obvious  tendency  of  a  diminution  in  the  value  of  money  not 
only  increases  our  expenditures,  but  adds  to  our  revenues  Ijy  the  in- 
creased value  of  production.  It  also  largely  diminishes  the  burden  of 
debt,  and  especially  of  a  national  debt  running  for  a  long  period  of 
years.  It  is  also  obvious  that,  as  nearly  one  half  of  out  expenditures 
are  on  the  basis  of  paper  money,  they  have  l)een  increased  to  at  least 
the  extent  of  the  depreciation  of  that  money.  Salaries  have  been  from 
time  to  time  increased,  to  cover  this  depreciation,  the  increase  in  some 
cases  l)eing  several  times  as  great  as  the  amount  of  the  depreciation.  The 
cost  of  all  supplies  for  the  ai-my  and  navy,  and  of  all  labor  for  the  civil 
service,  has  been  enhanced  in  the  same  way.  As  our  paper  money  ap- 
proaches to  a  specie  standard,  we  may  expect  a  corresponding  reduction 


340  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

ill  the  cost  of  supplies,  but  can  hardly  Lope  for  a  general  reduction  of 
salaries. 

Again,  we  ma}'  reasonably  hope  that  expenditures  growing  out  of 
the  war  will  (liiniiiish  as  time  passes.  My  colleague  in  the  House,  Gen- 
eral (iartifld,  made  an  interesting  and  ac-curate  statement,  showing  that 
out  of  the  s21.>l,.">(i4,441.43  of  aggregate  e.\])enditures  for  the  last  tiscal 
year,  SlT."), 54:^, 140.27,  or  sixty  and  one  half  jier  cent,  of  the  whole, 
was  paid  directly  for  the  expenses  growing  out  of  the  late  war.  The 
Secretary  of  the  Treasury  luis  estimated  for  a  probable  diminution  of 
these  expenses;  but  we  must  remember  the  vast  mass  of  unlitpiidated 
war  claims  which  are  imw  under  examination,  large  amounts  of  which 
will  uiKjuestioiiably  be  allowed,  and  will  enter  into  onr  expenditures 
for  some  yeai*s  to  come.  The  great  mass  of  our  expenditures,  probably 
over  eighty  per  cent,  of  the  whole,  is  settled  by  laws  whieh  are  j)racti- 
cally,  if  not  theoretically,  beyond  the  action  of  Congress.  The  })ublic 
debt,  the  permanent  appropriations,  the  salaries  of  public  otticers,  the 
pay  of  the  army  and  navy,  Indian  treaties— all  these  are  in  effect  be- 
yond ]m)bability  of  diminution.  Still,  as  I  have  already  stated,  there 
are  reforms  which,  if  ado})ted  by  Congress,  would  enable  us  to  })roj)ose 
a  greater  reduction  of  taxes  than  it  is  prudent  for  us  now  to  do. 

I  wish  to  call  the  attention  of  the  Senate  for  a  moment  to  some  re- 
marks made  in  the  House  of  Kepreseiitatives  by  one  of  its  most  distin- 
guished members,  on  this  very  jioiiit,  which  I  think  are  aj^t  to  mislead 
the  public  at  large,  as  \vell,  jierhaps,  as  the  Senate  and  the  J  louse.  The 
chairman  of  the  Committee  of  Ways  and  Cleans,  in  cautioning  the 
House  against  a  too  extravagant  expenditure  of  tHe  public  money,  has 
estimated  for  new  items  of  ajipropriation,  in  addition  to  the  sum  of 
$273,000,000  which  I  have  already  given,  and  which  he  says  were 
omitted  from  the  estimates.  IJut  this  is,  by  a  careful  examination, 
easily  explained.     He  says  : 

Now,  I  want  to  call  the  attention  of  tlio  Iloase  to  what  the  officers  of  the  De- 
partment have  added  to  this  amount : 

Estimates  for  1872-73,  not  including  pay  toward  public  debt $273,025,773 

To  be  added : 

Omissions  from  estimates $1,. 100,000 

Deficiency  bill ♦5,200,000 

Buildings  in  Chicago 4,000,000 

Buildings  in  Hartford 300,000 

Buildings  in  St.  Louis 2.')0,000 

Buildings  in  Albany 350,000 

Buildings  in  Indianapolis 100,000 

Buildings  in  Quincy 150,000 

Buildings  in  Trenton 250,000 

Corporation  tax  to  be  refunded 2,500,000 

Pensions  dated  back  up  to  and  including  1873 10,664,085 

Washington  treaty 310,000 

26,574,685 

Total !!299,60i>,458 

On  a  careful  analysis  of  this  statement  I  find  that  his  fears  are  en- 
tirely unfounded,  and  that  the  estimates  already  given  by  me  include 
every  item  of  expenditure,  M'itli  but  few  exceptions,  that  are  necessary 


INTEKXAL   TAXES   AND   TARIFF.  341 

to  be  provided  for  by  law.  They  are  ratlier  over-  than  under-esti- 
mated. For  instance,  as  to  omissions  from  the  estimates,  stated  by 
him  at  §1,500,000,  I  can  find  none  such.  Tlie  deficiency  bill  he  puts 
at  $0,200,000 ;  but  that  is  a  deficiency  for  this  year,  not  for  the  next 
year.  It  does  not  ^o  into  the  expenditures  of  next  year  at  all,  and 
will  be  paid  out  of  the  large  suiplus  revenue  of  the  present  year. 
Then  he  speaks  of  "  buildings  in  Chicago,  $4,000,000."  It  is  true  that 
we  may  expend  $4,0o0,000  for  buildings  in  Chicago,  but  our  receipts 
have  been  increased  more  than  twice  $4,o00,000  by  the  destruction  of 
duty-paid  goods  in  tliat  city ;  and  all  the  expenditures  necessary  to  be 
incurred  by  the  United  States  in  the  reconstiiiction  of  l)uildings  in 
Chicago  will  be  more  than  counterbalanced  by  the  gain  upon  duty-j^aid 
goods,  which  must  be  imported  to  supply  the  place  of  those  destroyed 
by  the  fire. 

Another  item  is,  "  Corporation  tax  to  be  refunded,  $2,500,000."  In 
the  first  place,  tlie  l)ill  for  the  refunding  of  taxes  has  not  yet  passed ; 
but,  if  it  does  pass,  it  will  only  take  so  mucli  money  out  of  the  current 
receijits  for  this  year,  of  which  there  is  a  large  surplus. 

The  "pensions  dated  back  to  and  including  ls73"  are  estimated  by 
him  at  $10,«U;4,<'>S5.  It  is  cnougli  to  say  that  the  House  of  Ilepresen- 
tatives,  probably  witliout  a  careful  examination  of  the  sul)ject,  passed 
that  l)ill;  but  I  am  as.<ured  there  is  not  the  slightest  })robability  that  it 
will  pass  the  Senate,  or  be  even  reported.  The  chairman  of  the  Com- 
mittee on  Pensions  informs  me  that  there  is  no  }>robability  or  possibil- 
ity of  such  a  bill  passing  at  this  session. 

So  I  find  that,  (»f  all  the  items  of  increase  to  be  provided  for  ac- 
cording to  this  statement,  there  is  l»ut  sl,7l(>,<»oo  left,  while  on  the 
other  hand  the  Committee  on  Approj)riations  in  the  ll(»use  lias  already, 
to  its  credit,  largely  reduced  the  estimates  of  the  Secretary  of  the 
Treasury.  Fur  instance,  the  fortification  bill,  which  is  estimated  at 
83,210,«'>00,  is  reduced  in  the  House  of  Rejiresentatives  to  $1,J)S5,000. 
The  appropriations  for  public  works,  instead  of  ])eing  $rj,4r)8,O00, 
Avill,  I  am  told,  in  the  single  item  fur  rivers  and  harbors,  be  reduced 
about  six  million  dollars;  and  there  is  scarcely  a  possibility,  certainly 
no  probabihty,  that  Congress  will  authorize,  all  told,  for  public  build- 
ings, the  amount  of  $19,468,000  estimated  by  the  Secretary  of  the 
Treasury.  It  is  likely  that  certain  public  buildings  will  be  erected,  ])ut 
it  is  not  probable  that  the  amount  named  for  them  in  the  annual  esti- 
mates will  be  expended  for  that  purpose. 

I  assume,  then,  upon  the  estimate  of  the  Secretary  of  the  Treasury, 
that  the  sum  of  $27^^,025,773.99  will  be  required  to  meet  the  interest 
on  the  public  debt,  the  pension  list,  and  the  other  proper  expenditures 
of  the  Government.  To  tliis  must  be  added  such  further  sum  as,  by  a 
wise  public  policy,  ought  to  be  applied  to  tlie  reduction  of  the  debt. 
So  much  of  this  sum  as  is  set  apart  as  a  sinking  fund,  under  the  acts  of 
February  25,  isr>2,  and  July  14.  1870,  is  not  open  to  discussion.  Tlii8 
fund  consists  of  two  items,  to  wit :  one  per  cent,  of  the  aggregate  debt, 
or  $22,s05,930,  and  the  interest  upon  the  capital  of  the  sinking  fund, 
which  next  year  will  be  $5,783,333  ;  making  together  an  afjgreo^atc  of 
$28,679,263.     This  sum,  increasing  year  by  year,  is  specifically  pledged 


342  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

to  the  reduction  of  tlie  del)t ;  and  its  regular  paj-nient  is  as  "niucli  a 
part  of  the  public  obligation  as  is  the  payment  of  interest. 

Whether  a  greater  sum  shall  be  applied  to  the  reduction  of  the 
debt  is  purely  a  question  of  public  policy.  There  is  not  now  the  same 
motive  as  formerly  for  its  rapid  extinction.  Since  the  close  of  the  war 
we  have  been  paying  interest  at  the  rate  of  seven  and  three  tenths  per 
cent,  annually.  We  could  sell  our  six  per  cent,  bonds  for  coin  only  at 
a  large  discount.  AYe  had  a  vast  unliquidated  floating  debt,  which  it 
was  clearly  the  public  policy  to  pay  off  rather  than  to  swell  the  funded 
debt.  Even  our  licpiidated  debt  was  largely  in  demand,  or  other  short- 
time  liabilities.  Our  currency  was  so  far  depreciated  as  to  affect  the 
public  credit  in  all  the  money  markets  of  the  world.  At  the  present 
time  the  change  is  wonderful.  Since  the  commencement  of  (reneral 
Grant's  administration  the  improvement  in  our  flnancial  condition  has 
been  unexampled.  We  can  borrow  readily  at  Ave  per  cent.,  and  are 
now  negotiating  for  a  still  lower  rate.  All  of  our  six  per  cent,  bonds, 
which  include  the  great  mass  of  our  indebtedness,  are  above  par  in 
gold,  and  await  our  pleasure  as  to  the  time  of  payment.  The  floating 
debt  is  all  paid,  save  that  which  is  litigated  and  disputed.  All  our  de- 
mand liabilities  are  discharged,  except  a  balance  of  the  three  per  cent, 
certificates,  and  these  are  being  gradually  redeemed.  Our  currency 
approximates  in  value  to  the  specie  standard,  and  the  Government  is 
strong  enough  to  resume  at  any  moment,  the  time  l)eing  only  a  question 
of  domestic  policy,  as  it  affects  debtor  and  creditor,  pn  xlucer  and  C(  »nsumer. 
The  banks  in  the  national  system  are  so  generally  distril)uted  that  they 
furnish  a  uniform  currency,  and  they  only  await  the  mandate  of  the 
Government  to  maintain  that  currency  at  par  with  gold  and  silver. 

Every  element  which  forms  the  basis  of  pul)lic  credit,  our  strength, 
our  resources,  and  our  fidelity  to  public  engagements,  has  been  demon- 
strated. Xo  unnatural  strain  upon  our  resources  is  now  necessary  to 
enable  us  to  fulfill  our  public  engagements,  to  resume  specie  payments, 
or  rapidly  to  fund  our  debt  at  lower  rates  of  interest.  But  we  have  a 
traditional  national  policy,  uniformly  maintained  in  time  f)f  peace, 
founded  upon  good  reasons,  and  supported  by  the  advice  of  all  the 
eminent  statesmen  of  our  country,  that  such  pro^•ision  ought  to  be 
made  as  will,  if  not  interrujited  by  war,  pay  off  the  public  debt  within 
the  life  of  a  single  generation,  or  in  about  thirty  years.  This  we  can 
now  easily  do,  and  yet  at  each  Congress  repeal  and  reduce  taxes.  The 
Committee  on  Finance  concluded  that  850,000,000,  including  the  sink- 
ing fund  provided  by  law,  should  be  annually  applied  to  the  reduction 
of  the  debt,  and  that  this  sum,  added  to  the  1^^273,025,773.99  of  apjiro- 
priations,  or  a  total  of  $323,025,773.99,  should  be  the  basis  for  deter- 
mining our  revenue  reduction. 

In  estimating  the  revenue  for  the  next  fiscal  year,  especially  from 
customs  duties,  we  have  several  elements  of  uncertainty.  Internal 
revenue,  based  upon  consumption,  and  customs  duties  on  such  articles 
as  tea,  sugar,  and  coffee,  may  be  estimated  uith  reasonal)le  accuracy ; 
but  the  results  of  any  given  rates  of  duty  on  the  great  body  of  textile 
and  metallic  fabrics  are  proverbially  uncertain.  An  ovei'flowing 
Treasury,  being  itself  evidence  of  excessive  importations,  may  within 


INTERNAL  TAXES  AND  TAEIFF.  343 

a  single  year  become  the  indirect  cause  of  a  cleliciency  of  revenue. 
The  results  of  any  system  of  duties  can  only  be  conjectured  by  a  care- 
ful study  of  trade,  and  the  most  sagacious  merchants  have  sometimes 
wrecked  their  fortunes  by  a  mistake  in  this  matter. 

One  illustration  I  remember  very  well.  In  March,  1857,  we  were 
legislating  to  reduce  the  revenue,  because  we  had  such  an  overflowing 
Treasury.  My  honorable  friend  from  Vermont  [Mr.  Momll],  then, 
like  myself,  a  member  of  the  other  House,  said  that  he  would  vote  for 
almost  any  bill  which  would  reduce  taxes,  in  order  to  get  rid  of  the 
surplus  revenue.  At  the  very  next  session  v:e  were  met  with  a  de- 
ficiency, and  were  compelled  to  borrow  money  from  the  beginning. 
The  occasion  of  this  was  the  revulsion  of  1S57,  which  paralyzed  all 
trade — the  revenues  of  the  country  l)eing  then  derived  entirely  from 
imported  goods.  A  long  period  of  time  shows,  as  a  general  result,  an 
annual  increase  of  revenue  of  about  four  per  cent,  per  annum  from  the 
same  taxes.  Tliis  increase  has  been  less  subject  to  violent  fluctuations 
with  our  paper  currency  than  witli  specie  payments. 

Again,  the  effect  oi  the  repeal  and  reduction  of  taxes  has  always 
])een  over-estimated.  The  decrease  of  a  tax  rarely  produces  a  correspond- 
ing decrease  of  the  revenue.  In  some  eases  it  causes  an  increased  im- 
portation of  the  foreign  and  a  falling  off  in  the  domestic  fabric,  while 
in  others  it  induces  an  increased  C(»nsumpti(ni  of  the  article.  Since  the 
1st  day  of  July,  18r)7,  tu  this  time,  the  receii)ts  from  customs  have 
gradually  risen,  as  follows : 

In  the  fiscal  vear  1868 8104,404,590  56 

In  tlie  fiscal  year  1800 180,048,426  03 

In  the  fiscal  year  1870 194,538,.374  44 

In  the  fiscal  year  1871 206,270,408  05 

This  is  an  aimual  increase  of  nearly  fourteen  millions  ;  and  yet,  dur- 
ing this  period,  customs  duties  were  repealed  which  yielded  s2<>,(iOO,- 
000  per  annum.  It  is  now  evident  that  the  customs  duties  for  the  cur- 
rent year  will  largely  exceed  those  for  last  year,  and  there  is  no  appar- 
ent reason  why  this  increase  shall  not  continue  during  the  next  fiscal 
year.  The  receipts  from  customs  from  the  1st  day  of  July,  1871,  to 
the  1st  day  of  March,  1872,  a  penod  of  eiglit  months,  are  !jil40,721,- 
000.  If  they  continue  at  the  same  rate  for  the  residue  of  the  fiscal 
year,  the  aggregate  receipts  will  be  8220,001,500. 

Four  months  ago  the  Secretary  of  the  Treasury  estimated  the  re- 
ceipts from  customs  for  next  year  at  8212,00(»,000;  but  upon  the  basis 
of  existing  law  we  may  fairly  estimate  them  at  8220,000,000.  The 
internal  revenue  for  the  next  fiscal  year,  upon  the  basis  of  existing 
law,  is  estimated  at  8110,500,000,  as  follows  : 

Spirits $50,000,000 

Tobacco 36,000,000 

Fermented  liquor? 8,500,000 

Hanks  and  bankers 5,000,000 

(Jas 3,200,000 

Adhesive  stamps 16,000,000 

Penalties 500,000 

Articles  and  occupations  formerly  taxed,  but  now  exempt 300,000 


Total $119,500,000 


344  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

This  estimate  does  not  include  the  residuum  of  the  income  tax  on 
personal  incomes  for  IbTl,  a  part  of  which  will  come  into  the  Treasury 
during  the  next  iiscal  year,  and  will  make  fully  good  the  estimate  of 
the  Secretary  of  the  Treasury,  of  S12(!,()00,000.  We  have  then  the 
proceeds  of  the  sale  of  public  lands,  and  miscellaneous  sources  of  reve- 
nue, estimated  at  $21,000,000,  making  an  aggregate  revenue  for  the 
next  iiscal  year  of  $373,000,000,  as  follows : 

Customs $226,000,000 

Internal  revenue 12(5,000,000 

Public  lauds 3,000,000 

Miscellaneous 18,000,000 

Total 8373,000,000 

This  will  create  a  surplus  of  $100,000,000  over  my  estimate  of  $273,- 
000,000,  or  of  $86,000,000,  over  that  of  the  Secretary  of  the  Treasury. 
The  general  balance-sheet  is  as  follows : 

Estimated  receipts  and  expenditures  for  the  year  ending  June  30,  1873. 

RECEIPTS. 

From  customs $226,000,000  00 

From  internal  revenue  as  follows : 

Spirits $50,000,000  00 

Tobacco 36,000,000  00 

Fermented  liquors 8,500,000  00 

Banks  and  bankers 5,000,000  00 

Gas 3,200,000  00 

Adhesive  stamps 16,000,000  00 

Penalties 500,000  00 

Articles  and  occupations  formerly  taxed,  but  now  exempt        300,000  00 

Residuum  of  income  tax 6,500,000  00 

126,000,000  00 

From  sales  of  public  lands 3,000,000  00 

Fees  from  United  States  consuls §565,563  24 

Fees  on  letters  patent 620,319  11 

Tax  on  circulation,  deposits,  etc.,  of  national  banks 6,303,584  32 

Repayment  of  interest  by  Pacific  Railroad  companies 813,284  75 

Homestead  and  other  land  fees 645,923  17 

Unenumerated 9,051,225  41 

18,000,000  00 

Total $373,000,000  00 

EXPENDITURES. 

Legislative  establishment 83,421,812  40 

Executive  establishment 17,443,531  38 

Judicial  establishment 3,383,350  00 

Military  establishment 31,422,509  88 

Naval  establishment 18,946,088  95 

Indian  affairs 5,445,617  97 

Pensions 30,480,000  00 

Public  works  under  Treasury  Department $3,104,500  00 

Public  works  under  Interior  Department 244,800  00 

Public  works  under  War  Department 14,609,662  97 

Public  works  under  Navy  Department 1,483,100  00 

Public  works  under  Agricultural  Department 26,500  00 

19,468,562  97 

Postal  service 5,474,001  00 

Miscellaneous 11,258,325  44 

Permanent  appropriations 126,281,974  00 

Carried  forward $273,025,773  99 


INTERNAL  TAXES  AND  TARIFF.  345 

Brought  forward $273,025,7'73  99 

Sinking  fund §22,895,930  00 

Interest  upon  capital  of  sinking  fund 5,783,333  00 

Reduction  of  debt  in  excess  of  sinking  fund 21,320,737  00 

50,000,000  00 

Total $323,025,773  99 

Receipts  in  excess  of  expenditures 49,974,226  01 

Total $373,000,000  00 

I  wish  also  in  this  connection,  as  this  is  a  matter  of  public  informa- 
tion, to  refer  a^ain  to  the  remarks  made  by  the  honorable  member  of 
the  House  of  Kepresentatives  to  whom  I  alluded  a  moment  ago.  He 
seemed  to  think  that  the  estimates  of  our  receipts  which  I  have  pre- 
sented are  overstated ;  and,  in  order,  no  doubt,  to  deter  the  House  from 
passing  too  large  appropriations,  or  increasing  the  expenditures  of  the 
Government,  he  endeavored  to  warn  them  against  the  possibility  of  a 
deficiency  of  the  revenue.  He  said  :  "  The  other  source  of  revenue  is  what 
is  known  as  miscellaneous  revenue.  In  its  nature  it  is  a  very  uncertain 
item  to  rely  upon."  Then  he  proceeded,  after  some  discussion,  to  re- 
duce the  miscellaneous  item  from  810,384,000,  as  I  gave  it,  to  812,181,- 
379.  But  when  I  come  to  examine  the  various  items  which  comjaose 
this  miscellaneous  revenue,  I  find  they  are  not  uncertain.  They  vary 
very  much,  it  is  tiiie,  from  year  to  year,  but  they  are  among  the  most 
certain  sources  of  revenue ;  and  there  is  scarcely  a  doubt  that  the  esti- 
mate given  by  me  is  an  under-  rather  than  an  over-estimate.  Among 
the  other  items  included  in  what  are  called  "  miscellaneous  "  is  the  tax 
on  the  capital,  circulation,  and  deposits  of  national  banks,  which  is  in- 
creasing year  by  year.  Last  year  the  tax  was  between  five  and  six 
millions,  and  this  year  it  is  estimated  at  86,303,000.  It  is  one  j^er  cent, 
on  the  amount  of  circulation,  one  half  of  one  per  cent,  on  the  amount 
of  deposits,  and  a  like  rate  on  the  amount  of  capital  not  invested  in 
United  States  bonds ;  and  the  whole  tax  can  not  be  less  than  from  six 
to  eight  million  dollars. 

The  other  matters  which  come  under  the  miscellaneous  head  are 
permanent  items  of  revenue.  For  instance,  the  "  repayment  of  interest 
by  the  Pacific  Railroad."'  That  road,  by  its  improved  condition  year 
by  year,  is  able  to  repay  more  and  more  of  the  interest  due.  Then  we 
have  "consular  fees,"  "homestead  and  other  land-office  fees,"  "tax  on 
seal-skins,"  "  reimbursement  of  the  United  States  for  salaries  of  store- 
keepers of  internal  revenue  bonded  warehouses  " — as  stable  as  anything 
can  be — 8557,000;  "parting  charges,  refining  gold  and  silver  coin, 
8200,000  "  ;  "  direct  tax,"  -vvhich  is  still  coming  in  ;  and  so  of  the  va- 
rious other  items  which  compose  this  "  miscellaneous  "  item.  My  honor- 
able friend  to  whom  I  have  alluded  has  undoubtedly  fallen  into  an  error 
as  to  the  character  and  nature  of  these  sources  of  revenue.  I  have  no 
doubt  they  will  exceed  rather  than  fall  short  of  the  estimates  that  have 
been  given. 

Again,  he  says  that  the  income  tax  is  estimated  to  yield  $12,000,000, 
but  that,  as  the  tax  expired  with  the  last  year,  as  a  matter  of  course, 
that  source  of  revenue  fails  ;  but  he  is  in  error  in  regard  to  that.  The 
amount  of  income  tax  estimated  to  be  collected  during  the  next  fiscal 


346  SPEECHES  AND  REPORTS  OF  JOHX  SHERMAN. 

year  is  $6,000,000  only,  a  part  of  tlie  whole  estimated  tax  being  collected 
duiing  the  present  fiscal  year,  and  going  to  swell  its  large  surplus.  Only 
$6,000,000  was  ever  estimated  for  the  next  fiscal  year. 

He  also  says :  "  The  Secretary  of  the  Treasury,  taking  last  year, 
and  so  much  of  the  present  year  which  has  passed,  estimates  the 
amount  to  be  received  from  customs,  for  the  purpose  of  estimating  the 
public  expenses,  at  $212,000,000."  If  the  rate  of  duties  received 
during  the  eight  months  of  the  current  fiscal  year  shall  continue  for 
the  next  four  months,  which  months  are  equally  as  favorable  for  the 
importation  of  goods,  the  actual  receijits  for  the  current  year  will  not 
be  less  tlian  two  hundred  and  twenty-odd  million  dollars ;  and,  making 
the  ordinary  allowance  for  an  increase,  the  same  duties  will,  duiing  the 
next  year,  unless  we  have  a  financial  revulsion,  produce  not  less  than 
$226,000,000,  and  probably  as  high  as  $230,000,000,  instead  of  $212,- 
000,000. 

I  will  not  pursue  this  matter  further,  because  I  think  I  can  see  very 
clearly  that  the  object  of  the  remarks  of  the  honorable  gentleman  to 
wdiom  I  referred  was  rather  to  caution  the  House  against  unnecessarily 
increasing  expenditures,  by  telling  tlie  very  true  and  very  sober  fact 
that  every  increase  of  appropriation  compels  us  either  to  continue  a  tax 
we  might  otherwise  repeal,  or  to  levy  a  new  tax,  in  case  the  expendi- 
tures should  greatly  exceed  the  amount  of  our  revenue. 

It  thus  appears,  upon  the  j^rinciples  which  I  have  stated,  and  upon 
estimates  whicli  necessarily  involve  uncertainty,  that,  after  applying 
$50,000,000  upon  the  j^ublic  debt,  we  shall  still  have  a  surplus  revenue 
of  $50,000,000.  Fifty  millions,  then,  is  the  extent  of  our  revenue  re- 
duction for  this  session.  How  shall  this  reduction  be  distributed  among 
the  objects  of  taxation  ?  In  what  mode  will  the  greatest  relief  be  given 
to  the  people  of  the  United  States  ?  Shall  this  large  reduction  be  made 
the  occasion  of  the  entire  revision  of  tlie  principles  upon  which  our 
revenue  laws  are  based,  or  shall  we  simply  repeal  or  reduce  the  most 
burdensome  taxes,  leaving  undisturbed  the  general  principles  of  our 
system  ? 

Since  the  passage  of  the  act  of  March  2,  1861,  commonly  known  as 
the  "  Morrill  tariff,"  our  domestic  industry  has  been  protected  from 
foreign  competition  by  duties  on  foreign  fabrics,  mainly  specific,  but, 
when  reduced  to  ad  valorem  rates,  ranging  from  twenty  to  eighty  per 
cent.  Under  this  protection  all  branches  of  manufacture  have  increased 
in  an  unparalleled  degree.  Old  industries  have  been  multiplied  and 
new  ones  established.  In  the  conduct  of  our  military  and  naval  opera- 
tions we  have  relied  mainly  upon  the  products  of  home  industry.  We 
now  produce  nearly  all  the  metallic  and  textile  fabrics  necessary  for  the 
use  of  man,  and  the  superior  invention  and  intelligence  of  our  mechanics 
is  largely  making  good  the  difference  between  the  cost  of  labor  here 
and  in  Europe. 

The  actual  cost  of  the  leading  productions  of  industry  is  now,  under 
domestic  competition,  nearly,  and  in  some  cases  quite,  as  low  as  before 
the  war.  The  market  value  of  aU  agricultural  products  has,  by  the 
diversity  of  our  industry  and  the  rapid  extension  of  our  railroads,  been 
maintained  as  high  proportionately  as  that  of  mechanical  fabrics,  while 


INTERNAL   TAXES   AND   TARIFF.  347 

the  increasing  use  of  agricultural  macliines  of  home  manufacture  has 
lessened  the  labor  of  production.  Wages  of  every  kind,  whether  for  the 
skilled  labor  of  the  artisan  or  for  the  rudest  form  of  manual  labor,  either 
on  the  farm,  in  the  mine,  the  workshop,  or  upon  the  railroad,  have  been 
maintained  at  rates  which  more  than  com]3ensate  for  the  increased  cost 
of  mechanical  and  agricultural  productions. 

(^ur  protective  system  has  drawn  to  our  country  a  vast  army  of  in- 
dustrious laborers.  Even  the  high  taxes  we  have  been  compelled  to 
im2)ose  on  domestic  industry  have  not  diminished  our  production,  for 
they  are  accomj^anied  by  increased  taxes  on  foreign  products.  We  may 
theorize  as  we  will,  but  the  actual  condition  of  the  country  is  the  best 
evidence  that  the  industrial  policy  steadily  maintained  by  us  during  the 
war,  and  since  the  war,  has  been  consistent  with  the  most  rapid  progress, 
has  enabled  us  to  meet  unexampled  difficulties,  and  yet  has  increased 
our  imports,  our  exports,  and  our  revenue. 

The  fear  that  high  duties  would  lessen  our  foreign  commerce  is  met 
by  the  steady  growth  of  it.     Our  imjjorts  were  : 

In  1869 ^414,256,243  29 

In  1870 452,875,665  68 

III  1871 518,759,518  32 

Our  exports  were : 

In  1869 8 113,961,115 

In  1870 499,092,173 

In  1871 562,518,651 

These  figures  show  a  steady  increase  in  our  foreign  commerce,  with  a 
growing  balance  of  trade  in  our  favor. 

We  have  not  the  statistics  to  demonstrate  the  annual  growth  of  our 
internal  commerce,  but  we  know  that  its  increase  has  been  much  greater 
than  that  of  our  foreign  commerce,  and  it  is  now  estimated  at  the  enor- 
mous sum  of  $4,000,000,000.  The  falling  off  in  our  merchant  marine 
on  the  ocean  is  caused  by  the  substitution  of  iron  for  wooden  vessels, 
while,  for  internal  commerce,  railroads  are  rapidly  taking  the  place  of 
water  navigation.  If  foreign-built  vessels  were  admitted  to  American 
registry  at  a  reasonable  rate  of  duty,  both  for  internal  and  external 
commerce,  it  would  not  only  encourage  the  building  of  American  iron 
ships,  but  would  secure  a  healthy  competition  in  our  internal  and  coast- 
ing trade,  now  absolutely  protected  by  our  navigation  laws. 

If,  then,  the  wisdom  of  our  protective  policy  is  to  be  tested  by  ex- 
perience, I  insist  that  it  is  proved  to  have  been  a  wise  policy  in  the 
actual  condition  of  our  country.  Ko  doubt  changes  are  demanded  by 
the  improved  and  improving  condition  of  our  finances.  Our  taxes  must 
be  reduced  to  correspond  with  the  reduced  wants  of  the  public  service ; 
but  every  industry  that  has  been  called  into  existence  by  our  policy, 
every  skilled  laborer  whom  we  have  invited  to  our  shores  or  encouraged 
to  devote  himself  to  a  special  employment,  every  capitalist  who  lias 
been  induced  by  our  laws  to  invest  his  money  in  industrial  pursuits, 
every  hamlet,  village,  and  city  that  has  been  built  by  reason  of  our  pro- 
tection laws,  every  community  of  farmers,  or  laborers,  or  shop-keejiers, 
whose  industry  has  been  employed  by  reason  of  our  policy,  may  demand 
of  us  that  any  changes  in  our  laws  shall  be  made  with  careful  reference 


318  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

to  the  industry,  capital,  and  skill  that  have  been  thus  encouraged,  in- 
vested, or  employed  in  the  development  of  our  policy. 

All  laws  that  affect  the  industry  of  the  people  should  be  as  stable  as 
possible,  consistent  with  the  inevitable  changes  that  attend  human  wants. 
I  hope,  therefore,  that  in  making  the  reduction  of  our  revenue  we  will 
all  agree  that  it  shall  be  so  done  as  to  give  the  greatest  measure  of  re- 
lief, and  do  the  least  possible  injury,  to  any  industry  fostered  bj^  our 
laws. 

In  the  reduction  of  duties  since  the  close  of  the  war,  it  has  been 
conceded  that  internal  taxes  should  first  be  repealed.  They  were  the 
product  of  the  war,  were  new,  inquisitorial,  reaching  every  county  and 
hamlet,  and  were  collected  by  officers  of  the  law  brought  to  the  door 
of  every  household.  The  worst  of  these  taxes  have  been  repealed  ;  but 
there  still  remain  many  special  taxes  which  make  it  necessary  to  keep 
revenue  ofHcers  in  every  county  of  the  United  States.  These  special 
taxes  are  imposed  on  wholesale  and  retail  dealers  in  spirits,  tobacco,  and 
beer,  on  banks  and  bankers,  and  on  gas.  Many  of  tlie  stamp  taxes  are 
imposed  on  the  production  of  such  articles  as  matches,  medicines,  and 
the  like ;  others  are  on  the  sale  of  property  and  on  commercial  paper ; 
while  all  of  them  involve  tjie  employment  of  a  multitude  of  agents  for 
the  sale  of  stamps,  at  a  cost  of  five  per  cent,  on  their  sales.  While  pro- 
ductive, they  are  annoying,  exj)ensive  in  collection,  and  in  a  multitude 
of  cases  easily  evaded.  If  the  special  taxes  on  spirits,  tobacco,  and  beer 
can  be  consolidated  with  the  tax  now  levied  on  the  manufacture  of  these 
articles  at  the  distillery,  brewery,  and  manufactory,  and  the  special  tax 
on  gas  and  bankers  be  repealed,  we  can  then  dispense  with  the  vast 
army  of  revenue  officers,  and  concentrate  the  attention  and  surveillance 
of  the  internal  revenue  office  upon  the  places  where  whisky,  tobacco, 
and  beer  are  made.  If  we  can  dispense  with  the  stamp  taxes,  the  whole 
system  of  internal  taxes  will  disappear,  except  the  excise  taxes  on 
whisky,  tobacco,  and  beer,  which,  by  the  common  consent  of  both  pro- 
ducer and  consumer,  are  recognized  as  proper  objects  of  taxation. 

The  taxes  on  the  circulation  and  deposits  of  national  banks  do  not 
enter  into  our  internal  revenue  system.  They  are  rather  regarded  as 
the  fund  from  which  to  pay  the  expenses  of  printing  the  notes  and 
maintaining  the  system.  The  excess  collected  from  this  tax  over  these 
expenses  may  properly  be  regarded  as  a  return  payment  for  a  franchise. 
The  tax  is  collected  directly  by  the  Treasurer  of  the  United  States,  and 
should  be  retained.  If  it  be  deemed  best  to  retain  this  tax  as  against 
other  banks  and  bankers,  it  may  be  collected  in  the  same  way  and  by 
the  aid  of  bank  examiners. 

In  advance  of  a  definite  measure  dealing  with  internal  revenue,  I 
am  prepared  to  say,  without  committing  any  one  else,  that  we  can  and 
ought  now  to  repeal  all  internal  taxes  except  those  on  whisky,  tobacco, 
and  beer,  and  to  consolidate  and  simplify  these  last. 

The  income  tax  expires  with  the  collection  of  the  tax  of  1871,  which, 
on  personal  incomes,  is  assessed  during  the  present  month.  The  public 
mind  is  not  yet  prepared  to  apply  the  only  key  to  a  genuine  revenue 
reform.  A  few  years  of  further  experience  will  convince  the  body  of 
our  people  that  a  system  of  national  taxes  which  rests  the  whole  burden 


INTERNAL  TAXES  AND  TARIFF.  349 

of  taxation  on  consumption,  and  not  one  cent  on  property  or  income. 
is  intrinsically  unjust.  While  the  expenses  of  the  National  Government 
are  largely  caused  by  the  protection  of  property,  it  is  but  right  to  re- 
quire property  to  contribute  to  their  payment.  It  will  not  do  to  say 
that  each  person  consumes  in  proportion  to  his  means.  This  is  not 
true.  Every  one  must  see  that  the  consumption  of  the  rich  does  not 
bear  the  same  relation  to  the  consumption  of  the  poor  as  the  income  of 
the  one  does  to  the  wages  of  the  other.  As  wealth  accumulates,  this 
injustice  in  the  fundamental  basis  of  our  system  will  be  felt  and  forced 
upon  the  attention  of  Congress.  Then  an  income  tax,  carefully  ad- 
justed, with  j)roper  discriminations  between  income  derived  from  prop- 
erty and  income  from  personal  services,  and  freed  from  the  espionage 
of  our  j)resent  law,  will  become  a  part  of  our  system,  just  as  such  a  law 
proposed  by  Sir  Robert  Peel,  after  a  disuse  of  twenty-five  years,  was 
the  basis  of  the  revolution  in  the  tax  system  of  Great  Britain. 

If  these  changes  in  our  internal  revenue  laws  be  made,  it  will  re- 
duce internal  taxes  831,500,000,  or  from  8126,000,000  to  891-,500,000. 
But  this  reduction  of  taxes  will  be  accompanied  by  a  reduction  of  our 
expenditures  of  not  less  than  82,500,000 ;  and  if  the  new  regulation  as 
to  the  whisky  tax  should  prove  practicable,  the  reduction  of  expenses 
will  be  much  greater.  This  will  leave  us  a  net  loss  of  revenue  of 
$29,000,000,  and  M^th  a  margin  of  821,000,000  for  the  reduction  of 
tariff  duties. 

Upon  what  articles  and  upon  what  principle  shall  this  reduction  be 
made  ?  The  House  of  Ivepresentativcs  ])roposes  to  repeal  the  duties 
on  coal  and  salt,  articles  largely  produced  in  this  country,  and  on  tea 
and  coffee,  which  are  not  produced  in  this  country.  The  aggregate 
duties  collected  on  these  articles  last  year  were : 

On  coal ^oSS.SVS  82 

On  salt 1,175,58'7  37 

On  tea 8,322,994  67 

On  coffee 10,969,098  77 

In  all $21,006,056  63 

or  just  the  amount  we  are  able  to  repeal.  Why  single  out  these  arti- 
cles for  special  repeal  ( 

The  whole  quantity  of  coal  imported  last  year  was  431,108|-  tons. 
The  amount  of  bituminous  coal  produced  in  this  countiy  last  year  is 
estimated  at  15,000,000  tons,  and  of  anthracite  at  19,000,000  tons,  or 
an  aggregate  of  3-1,000,000  tons ;  so  that  the  imported  coal  equals  less 
than  one  and  a  half  per  cent,  of  the  amount  consumed.  The  whole 
benefit  of  this  repeal  will  inure  to  Nova  Scotia,  and  not  to  any  part  of 
our  country.  The  cost  of  production  of  domestic  coal  fixes  its  price, 
and  the  only  effect  of  the  repeal  will  be  to  raise  the  price  of  foreign  coal 
for  the  benefit  of  Nova  Scotia  miners  and  land-owners,  or  more  espe- 
cially for  the  benefit  of  American  speculators  in  coal  mines  in  Nova 
Scotia.  It  will  not  appreciably  inure  to  the  benefit  of  our  consumers. 
To  the  precise  extent  that  the  repeal  increases  the  importation  of  for- 
eign coal,  it  ^\'ill  diminish  the  mining  of  our  own.  Finding  our  vast 
market  open  and  free  to  them,  they  will  force  the  production  in  Nova 


350  SPEECHES  AND  REPORTS   OF  JOIIX  SHERMAN. 

Scotia,  and  divide  tlie  profits  between  tlieir  land-owners,  their  miners, 
and  their  sailors.  Our  industry  will  be  diminished  to  the  same  extent, 
without  benefiting  our  consumers. 

Again,  free  coal  will  have  the  same  effect  upon  Nova  Scotia  that 
the  reciprocity  treaty  had  in  Canada.  It  will  give  to  its  people  the 
benefit  of  our  markets  without  the  burden  of  our  taxes  on  home  pro- 
ducers. It  will  make  the  annexation  of  those  kindred  countries  impos- 
sible. 

Again,  it  is  gross  injustice  not  only  to  our  miners,  but  to  our  ship- 
pers. By  the  settled  policy  of  our  navigation  laws,  no  foreign  vessel 
can  carry  our  coal  from  Philadelphia  to  Boston ;  but  nnder  this  repeal 
they  can  caiTy  it  from  Nova  Scotia  to  Boston.  It  is  snid  that  a  foreign 
vessel  can  carry  more  cheaply  than  ours.  Thus  you  discriminate  in 
favor  of  Nova  Scotia,  by  allowing  their  products  to  be  carried  in  the 
cheapest  vessels  in  the  world,  while  our  minei-s  nnist  ship  in  an  Ameri- 
can vessel.  You  must  repeal  your  navigation  laws  before  you  can 
make  coal  free.  The  same  vessel  that  carries  coal  from  Nova  Scotia 
to  Boston  can  not  carry  domestic  coal  there ;  and  yet  Boston  at  the 
same  moment  insists  upon  the  navigation  laws  and  upon  the  repeal  of 
the  duty  on  coal. 

Moreover,  so  far  as  the  duty  on  coal  is  concerned,  it  is  only  claimed 
that  its  repeal  may  slightly  reduce  the  cost  of  coal  consumed  northeast 
of  New  York.  It  can  not  affect  the  price  elsewhere,  because,  even 
without  a  duty,  foreign  coal  will  not  be  used  south  or  west  of  New 
York.  Now,  New  England  lip.s  the  benefit  of  our  navigation  laws 
and  our  duties,  protecting  tlieir  industries.  Coal  is  the  finished  prod- 
uct of  the  miner  as  much  as  cloth  is  of  the  manufacturer.  How  can 
you  convince  the  miner  that  he  should  not  have  the  benefit  of  a  duty 
on  coal  when  you  demand  it  on  cloth  ? 

So  with  salt.  Salt  is  largely  produced  in  this  country.  It  is  chiefly 
the  product  of  interior  sections,  where  other  manufacturing  industries 
do  not  exist.  The  chief  sources  of  supply  are  at  Syracuse,  New  York, 
at  Saginaw,  Michigan,  and  at  Pomeroy,  Ohio.  It  employs  fifteen 
thousand  persons  and  twenty  millions  of  capital.  It  is  an  absolute 
necessity  of  life.  This  industry  must  be  maintained  in  war,  for  our 
foreign  supply  would  be  imperiled  in  case  of  hostilities  between  this 
country  and  any  maritime  power. 

The  domestic  supply  is  ample,  and  the  product  is  cheap.  It  is 
sold  in  every  home  market  at  less  that  one  cent  per  pound.  Om-  fish- 
ermen, who  must  compete  with  foreigners,  have  their  salt,  in  effect, 
duty  free,  for  they  are  paid  a  drawback  of  the  duty  on  all  they  use. 
It  is  a  Western  commodity,  and  its  production,  transportation,  and  use 
represent  labor.  Every  part  of  it  is  labor.  The  raw  brine  costs  no- 
thing but  the  labor  of  pumping.  It  is  labor  in  the  form  of  salt.  If 
labor  is  to  be  protected,  why  should  labor  producing  salt  be  excepted  ? 
There  is  now  a  duty  on  sail  of  eighteen  cents  per  hundred  pounds,  or 
less  than  one  fifth  of  one  cent  per  pound.  If  all  textile  and  metallic 
fabrics  must  be  protected,  why  not  salt  ?  If  you  look  for  revenue,  it 
yields  over  one^  million,  with  little  cost  and  absolute  certainty.  If  you 
look  to  protection  to  labor,  ^^•llat  duty  gives  protection  more  properly 


INTERNAL  TAXES  AND  TARIFF.  351 

than  the  duty  on  salt  ?  The  duty  does  add  to  the  cost  of  the  article  on 
the  seacoast,  but  does  not  affect  the  price  in  the  West ;  but  if  duties 
are  to  be  levied  only  on  articles  wliich  are  the  manufacture  of  the 
East,  how  long  will  they  stand  i 

The  revision  of  the  tariff  must  be  treated  as  a  whole.  General 
principles  must  be  applied.  If  special  exemption  from  duty  is  applied 
to  one  article  of  domestic  product,  it  must  be  applied  to  all.  We  may 
stand  ujDon  exemptions  from  duty  on  articles  that  we  can  not  produce, 
but  we  can  not  stand  upon  a  special  exemption  on  any  article  that  we 
can  and  ought  to  produce.  Free  coal  and  free  salt  mean  free  iron  and 
free  woolens.  You  may  discriminate  in  rate  of  duty  by  reason  of  cost, 
bulk,  capacity  of  production,  and  for  other  causes,  and  for  them  you 
may  properly  reduce  the  duty ;  but  you  can  not  make  the  article  free, 
whether  you  adopt  the  theory  of  a  revenue  or  a  protective  tariff. 

It  is  said  that  coal  and  salt  are  raw  articles.  Every  article  is  the 
finished  product  of  one  industry — coal  of  the  miner,  salt  of  the  boiler. 
Ev^ery  commodity  is  only  the  raw  basis  of  other  industries — cloth  for 
the  tailor,  tools  for  the  farmer,  machinery  for  the  manufacturer ;  and 
all  of  them  are  the  raw  articles  of  the  merchant.  I  therefore  conclude 
that,  whether  we  regard  the  duties  on  coal  and  salt  as  revenue  or  pi'o- 
tective  duties,  they  ought  not  to  be  entirely  repealed,  and  therefore 
the  House  bills  ought  not  to  pass. 

As  to  the  duties  on  tea  and  coffee,  their  repeal  is  simply  a  question 
of  revenue.  We  can  not  produce  them.  They  are  of  such  general  use 
as  to  enter  into  the  consumption  of  nearly  every  family  in  the  United 
States.  The  duties  on  sugar,  tea,  and  coffee  are  among  the  most  stable 
and  unchangeable  sources  of  revenue.  The  quantities  consumed  vary 
less  than  those  of  any  other  chief  aiticles  imported.  They  are  bulky, 
and  can  not  be  easily  smuggled.  The  duty  is  specific,  and  is  rarely 
evaded  by  fraud.  Still,  they  are  regarded  as  necessaries  of  life.  The 
repeal  of  the  duty  will  lessen  the  cost  to  the  precise  extent  of  the 
duty.  Dealei-s  will  not  at  first  lower  the  price,  but  competition  will 
soon  reduce  it ;  so  that  the  repeal  of  either  of  these  duties  will,  in  some 
degree,  cheapen  the  daily  meals  of  nearly  every  family.  The  House 
of  ReiDresentatives  has  shown  its  desire  to  make  tea  and  coffee  free,  by 
twice  passing  bills  for  that  pui-pose  ;  but  it  is  manifest  that  if  this  is 
done  we  must  postpone  for  the  present  all  other  reductions  of  duty. 
We  are  compelled  to  consider  whether  other  duties  ought  not  to  be 
modified  before  this  purely  revenue  duty  is  entirely  repealed. 

I  come  now  brieffy  to  consider  the  measure  proposed  by  the  Com- 
mittee on  Finance.  Instead  of  repealing  entirely  the  duties  on  coal, 
salt,  tea,  and  coffee,  we  propose  a  large  reduction  of  them.  We  reduce 
the  duties  on  lumber,  rice,  lead,  and  other  articles,  the  rawer  products 
of  industry,  on  which  the  present  rates  are  excessive.  We  add  largely 
to  the  free  list,  and  propose  a  reduction  of  ten  per  cent,  of  the  duties 
on  most  textile  and  metallic  fabrics.  The  reduction  proposed  is  s22,- 
507,323.26  ;  but  we  may  fairly  antici]iate  such  lessening  of  expenses 
and  such  increase  of  importation  as  will  reduce  the  loss  of  revenue  to 
821,000,000. 

This  is  not  the  time  for  stating  in  detail  the  reasons  for  the  great 


352  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

reduction  on  certain  specific  articles.  As  the  debate  progresses  each 
article  will  be  separately  considered,  and  if  we  err  as  to  details  the 
Senate  will  correct  us.  I  have  now  only  to  consider  the  general  prin- 
ciples involved. 

We  are  met  by  opposing  theories  of  political  economy,  by  theories 
of  protection  and  theories  of  free  trade.  The  object  of  protection  is 
to  secure  to  home  industry  the  benefit  of  the  markets  of  our  own  coun- 
try. The  means  proposed  are  higli  duties  on  foreign  fabrics  which 
compete  with  our  own,  and  low  duties,  or  none  at  all,  on  foreign  articles 
used  in  manufacturing.  The  object  of  free  trade  is  to  secure  an  article 
at  the  lowest  price,  without  regard  to  its  place  of  production.  A 
revenue  tariff  is  inconsistent  with  the  extreme  theories  of  both  the 
free-trade  and  protection  schools  ;  ior  if  a  foreign  article  is  excluded 
by  rates  of  duty  so  high  as  to  give  the  home  proclucer  the  entire  mar- 
ket, the  revenue  is  destroyed  as  absolutely  as  if  no  duty  at  all  were 
imposed.  Tliis  obvious  truth  reduces  a  revenue  tariff  to  a  matter  of 
details  ;  and  in  determining  the  rate  of  duty  on  any  article,  due  weight 
must  be  given  to  the  nature  of  the  article — whether  it  can  or  can  not 
be  produced  in  this  country,  and  whether  the  duty  should  be  higher 
or  lower  than  the  average  rate  requisite  to  produce  the  revenue  needed. 
This  principle  is  admirably  stated  in  the  report  of  Robert  J.  Walker, 
made  in  1846.  While  I  do  not  agree  with  all  the  details  of  that  report, 
it  contains  some  excellent  general  principles. 

In  the  course  of  the  innumerable  discussions  on  this  subject  by  dif- 
ferent commercial  nations,  it  has  become  obvious  that  theories  and 
maxims  adopted  by  one  nation  in  fixing  the  rates  of  duty  are  totally 
inapplicable  to  another  nation,  by  reason  of  the  differences  of  climate, 
soil,  productions,  labor,  and  age.  This  is  especially  true  of  Great 
Britain  and  the  United  States.  In  all  the  essential  elements  which 
determine  a  tariff  policy  we  are  the  exact  antipodes  of  Great  Britain. 
Their  chief  occupation  is  that  of  manufactures  ;  ours  of  agriculture. 
Their  chief  commerce  is  foreign  ;  ours  is  domestic.  They  produce 
but  little  raw  material ;  we  produce  more  than  any  other  nation.  Their 
extent  is  small ;  ours  is  vast.  They  are  very  rich  ;  we  are  not.  In 
Great  Britain  capital  yields  the.  smallest  interest ;  here  it  yields  the 
highest.  There  labor  is  low  in  jDrice  and  abundant ;  here  it  Ib  very 
high.  The  industry  of  Great  Britain  could  not  survive  without  foreign 
raw  materials  ;  here  we  have,  undeveloped,  the  necessary  raw  material 
for  all  products  which  are  essential  to  the  ha^opiness  and  comfort  of 
man. 

Again,  this  subject  of  the  tariff  has  been  so  often  discussed  and 
acted  upon  in  Congress,  that  we  may  say  that  certain  principles  are 
settled  in  the  United  States,  by  the  common  consent  of  our  people.  It 
is  settled  that  our  national  revenue  must,  in  the  future  as  in  the  past, 
be  mainly  collected  by  duties  on  imported  goods ;  and,  as  the  war  has 
enormously  increased  our  wants,  we  may  as  well  dismiss  to  future  gen- 
erations the  extreme  ideas  of  free  trade  and  protection,  which  are  alike 
inconsistent  with  a  revenue  tariff.  It  is  fairly  settled  that,  in  levying 
duties,  at  least  the  average  rate  will  be  put  upon  articles  of  foreign 
manufacture  that  come  into  competition  with  home  industry,  and  that 


INTERNAL  TAXES  AND  TARIFF.  353 

these  duties  will  be  so  graded  and  classified  as  to  give  full  incideutal 
protection  to  industries  natural  to  our  country,  and  for  which  we  have 
the  raw  material.  It  is  settled  that,  as  the  difference  between  the  price 
of  labor  in  this  country  and  in  Europe  is  the  chief  cause  of  the  differ- 
ence in  the  cost  of  production  here  and  there,  it  is  not  good  policy,  by 
permitting  too  close  a  competition  between  foreign  and  domestic  pro- 
duction, to  reduce  the  wages  of  American  labor,  engaged  in  producing 
any  article  essential  to  our  wants,  below  the  standing  of  other  similar 
labor  in  tliis  countr}^  It  is  agreed  that,  to  secure  certainty  and  avoid 
undervaluation,  all  duties  should,  as  far  as  practicable,  be  specific  in- 
stead of  ad  valorem.  These  principles  are  the  basis  of  the  American 
system  of  protection,  embodied  in  the  act  of  March,  1801.  The  rates 
of  duty  have  been  much  increased  by  the  new  demands  for  revenue 
caused  by  the  war,  and  may  now  be  reduced  as  these  demands  diminish; 
but  these  protective  principles  will,  I  trust,  be  maintained  as  the  essen- 
tial foundations  of  our  national  prosperity. 

On  the  other  hand,  it  is  equally  well  settled  that  there  is  a  multi- 
tude of  articles  in  which  the  trafiic  should  be  as  free  as  our  domestic 
trade.  All  raw  ])roductions  of  nature,  which  are  the  gift  of  Providence, 
ought  to  be  as  free  as  the  hand  that  gave  them ;  but  if  they  can  be 
made  available  by  labor,  and  yet  ai'c  abundant  in  our  country,  the  rate 
of  duty  should  not  be  higher  than  will  conipensate  for  the  bare  differ- 
ence in  the  wages  of  such  labor  here  and  in"  the  place  of  exportation. 

There  is  a  great  number  of  articles,  the  jiroduct  of  trojjical  climes, 
or  which  for  other  causes  are  not  readily  producible  here,  that  ought  to 
be  admitted  free,  or  at  such  moderate  revenue  rates  of  duty  as  our 
wants  demand.  Where  the  amount  imported  is  small,  the  articles 
should  be  free  ;  for  a  multitude  of  duties  creates  expense.  When  the 
quantity  is  large,  as  in  the  case  of  tea,  coffee,  and  sugar,  the  only  ques- 
tion should  be  whether  the  tax  proposed  is  less  burdensome  than  other 
taxes  imposed.  As  this  class  of  articles  enters  largely  into  the  consump- 
tion of  all,  it  has  been  the  general  policy  of  the  country  to  admit  them 
free,  or  at  low  rates  of  duty.  We  taxed  them  heavily  during  the  war, 
for  purely  revenue  purposes.  We  reduced  those  taxes  two  years  ago, 
and  now  propose  to  reduce  further  the  taxes  on  tea  and  coffee,  but  we 
are  not  yet  prepared  for  their  entire  repeal. 

I  come  now  to  consider  the  duties  imposed  on  textile  and  metallic 
fabrics.  These  constitute  the  great  bulk  of  foreign  articles  that  come 
into  competition  with  the  domestic  fabrics.  It  is  said  that  the  present 
duties  are  not  too  high  ;  that  under  them  our  industries  are  prosperous, 
and  labor  is  well  jiaid  ;  and  that,  if  the  duties  are  undisturbed,  domestic 
competition  will  reduce  prices  as  rapidly  as  increased  foreign  competi- 
tion can  do  so ;  that  any  change  disturbs  the  business  of  the  country  by 
deteiTing  new  enterprises,  and  that  it  reduces  the  wages  of  labor.  On 
the  other  hand,  it  must  be  remembered  that  the  present  duties,  taken 
together,  are  far  in  excess  of  what  they  ever  were  before  the  war,  and 
that  they  have  been  three  times  largely  increased  since  the  passage  of 
the  Morrill  tariff  act  of  1861. 

After  a  careful  examination,  in  detail,  of  all  the  duties  and  the  indus- 
tries affected  by  them,  it  does  not  appear  that  the  reduction  proposed 
23 


354  SPEECHES  AND  KEPORTS  OF  JOHN  SHERMAN. 

will  seriously  affect  these  industries.  During  the  war  these  duties  were 
increased  to  counterbalance  the  internal  taxes  levied  upon  domestic 
productions.  The  last  shred  of  those  interaal  taxes  will  now  be  re- 
pealed, and  no  article  of  home  industry  will  be  taxed  excei3t  whisky, 
tobacco,  and  beer.  Our  manufacturers  have  now  to  compete  with  their 
foreign  rivals,  with  no  disadvantage  but  higher-priced  labor,  and  this  is 
met  by  a  duty  of  from  thirty-five  to  one  hundred  per  cent.,  or  an  aver- 
age duty  on  the  whole  list  of  fifty  per  cent.  This  very  bill  repeals  or 
reduces  duties  on  raw  materials  for  domestic  fabrics  to  an  extent  which 
is  fully  equal  to  a  reduction  of  ten  per  cent,  on  the  finished  product. 
This  is  admitted  to  be  so  as  to  many  industries.  The  general  lifting 
off  of  the  burdens  of  internal  taxation,  and  the  repeal  of  taxes  on 
raw  materials,  will  enal)le  our  home  industry  to  enter  into  a  fairer  com- 
petition. Shall,  then,  the  protective  duties  be  maintained  without 
diminution,  when  all  internal  taxes  are  repealed,  when  raw  materials 
are  admitted  free  or  at  reduced  rates,  when  our  currency  is  appreciated 
near  to  the  gold  standard,  and  M'hen  the  present  duties  are  not  needed 
for  the  support  of  the  Government?  Will  the  producers  in  other 
forms  of  industry  consent  to  the  maintenance  of  excessive  rates  of  duty 
on  mechanical  fabrics  ? 

The  result  of  such  duties  is  to  secure  to  mechanical  industries 
higher  wages  than  can  be  earned  in  other  kindred  employments.  Such 
excessive  protection  not  only  ceases  to  diversify  production,  but  forces 
labor  into  protected  employments.  If  the  present  rates  of  duty  were 
high  enough  during  and  since  the  war,  when  home  industry  was  bur- 
dened with  heavy  internal  taxes — with  stamp  duties,  income  taxes,  and 
high  rates  on  raw  materials — then  surely  they  are  now  too  higli,  when 
all  these  taxes  are  removed. 

In  a  controversy  like  this  between  opposing  theories,  the  highest 
wisdom  often  lies  between  them.  AVhile  protecting  home  industry 
we  ought  not,  in  any  case,  to  levy  a  duty  so  high  as  to  exclude  the  for- 
eign fabric,  Init  only  such  as  will  secure  fair  but  not  excessive  wages, 
and  as  will  induce  a  competition  between  the  foreign  and  domestic 
fabric  that  shall  secure  to  the  consumer  the  lowest  prices  consistent 
with  the  maintenance  in  our  country  of  all  the  industries  for  which  we 
have  ecpial  natural  facilities.  We  must  not  compel  our  laborers  to 
compete  with  the  poorly  paid  labor  of  Europe  ;  but  we  ouglit  not,  by 
our  protection  laws,  to  secure  to  them  higher  wages  than  can  be  earned 
in  kindred  employments. 

Another  series  of  causes  is  now  slowly  but  surely  operating  in  favor 
of  American  labor.  The  laboring  men  of  Europe,  by  trade  associa- 
tions, and  by  laws  prohibiting  the  employment  of  minors  and  women 
and  limiting  the  number  of  apprentices,  are  raising  the  general  rate  of 
wages  among  all  Christian  nations.  This  is  especially  so  in  Great  Brit- 
ain. It  is  adding  to  the  cost  of  foreign  production,  and  so  operates  as 
a  protection  to  our  domestic  labor. 

For  these  reasons,  and  many  others  that  will  be  stated  in  the  course 
of  the  debate,  the  Committee  on  Finance  is  of  the  opinion  tliat  now, 
when  so  many  taxes  have  been  repealed,  there  ought  to  be  a  general 
reduction  of  the  duties  on  textile  and  metallic  fabrics ;  and  that  this 


INTERNAL  TAXES  AND  TARIFF.  355 

^      ^r^  hp  nt  the  rate  of  ten  per  cent.,  whicli  is  about  the 
reduction  should  be  at  tne  rate  oi  i«     i  ^^  g^^_ 

rate  of  the  aggregate  reduction  ^f  f  ^f  ^^^^^^^  maintenance  of  the 
counter  the  opposition  of  ^^^ZfT^J^  iahZs^n^^^  those  who  would 
highest  duties  on  foreign  f  ."^P^^^i^f  ^^^^  reduction  of 

abf uptly  distui-b  our  ^^ ^.^^^^^^^^^^  perhaps  both 

duties  to  what  they  term  %^^^^ ^'^^^.-^  xr^„  purely  revenue  duty 
classes  of  opponents  wjUnm^^^  ^^^^^  ^.  ,, 

Z':;  ^^^^^e^Jn^^  then^^te  for  striking  out  the 
ratfbVreductV  on  textile  and  met^^^^^^  .^  ^^^^^,^ 

Indeed,  Senators    the  (J^  ^ ^^f Xr^^^^^^^^^^^  nil  the  present 

controversy  m  this  tanfE  \^},''l^^r^^^ 
duties  upon  texti  e  and  ^^^^tallicfabiics  stand  ai^^^^^  ^ 

their  producers  the  raw  "^f  ";^  ^^^\^,",^4ed  the^  dut/on 

them  of  an  internal  ^liaracter,  and    educed  the  p^^  ^^^^^.^^ 

tea  and  coffee;  o^  whether  you  will  a^^^^  Scott]  has, 

and  metallic  fabrics.     My  friend  f^^;^,  ^f^"^'^^™  the  only 

at  the  outset,  very  properly  Ff  ^iited  by  /"^  ^^^^^^^^^^^^^^^^  ^^ere  set- 
question  in  this  whole    ant^  debate ,  ^^^^^^  ^^^  ,^e  day.     If, 

/led,  we  could  f-^"^?\*^^-/f/^^tt  ,1  el  o  l^artt^  in  this  matter- 
therefore,  Senators  unite-I  do  ,^2^^^.^i;f^^^^^^^  nnite  in  repeal- 
but  if  Senators  who  represent  ^.f ^^f  ^  ^^^^^^^t^J^"^^^  for  is  to 
ing  the  duty  on  tea  and  coffee,  it  wil  be  t  ^^  '2^,,^,,^  limit  to 
go  one  step  further  ;  because  ^^  }j^' ^l''"'^^' ^,^  ^,ovose  to  rednco 
fvhich  we  can  go  in  the  -l-al  of  tanff^Uitie^  if  ^^Vm  ^^^^^^. 

our  internal  revenue,  is  f^'f^^^^^f^^ /coffee  you  ^?ill  have  surren- 
and  if  you  repeal  the  duty  on  tea  and  cotte^'  J .  therefore, 

dered  all  the  revenue  we  can  ^^^^^f/^^^^^^  ^^ 
that  Senators,  when  they  come  to  vote  on  ^^^^^^f  ^^^^^^^^gee,  so  aslo 
aU  would  like  to  vote  to  repea    the  ^^^^ty^^  ^^  ^  \  remember  that 
ir  sX:  ^S^^  ^iKS^^rS  power  of  repealing 

^'^  itZ  StS:^;^  pSence,  day  by  d.y,  to  tl^e^ta^-7^-^  ^ 
tlemVn;L  are  interesdd  in  o^^f^n^^^^^S^,  ITi  JZ 
believer  in  the  general  idea  of  P^^^^^Jing  .^^^^^^^  the  present 

them,  as  I  have  assured  their  f  f  ?«^^  fj^;^^^^^^^^^^^^  hv  nearly 

high  rates  of  clnties,  imexampled  m  our  coim^^^^^^ 

fifty  per  cent,  than  they  were  m  1^^'^',  XTrHnternal  taxes  which 
textile  fabrics,  after  we  have  ^fP^^^^^,  f^^  .VJL  ^Wmthem  their  raw 
gave  rise  to  them,  and  after  we  have  '"'^'f^J^l^'^^^^^  among 

Siaterials  free  of  duties,  we  shall  have  ^J^^^^^^^^^'^^^^^^^^^^  anS 

other  interests  in  the  country  tlja  will  ^^f^^^^  ^^^^^^  of 

do  greater  harm  than  can  P^-^^yj^^^^^^Xtii^^^^  intelligent  men, 
the  present  rates  of  duty.     And  i  .^"^  qm  e  ^  nietallic 

controversy  in  which  1  believe  they  will  be  m  the  wrong. 


356  SPEECHES   AND   REPORTS  OF  JOUN   SHERMAN. 

I  have  now,  Mr.  President,  stated  the  general  features  of  this  bill. 
I  will  end,  as  I  commenced,  with  the  congratulation  that  we  are  able 
so  soon  again  to  throw  off  burdens  cheerfully  assumed  by  our  people 
during  the  great  civil  war.  Xo  man  can  candidly  review  the  dangers 
we  have  passed,  the  difficulties  we  have  overcome,  the  burdens  we  have 
borne,  and  the  success,  growth,  and  prosperity  that  attended  us  amid 
all  our  difficulties,  without  a  reverent  feeling  of  tliankfulness  to  Al- 
mighty God.  Our  honorable  name  and  admitted  rank  among  the  na- 
tions of  the  earth,  the  general  intelligence  and  comfort  of  our  people, 
the  rapid  spread  of  our  civilization  over  the  Western  plains,  the  diversity 
of  our  industry,  and  the  vast  increase  of  our  productions — all  these  are 
accomplished  results,  whicli,  if  properly  preserved  and  utilized,  will 
realize  the  highest  good  that  can  be  derived  from  human  government. 


FEENCH    SPOLIATION    CLAIMS. 

m  THE  SEKATE,  DECEMBER  17,  1S72. 

The  bill  to  provide  for  the  adjustment  and  satisfaction  of  claims  of  American 
citizens  for  spoliation  committed  by  the  French  prior  to  the  31st  day  of  July,  1801, 
being  before  the  Senate,  Mr.  Sherman  said : 

Mr.  President  :  My  acquaintance  with  the  French  spoliation  bill 
commenced  with  my  entrance  into  the  House  of  Ilepresentatives  in 
the  winter  of  1855-56,  when,  being  a  member  of  the  Committee  on 
Foreign  Affaii*s,  this  old  and  interesting  class  of  claims  was  handed  to 
me  for  investigation.  At  that  time  my  mind  was  entirely  unbiased 
upon  the  subject.  The  examination  of  the  claims  opened  an  interest- 
ing portion  of  American  history,  and,  without  much  to  do,  I  entered 
upon  it,  reading  nearly  all  the  public  documents  then  already  accumu- 
lated in  great  numbers  of  volumes.  I  informed  myself  in  regard  to 
all  the  points  that  had  been  made  in  the  discussion  of  the  question. 
After  this  examination  I  became  entirely  convinced  that  there  was  no 
ground  either  in  law  or  equity  why  these  claims  ought  to  be  paid  by 
the  United  States.  During  that  Congress  there  was  no  action  upon 
them.  From  that  time  they  have  rested  without  any  definite  action 
by  either  House  of  Congress.  Xow  they  are  pressed  with  a  confident 
expectation  of  payment,  and  it  becomes  my  duty,  without  much  time 
for  preparation,  to  give  the  reasons  for  my  conviction  why  they  ought 
not  to  be  paid. 

Mr.  President,  it  is  no  bar  to  these  claims  to  say  that  they  are  sev- 
enty-two years  old  ;  that  the  generation  of  men  who  knew  all  about  the 
facts  which  gave  rise  to  them  did  not  recognize  them  as  valid  ;  that 
none  of  the  actors  of  the  period  of  1800  who  participated  in  the  nego- 
tiations connected  with  the  subject  ever  took  any  prominent  or  leading 
part  in  seeking  to  enforce  them.  A  bill  for  paying  these  claims  was 
never  passed  by  the  Senate  of  the  Li^nited  States  until  1835.     All  the 


FRENCH  SPOLIATION   CLAIMS.  357 

men  who  participated  in  the  historical  events  which  gave  rise  to  them 
had  then  disappeared.  Seventy-two  years  have  now  rolled  around,  car- 
rying away  two  or  three  generations  of  statesmen  who  knew  of  or  acted 
here  upon  them  ;  and  yet  these  claimants  are  not  discouraged,  and  still 
insist  that  they  have  a  right  to  demand  of  the  United  States  as  a  matter 
of  law  payment  of  $5,000,000,  at  least,  for  injuries  suffered  by  Ameri- 
can citizens  by  French  spoliations  prior  to  1800. 

Nor  is  it  a  conclusive  reply  to  these  claims  to  say  that  they  arraign 
George  Washington,  arraign  the  course  of  the  American  Government 
at  its  foundation ;  that  they  are  based  upon  the  allegation  that  we  vio- 
lated our  treaties  with  France ;  that  they  arraign  the  conduct  of  all  the 
early  officers  of  the  Government.  If  they  are  just  claims,  they  ought 
to  be  paid  even  if  their  payment  compels  us  to  change  the  popular  view 
of  the  whole  history  of  the  first  ten  years  of  the  American  Govern- 
ment. 

The  claims  are  pressed  upon  us  with  a  pertinacity  unparalleled. 
From  the  daily  papers  I  cut  recently  an  advertisement  signed  by  James 
II.  Causten,  wlio  represents  that  he  has  been  for  forty-nine  years  at  the 
head  of  an  organized  agency  in  this  city  to  prosecute  these  claims.  He 
invites  the  citizens  of  the  United  States  who  are  interested  in  them, 
or  who  are  the  descendants  of  claimants,  to  send  their  petitions  to 
Congress.  He  says  that  this  organization  has  been  maintained  here 
year  after  year.  It  was  founded  in  the  city  of  Washington  before 
either  House  of  Congress  recognized  any  equity  in  the  claims,  before 
^ny  compiittee  of  either  House  had  reported  in  favor  of  them,  after 
committees  had  reported  against  them,  and  has  been  kept  up  for  forty- 
nine  years.  I  will  read,  merely  to  show  the  character  and  nature  of 
this  claim,  and  how  persistent  and  how  enterprising  has  been  its  prose- 
cution, a  part  of  this  public  advertisement  which  is  laid  upon  your  table 
in  every  one  of  the  daily  papers  in  this  city.     It  is  dated — 

Agency  of  FRENcn  Spoliation  Claims, 
Office  No.  1246  F  Stkeet, 
"Washington,  D.  C,  November  5,  1872. 

This  institution  was  established  forty-nine  years  ago,  with  the  undersigned  as 
agent  and  protector  of  the  original  claimants,  all  of  whom  are  long  since  dead,  as 
also  their  second  generation.  Their  third  generation  are  now  living,  but  death  and 
other  casualties  have  rendered  my  record  so  far  useless  as  to  who  and  where  they 
are  to  be  found. 

Then  he  gives  notice  to  all  these  legal  representatives  who  have  not 
sent  their  petitions  into  the  Halls  of  Congress  to  do  so  at  once.  He 
then  goes  on : 

The  delays  of  action  on  this  case,  occasioned  by  tlie  late  rebellion,  impeachment 
of  Pi-esident  Johnson,  and  the  excitement  just  terminated  in  the  presidential  elec- 
tion, afford  a  free  access  to  the  attention  of  Congress ;  but,  above  all,  the  near  ap- 
proach of  Congress,  its  short  session,  and  much  to  be  done  by  interested  parties, 
point  to  the  indispensable  necessity  for  instant  preparation  by  the  claimants. 

Printed  blank  memorials  will  be  furnished  by  the  undersigned  free  of  cost;  also, 
a  printed  pamphlet  history  and  proceedings  on  the  claims  by  both  Governments  and 
by  Congress  (at  a  trifling  cost  of  printing)  will  be  furnished  those  who  desire  it  and 
shall  so  advise  me  by  letter. 

Mr.  President,  here  is  a  claim,  stated  by  the  chairman  of  the  Com- 


358  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

mittee  on  Foreign  Relations  at  $20,000,000,  wliicli  these  j^eople  are 
offering  to  compound  now,  after  seventy-two  years,  at  five  millions, 
pressed  upon  us  year  after  year,  after  a  lapse  of  seventy-two  years,  by 
an  organized  agency,  which  has  been  in  this  city  for  forty-nine  years, 
and  now  advertises  to  the  people  interested  to  send  forward  their  peti- 
tions in  order  to  press  Congress  at  this  session  to  pass  the  French  spoli- 
ation bill. 

All  these  are  considerations  which  ought  not  to  prevent  us  from 
paying  this  obligation  if  it  is  just  and  honest.  If  it  is  right  in  law  and 
in  equity  that  the  Ignited  States  sliould  pay  it,  I  do  not  object  to  the 
means  by  which  it  is  urged  upon  Congress,  or  to  the  long  lapse  of  time. 
But,  sir,  this  lapse  of  time  and  the  means  necessary  to  enforce  the  claim 
are  circumstances  which  demand  of  Congress  a  strict  scrutiny  into  all 
the  facts  alleged,  that  we  may  see  whether  or  not  the  founders  of  this 
Government,  with  George  AVashington  at  the  head,  did  injustice  to 
these  claimants,  our  own  citizens ;  and  whether  all  those  who  have  pre- 
ceded us  in  this  position  have  so  far  ])een  neglectful  of  their  duty  that 
they  have  refused  to  pay  a  just  and  honest  claim  so  long.  That  is  the 
question. 

]^ow,  sir,  what  is  the  basis  of  this  French  spoliation  claim  ?  As 
stated  by  Mr.  Webster  in  the  celebrated  debate  of  1834r-'35,  it  is 
founded  upon  three  assumptions.  I  will  read  from  the  opening  re- 
marks of  Mr.  Webster  at  the  beginning  of  the  debate,  December  17, 
1834;  and  I  may  here  remark  that  this  debate  is  the  most  complete,  in 
my  judgment,  tlie  most  thorough  and  exhaustive,  of  the  many  made 
on  this  subject  in  Congress,  although  it  was  followed  by  many  very 
able  sjieeches.     Mr.  Webster  said : 

This  bill  supposed  two  or  three  leadinj?  propositions  to  he  true. 

It  supposed,  in  the  first  place,  that  illejjal  seizures,  detentions,  captures,  con- 
demnations, and  confiscations  were  made  of  the  vessels  and  property  of  the  citizens 
of  the  United  States  before  tlie  30th  of  September,  1800. 

It  supposed,  in  the  second  place,  that  these  acts  of  wrong  were  committed  by 
such  orders  and  under  such  circnmstances  as  that  tlie  snflferers  had  a  just  right  and 
claim  for  indemnity  from  the  hands  of  the  Government  of  France. 

Here,  at  the  very  outset,  I  admit  that  these  two  propositions  are 
true ;  that,  according  to  my  judgment,  the  acts  of  France  in  capturing 
our  vessels  did  constitute  a  just  and  fair  ground  for  the  claims  against 
the  French  Government,  and  that  we  were  justified  in  doing  all  that 
we  could,  short  of  actual  war,  to  enforce  them.  But  it  must  be  con- 
ceded that  the  French  Government  insisted  that  these  captures  and  de- 
tentions were  caused  by  our  violation  of  our  treaties  with  them.  The 
claims  of  the  two  Governments  were  carried  almost  to  open  and  general 
war,  the  French  insisting  that  these  captures  and  detentions  were  law- 
ful acts  of  reprisal  on  the  United  States  for  her  disregard,  or  alleged 
disregard,  of  the  treaties  with  France,  and  that  there  was  no  obligation 
on  the  part  of  France,  because  of  this  lawful  act  of  reprisal,  to  pay  to 
these  claimants  any  money  indemnity,  but  that  it  was  a  controversy 
between  the  two  nations  ;  the  United  States,  on  the  other  hand,  assum- 
ing that,  under  the  circumstances,  it  had  a  right  to  issue  its  proclama- 


FEENCH   SPOLIATION  CLAIMS.  359 

tion  of  neutrality,  and  pursue  the  course  of  conduct  wliicli  I  will  allude 
to  presently.     T^hen  Mr.  "Webster  states  the  third  proposition  : 

Going  on  these  two  propositionsi,  the  bill  assumed  one  other,  and  that  was,  that 
all  such  claims  on  France  as  came  witliin  a  prescribed  period,  or  down  to  a  pre- 
scribed period,  had  been  annulled  by  the  United  States,  and  that  this  gave  them  a 
right  to  claim  indemnity  from  this  Government.  ("Congressional  Debates,"  vol. 
xi.,  part  I.,  page  16.) 

Here  is  the  gist  of  the  whole  matter :  Did  the  United  States  annul 
these  obligations  by  assuming  them  under  such  circumstances  as  would 
make  a  liability  on  the  part  of  the  United  States  to  pay  our  citizens  for 
these  depredations  ?  I  say  that,  by  a  careful  examination  of  all  the 
facts  of  this  history,  the  chief  of  which  I  will  now  bring  before  you,  it 
appears  that  neither  by  the  law  of  war,  nor  by  international  law,  nor 
by  justice  or  right,  did  the  United  States  ever  assume  or  incur  any  ob- 
ligation to  pay  these  debts  to  our  citizens.  There  was  never  the  slight- 
est thing  done  in  the  ten  years  during  which  they  arose  which  gave  a 
legal  or  an  equitable  claim  on  the  part  of  these  citizens  as  against  the 
United  States ;  but,  on  the  contrary,  the  United  States  pressed  these 
claims,  insisted  upon  them,  demanded  them,  urged  them,  pressed  them 
even  to  the  point  of  war — went  far  beyond  the  duty  of  the  Govern- 
ment in  favor  of  its  citizens  as  against  a  foreign  nation,  and  discharged 
all  the  obligations  which,  by  any  rule  of  morals,  duty,  or  law,  are  im- 
posed upon  any  nation  in  behalf  of  its  citizens  against  foreign  nations. 

Mr.  President,  having  thus  stated  the  general  view  of  this  case  as 
made  by  Mr.  Webster  and  the  general  impression  that  the  facts  have 
made  on  my  own  mind,  let  us  very  briefly  pursue  the  historical  events, 
which  I  can  do  only  by  referring  to  some  of  the  leading  incidents  of 
the  controversy ;  and  the  first  and  the  groundwork  of  the  whole  are 
the  treaties  with  France  made  during  the  revolutionary  war,  in  1778. 
The  treaty  of  alliance  is  the  first  in  order.  This  treaty  with  France 
was  the  life-blood  of  our  country  at  the  time  it  was  made,  without 
which  we  might  have  stmggled  "^through  a  long,  wearisome  war,  and 
perhaps  have  failed  to  attain  our  independence,  but  with  which  we 
were  enabled  in  a  short  time  to  establish  this  nation. 

The  eleventh  and  twelfth  articles  of  the  treaty  of  alliance  contain 
two  guarantees.  The  eleventh  article  contained  mutual  guarantees, 
one  by  France  of  "  the  liberty,  sovereignty,  and  independence  "  of  the 
people  of  the  United  States,  "  absolute  and  unlimited  as  well  in  matters 
of  government  as  commerce,"  and  a  guarantee  by  the  United  States  to 
France  of  "  the  present  possessions  of  the  crown  of  France  in  America," 
with  the  additions  or  conquests  they  might  obtain  during  the  war.  The 
effect  of  the  two  articles,  eleventh  and  twelfth,  was  a  mutual  guarantee, 
by  which  France  guaranteed  to  us  our  liberty  and  independence,  and 
we  guaranteed  to  France  her  West  India  possessions.  That  is  not  the 
precise  language,  but  that  was  the  definite  meaning  of  the  articles. 

The  treaty  of  commerce  entered  into  between  the  two  nations  on 
the  same  day  contains  four  articles  which  become  material  to  this  con- 
troversy. Articles  seventeen  and  twenty-two  were  made  for  the  benefit 
of  France.  They  provide  that  prize  of  war  may  be  carried  into  the 
ports  of  either  party,  and  that  no  shelter  shall  be  given  by  either  party 


360  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

to  the  captors  of  prizes  from  the  other  party ;  that  is,  that  the  ports  of 
the  United  States  should  be  free  for  France  to  bring  in  her  seizures 
of  vessels  of  foreign  nations  with  whom  she  was  at  war,  and  that  we 
should  not  give  the  corresponding  benefit  to  any  other  nation.  The 
twenty-second  article  provides  that  foreign  privateers  shall  not  be  al- 
lowed to  fit  out  or  sell  their  prizes  in  the  ports  of  either  party,  but  that 
the  privateers  of  either  party  may  use  the  ports  of  the  other  to  fit  out 
and  equip  private  armed  ships  and  vessels  of  war.  These  two  provi- 
sions w^ere  made  in  the  interest  of  France. 

The  twenty-tliird  and  twenty-fourth  articles  were  made  in  the  in- 
terest of  the  United  States.  The  twenty-third  article  provides  for  lib- 
erty for  either  party  to  trade  with  a  nation  at  war  with  the  other. 
That  is,  while  the  United  States  gave  to  France  these  important  advan- 
tages of  the  use  of  our  ports  to  her  privateers  and  lier  captures,  yet  we ' 
were  to  be  at  liberty  to  trade  with  nations  with  whom  she  was  at  war, 
and  free  ships  should  carry  free  goods.  In  other  words,  to  apply  it  to 
the  events  that  followed,  if  a  war  should  occur  between  France  and 
Great  Britain,  while  we  were  bound  to  receive  in  our  ports  French  pri- 
vateers and  French  captured  vessels,  we  had  a  corresponding  right  to 
trade  with  England,  and  under  our  flag  to  carry  even  articles  which  by 
the  law  of  war  were  contraband  of  war  into  the  ports  of  England. 

The  twenty-fourth  article  proceeds  to  define  what  shall  be  consid- 
ered contraband  of  war,  and  changes  the  whole  rule  of  international 
law,  making  it  much  more  liberal  to  the  United  States ;  so  that  this 
treaty  of  commerce,  wdiile  it  gave  to  France  certain  facilities,  gave  us 
privileges  of  vast  importance. 

In  a  moment  you  will  see,  Mr.  President,  what  was  the  bearing  of 
these  treaties  on  the  controversy  which  soon  sprang  up.  These  were 
mutual  concessions,  some  for  the  benefit  of  the  Ignited  States  and  some 
for  the  benefit  of  France.  The  honorable  Senator  from  Massachusetts 
in  his  report  treats  the  whole  thing  as  if  the  treaty  of  commerce  was 
all  on  one  side,  as  if  there  were  no  provisions  in  that  treaty  that  bore 
hardly  upon  France  ;  and  yet  it  will  turn  out  immediately  that  at  the 
very  time  this  treaty  was  first  put  in  force,  at  the  very  breaking  out  of 
the  war,  France  was  the  first  to  violate  the  stipulations  of  the  treaty, 
the  only  stipulations  made  in  our  favor,  and  her  persistent  violation 
was  made  one  of  the  grounds  upon  which  General  Washington  based 
the  proclamation  of  neutrality,  and  virtually  suspended,  for  the  time 
at  least,  the  two  articles  which  were  made  in  favor  of  France. 

Mr.  President,  this  leads  us  to  the  next  and  most  important  step  in 
our  history  in  connection  with  foreign  affairs.  In  1793  France  and 
England  were  involved  in  war.  France  was  at  war  with  nearly  all  the 
nations  of  Europe.  She  had  beheaded  her  king ;  she  had  proclaimed 
war  against  despots  and  tyrants  in  any  form.  The  sympathy  of  the 
American  people  generally  went  with  France.  But  the  question  came 
up  before  the  Cabinet  of  George  Washington,  what  should  be  done  ? 
Should  they  involve  this  little  nation  of  ours,  in  its  infancy,  without 
troops,  without  arms,  without  vessels  or  means  of  warfare,  in  the  Mael- 
strom of  European  politics?  Should  they  take  sides  with  France 
against  England  i     It  appeared  at  once  that  if  we  observed  faithfully 


FRENCH  SPOLIATION  CLAIMS.  361 

articles  seventeen  and  twenty-two  of  our  treaty  of  commerce  with 
France,  we  took  sides  with  France,  and  of  course  involved  ourselves  in 
a  war  with  England  ;  we  became  a  party  to  the  war  ;  and  the  question 
then  arose  in  the  Cabinet  of  Washington  whether  the  war  which  was 
then  raging  in  Europe  was  one  of  those  wars  that  were  provided  for 
by  the  treaty  of  commerce ;  whether  the  occasion  for  the  clauses  of 
guarantee  in  the  treaty  of  alliance  had  arisen,  and  whetlier  we  were 
bound  to  guarantee  to  France  her  West  India  islands ;  whether  we 
were  bound  to  let  French  privateers  and  vessels  of  war  come  into  our 
ports  to  re-man,  to  arm,  and  to  equip,  and  thus  make  war  against  Eng- 
land and  all  the  oilier  nations  of  Europe. 

This  question  came  before  the  Cabinet  of  Washington.  It  was  a 
question  of  life  or  death.  If  General  AVashington  had  decided  the 
questions  as  the  French  desired  him  to  do,  our  commerce  would  have 
been  swept  from  the  ocean ;  we  should  have  at  once  been  involved  in 
a  war  with  Great  Britain,  With  lier  enormous  naval  power,  developed 
soon  after  in  the  controversy,  she  might  have  seized  all  our  ports,  and 
closed  our  country  as  a  sealed  book.  She  could  easily  have  done  it. 
Under  the  circumstances  which  surrounded  him,  General  Washington 
addressed  certain  inquiries  to  the  members  of  his  Cabinet,  and  I  have 
them  here,  but  I  will  not  take  time  to  read  them.  Senators  who  desire 
to  look  at  them  may  find  them  in  Sparks's  "Life  of  Washington." 
Various  inquiries  were  submitted  by  General  Washington  to  the  mem- 
bers of  his  Cabinet,  and  the  very  mode  in  which  the  inquiries  are  put 
shows  the  anxiety  of  Washington,  the  critical  state  of  our  affairs ;  and 
these  questions  arc  given  in  full,  together  with  the  elaborate  answers 
of  the  members  of  the  Cabinet.  The  result  was  that  the  members  of 
the  Cabinet  differed  somewhat  on  minor  matters ;  but  upon  the  main 
point,  that  it  was  the  duty  and  the  right  of  the  United  States  to  main- 
tain neutrality  between  Great  Britain  and  France,  they  were  all  agreed. 

Mr.  President,  upon  the  opinion  of  his  Cabinet  General  Washing- 
ton issued  the  proclamation  of  neutrality.  What  was  that  ?  The  lan- 
guage is  simple  and  brief.  It  simply  declared  that  in  the  condition  of 
affairs  then  existing  in  Europe,  in  the  state  of  war  between  France  and 
the  powers  of  Europe,  the  United  States  would  remain  in  a  state  of 
honorable  neutrality,  treating  all  the  contestants  by  the  same  rules  and 
principles,  and  observing  with  sincerity  and  good  faith  a  friendly  and 
impartial  conduct  toward  all  the  belligerents.  That  was  the  proclama- 
tion of  neutrality.  Now,  sir,  what  followed  ?  The  proclamation  was 
communicated  to  both  Houses  of  Congress.  According  to  the  forms 
that  then  existed,  the  Senate  by  a  formal  address  approved  it,  and  en- 
dorsed and  approved  the  conduct  of  Washington  in  issuing  it.  The 
House  of  Rejjresentatives,  with  equal  strength,  also  approved  and  en- 
dorsed the  proclamation,  and  it  was  at  once  adopted  by  all  the  people 
of  the  United  States  as  the  policy  of  the  Government.  Jefferson  was 
then  Secretary  of  State,  and  Hamilton  was  Secretary  of  the  Treasury. 
The  incipient  divisions  which  soon  followed  in  our  own  political  con- 
tests had  already  appeared  ;  but  all  citizens  and  all  parties  felt  that  it 
was  the  right  of  the  United  States  to  maintain  neutrality  ;  that  the  law 
of  necessity,  if  nothing  else,  justified  it ;  and,  however  much  they  were 


362  SPEECHES   AND  EEPORTS  OF  JOHN  SHERMAN. 

divided  in  sympathy  in  the  controversy  between  France  and  Great 
Britain,  they  felt  that  neutrality  was  the  safety  of  the  United  States, 
and  it  was  adopted. 

The  policy  was  not  only  adopted  with  the  assent  of  the  two  Houses 
of  Congress,  but  it  was  sanctioned  by  the  judiciary.  This  particular 
proclamation  of  neutrality  and  the  acts  subsequent  thereto  were 
brought  before  the  Supreme  Court  of  the  United  States  in  a  case  to  be 
found  in  7  Cranch.  The  Supreme  Court,  Chief  Justice  Marshall  de- 
livering the  opinion,  stated  that  the  action  of  General  Washington, 
thus  approved  by  Congress,  and  supplemented  as  it  was  afterward  by 
an  act  of  Congress,  was  the  established  policy  of  *the  country,  and, 
whether  it  violated  the  treaty  or  not,  it  was  the  law  of  the  land  so  far 
as  the  people  of  the  United  States  were  concerned  ;  that  Congress  was 
the  political  power  of  the  country,  and  had  to  make  the  laws  to  govern 
the  conduct  of  the  people  of  tlie  United  States,  and  it  was  for  Con- 
gress, the  political  power,  to  judge  whether  or  not  this  policy  was  con- 
sistent with  the  French  treaty,  and  the  people  of  the  United  States 
were  bound  to  obey  the  decision. 

Now,  mark  it,  not  only  was  this  a  policy  adopted  by  every  branch 
of  the  Government,  but  it  was  concurred  in  by  the  very  claimants 
themselves.  It  was  for  their  interest.  There  was  not  one  single  per- 
son whose  heirs  or  descendants  or  representatives  petition  here,  but  de- 
manded tliis  policy  of  neutrality ;  not  one  of  them  but  was  interested 
in  it.  Without  this  policy  of  neutrality  there  would  have  been  no  ships 
to  be  captured,  no  vessels  to  be  retained.  Our  ships  and  vessels  would 
have  been  swept  from  the  ocean  as  with  the  besom  of  destmction.  It 
was  a  policy  in  which  the  East  was  especially  interested.  The  very 
States  from  whence  these  claims  come  demanded  it  by  universal  voice. 
It  was  the  policy  of  the  country,  the  policy  of  safety.  It  was  absolutely 
necessary  to  our  national  existence,  and  there  was  no  man  to  question 
it.  But  now,  after  these  men  are  in  their  graves,  after  a  period  of 
seventy-two  years,  we  are  told  on  the  floor  of  the  Senate,  by  the  most 
eminent  members  of  the  Senate,  that  the  conduct  of  the  United  States 
violated  the  treaty  with  France,  and  the  alleged  violation  is  made  the 
basis  of  an  application  to  us  to  pay  for  all  the  depredations  committed 
by  France  on  our  commerce. 

jN'ow,  sir,  the  legal  effect,  according  to  the  decision  of  the  Supreme 
Court,  was  that  if  this  proclamation  of  neutrality  was  inconsistent  with 
the  seventeenth  and  twenty-second  articles  of  the  treaty  to  which  I 
have  referred,  so  far  as  the  citizens  of  the  United  States  were  concerned 
it  superseded  those  sections,  and  it  made  no  difference  in  this  contro- 
versy whether  we  acted  in  violation  of  the  treaty  or  not. 

I  do  not  intend  to  stop  here,  but  I  shall  show  that  France  herself 
recognized  this  view  of  the  matter,  and  that  France,  before  we  had 
violated  the  treaty,  as  she  claimed,  by  the  proclamation  of  neutrality, 
had  violated  other  clauses  of  the  treaty  which  were  made  in  our  favor. 
I  had  prepared  quite  a  number  of  lengthy  extracts  from  the  correspon- 
dence between  Genet  and  Jefferson  to  show  that  the  French  minister 
did  not  object  to  the  policy  that  was  adopted  by  the  American  Govern- 
ment ;  on  the  contrary,  he  acceded  to  it ;  but  I  find  here,  furnished  to 


FRENCH  SPOLIATION  CLAIMS.  363 

my  hand  in  tlie  rej)oit  of  the  Senator  from  Massachusetts,  a  declaration 
that  even  before  this  proclamation  was  issued  France  liad  herself  vio- 
lated the  treaty,  and  had  treated  it  as  so  much  waste  paper.     He  says : 

But  before  the  proclamation  reached  France,  orders,  in  direct  repugnance  to  the 
treaties  with  the  United  States,  were  issued  tliere  for  the  capture  and  forfeiture  of 
enemies' goods  on  board  neutral  vessels ;  whereas  it  had  been  stipulated  that  free 
ships  should  make  free  goods,  so  that  even  if  the  denial  of  the  "  guarantee  "  was 
wrong,  and  the  proclamation,  according  to  French  accusation,  was  "  insidious,"  the 
United  States  were  not  the  first  to  otfend. 

I  could  fortify  this  general  declaration  by  innumerable  documents 
showing  that  the  French  themselves  disregarded  the  treaty  as  entirely 
inapplicable  to  the  then  existing  state  of  affairs  ;  that  they  in  effect  sus- 
tained the  position  taken  by  Washington,  that  the  treaties  of  commerce 
and  of  alliance  related  only  to  defensive  warfare  on  the  part  of  France, 
and  could  not  be  held  to  apply  to  a  state  of  revolution,  where  every- 
thing was  changed,  where  the  Government  had  killed  the  king  who 
made  the  treaty  with  us  ;  that  the  provisions  of  old  treaties  here  quoted 
did  not  apply  to  that  condition  of  affairs.  AVashington  held  that  the 
state  of  affairs  which  then  existed  in  Europe  was  not  a  defensive  war- 
fare in  any  sense  of  the  word,  or  within  the  meaning  of  the  treaty. 

But,  sir,  whether  that  be  so  or  not,  it  is  admitted  on  all  hands  that 
France  violated  the  treaty,  that  France  refused  to  allow  us  the  com- 
mercial advantages  which  were  stipulated  for  in  the  treaty  of  1778,  and 
that  too  before  Washington  had  issued  his  proclamation  of  neutrality ; 
in  other  words,  that  France  had  disregarded  two  of  the  articles  of  the 
treaty,  and  she  complained  that  "Washington  by  his  proclamation  of 
neutrality  had  also  disregarded  two  of  those  articles,  both  nations  dis- 
regarding these  treaties  as  incompatible  and  inconsistent  with  the  new 
state  of  affairs  that  had  sprung  up  on  the  map  of  Europe. 

And  so  Jay's  treaty,  to  which  I  need  scarcely  refer,  expressly  vio- 
lated the  French  treaty.  It  was  admitted  on  all  hands  tliat  it  was 
inconsistent  with  the  French  treaty.  Why,  sir,  the  eighteenth  article 
of  this  treaty  was  entirely  inconsistent  with  the  French  treaty.  It 
prescribed  an  entirely  different  rule  of  law  as  to  what  should  be  con- 
traband of  war*  Under  Jay's  treaty  the  articles  named  as  contraband 
of  war  conformed  to  the  law  of  nations.  Under  our  treaty  with 
France  the  list  of  articles  named  as  contraband  of  war  was  much  more 
liberal,  and  much  more  favorable  to  the  United  States.  It  was  utterly 
impossible  to  carry  on  an  intercourse  with  France  and  Great  Britain 
with  treaties  so  utterly  inconsistent  with  each  other.  This  shows  that 
Jay's  treaty  was  based  on  the  idea  that  the  stipulations  upon  which 
these  claims  are  now  based  were  regarded  both  by  France  and  the 
United  States,  and  especially  by  the  United  States,  as  practically  ab- 
rogated and  done  away  with. 

But  if  there  ever  was  any  doubt  about  the  matter,  it  was  entirely 
removed  by  an  act  of  Congress,  which  in  so  many  words  said  that 
these  treaties  had  been  abrogated,  and  declared  them  to  be  of  no  force 
and  effect.  That  law  of  Congress  was  passed  in  1798,  two  years  before 
the  treaty  of  1800  was  made.  I  will  read  the  operative  words  of  that 
law.     On  the  7th  of  July,  1798,  the  following  act  passed  Congress : 


364  SPEECHES  AND  EEPORTS  OF  JOHN"  SHERMAN. 

Whereas  the  treaties  concluded  between  the  United  States  and  France  have 
been  repeatedly  violated  on  the  part  of  the  French  Government,  and  th^  just  claims 
of  the  United  States  for  reparation  of  the  injuries  so  committed  have  been  refused, 
and  their  attempts  to  negotiate  an  amicable  adjustment  of  all  complaints  between 
the  two  nations  have  been  repelled  with  indignity;  and  whereas  under  the  author- 
ity of  the  French  Government  there  is  yet  pursued  against  the  United  States  a 
system  of  predatory  violence,  infracting  the  said  treaties,  and  hostile  to  the  rights 
of  a  free  and  independent  nation  : 

Be  it  enacted^  etc.,  That  the  United  States  are  of  right  freed  and  exonerated 
from  the  stipulations  of  the  treaties  and  of  the  consular  convention  heretofore  con- 
cluded between  the  United  States  and  France  ;  and  that  the  same  shall  not  hence- 
forth be  regarded  as  legally  obligatory  on  the  Government  or  citizens  of  the  United 
States. 

This  act  made  a  law  for  our  citizens,  whatever  it  did  for  France — 
a  law  bj  which  our  citizens  were  hound.  The  treaties  and  the  stipu- 
lations therein  upon  which  the  pretensions  of  France  w^ere  based  were 
set  aside,  not  by  the  proclamation  of  neutrality  merely,  but  by  a  direct 
act  of  Congress ;  so  that  the  treaties  were  not  in  force  at  all  when  the 
negotiation  of  1800  occuiTed. 

But  all  this  time  the  French  Government  in  its  warfare  with  Great 
Britain  was  issuing  its  edicts  and  orders  under  which  all  these  depre- 
dations were  committed  upon  our  commerce.  They  disregarded  the 
treaties.  They  treated  them  as  superseded  by  events,  and,  driven 
probably  by  the  necessities  of  their  position,  they  seized  our  vessels 
destined  for  English  ports,  took  them  to  France,  held  many  in  em- 
bargo in  violation  of  the  treaty,  destroyed  some,  used  the  provisions 
that  were  intended  for  her  enemy  to  support  her  o^vn  people,  and  not 
only  violated  the  treaty,  but  violated  the  rules  of  international  law. 
She  so  conducted  herself  as  to  excite  against  her  the  strong  antipathy 
of  the  American  people,  and  nearly  to  wear  out  all  that  l^indly  affec- 
tion which  had  existed  between  France  and  the  United  States. 

Now,  sir,  what  was  the  duty  of  the  United  States  under  these  cir- 
cumstances ?  We  had  set  aside  the  treaties  by  our  solemn  acts,  so  far 
as  we  could  do  so.  Our  citizens  were  bound  by  the  acts  of  our  Gov- 
ernment. "When  our  citizens  were  thus  deprived  of  property,  what 
did  the  United  States  do  ?  Were  our  ancestors  quiet  and  supine  ? 
Did  they  allow  these  dej)redations  to  proceed  without  e^fpressing  their 
resentment  ?  Not  at  all.  First,  there  was  negotiation  from  1793  to 
1Y98,  continued  day  after  day — expostulation.  We  finally  sent  to 
France  three  of  the  most  eminent  citizens  of  the  United  States,  at  the 
head  of  whom  was  Ellsworth,  the  Chief  Justice  of  the  United  States. 
How  were  they  treated  ?  They  were  scoffed  at,  refused  admission — 
told  that  if  they  would  bribe  this  man  or  that  they  might  possibly  get 
some  kind  of  redress.  The  famous  correspondence  of  "  X.  Y".  Z.," 
whicli  disgraced  the  French  people  at  the  time,  was  published.  The 
people  of  the  United  States  were  indignant ;  but  still,  remembering 
the  old  feelings  between  France  and  the  United  States,  they  did  not 
declare  war,  but  continued  negotiation.  Depredations  were  still  com- 
mitted, and  we  prepared  for  war. 

We  issued  letters  of  marque  and  reprisal.  We  authorized  the  sei- 
zure of  Fi-ench  vessels.  Vessels  were  seized  upon  the  ocean  ;  blood 
was  shed,  battles  were   fought,  vessels  were  captured,  and  war  was 


FRENCH  SPOLIATION  CLAIMS.  365 

waged,  in  belialf  of  tliese  claims.  Althougli  our  countiy  was  tlieu  sub- 
stantially without  means  of  offense,  depending  upon  no  vessels  of  war 
except  those  she  could  improvise  out  of  her  merchant  marine  ;  al- 
though we  were  then  poor,  in  debt,  with  only  four  million  people  scat- 
tered along  a  coast  two  or  three  thousand  miles  long,  yet,  in  behalf  of 
these  very  claimants,  we  did  go  to  the  very  verge  of  war,  if  we  did 
not  cross  the  boundary  and  wage  war  against  France.  No,  sir  ;  the 
Government  and  the  people  of  the  United  States  were  never  indifferent 
to  the  losses  suffered  by  these  claimants.  We  went  to  the  very  ex- 
treme. 

All  that  we  did  not  do  was  to  depart  from  the  policy  of  neutrality 
and  involve  ourselves  in  the  events  then  shaking  Europe  to  its  very 
center.  But  everything  short  of  that  we  did  in  behalf  of  these  claim- 
ants ;  yea,  we  spent  millions  upon  millions  of  dollars.  We  called 
Washington  from  his  retirement ;  we  mustered  Alexander  Hamilton, 
substantially,  at  the  head  of  our  armies  ;  we  engaged  in  the  building 
of  vessels  ;  we  did  all  that  a  nation  could  do.  We  were  not  unmindful 
of  the  obligations  that  rested  upon  us  to  defend  the  rights  of  our  citi- 
zens.    What  more  could  Ave  do  'i 

And  yet  this  claim  is  now  presented  here  upon  the  ground  fonnerly 
taken  by  the  French.  Washington  and  all  his  contemporaries  are  ar- 
raigned here  for  using  tlie  private  property  of  these  claimants  to  buy 
off  the  old  treaties  which  we  had  twice  repudiated  and  declared  by 
acts  of  Congi'ess  not  to  be  operative  on  us,  and  which  France  had  dis- 
regarded. Why,  sir,  by  this  bill  Washington  and  Adams  and  Jeffer- 
son are  charged  with  appropriating  ^he  property  of  citizens  of  the 
United  States  to  quiet  an  antiquated  claim  which  they  had  rejected  in 
every  possible  form  of  language,  and  which  they  never  during  the 
negotiations  of  1800  recognized  as  having  any  binding  force  or  obliga- 
tion upon  the  United  States — one  the  President  when  the  treaty  of 
1800  was  negotiated,  another  President  when  the  treaty  was  ratified 
— and  the  claimants  say  that  the  Government  of  the  United  States  has 
refused  for  seventy-two  years  to  pay  for  the  private  property  thus  used. 
Sir,  I  thank  God  that  I  can  say,  after  a  full  examination  of  all  these 
documents,  that  there  is  no  ground  for  the  claim  to  stand  upon.  The 
United  States  pressed  the  claim  by  negotiation,  by  all  the  power  that 
we  were  enabled  to  wield.  There  is  no  ground  whatever  to  say  that 
the  Government  of  the  United  States  in  its  early  foundation  was  not 
true  and  faithful  to  its  obligations  to  its  citizens. 

JS^ow,  Mr.  President,  let  us  examine  for  a  moment  the  question, 
what  is  our  obligation  to  our  citizens  in  regard  to  war  ?  I  do  not  know 
that  it  is  necessary  for  me  to  cite  authority  upon  this  point,  because  it 
seems  to  be  conceded  that  we  are  not  bound  to  stake  the  salvation  of 
our  country  in  the  support  of  the  claims  of  our  citizens ;  but  I  have 
here  a  number  of  quotations  from  many  eminent  men  to  show  that  it 
is  not  the  duty  of  the  Government  of  the  United  States  ever  to  press 
a  claim  of  private  citizens  against  foreign  countries  to  an  extent  that 
would  even  damage  the  commercial  interests  of  the  people.  That  is 
the  law  of  nations. 

We  are  bound,  according  to  the  Constitution  of  the  United  States, 


366  SPEECHES  AND  REPOETS  OF  JOHN  SHERMAN. 

when  we  take  the  property  of  our  people,  to  give  them  compensation ; 
but  when  our  citizens  engage  in  commercial  ventures  with  foreign  na- 
tions, when  thej  leave  our  own  land  and  go  among  foreign  nations, 
what  are  we  bound  to  do  for  their  protection  ?  We  are  bound  to  see 
to  them,  to  care  for  them,  to  look  after  them,  to  do  what  we  can  to 
protect  them,  to  encourage  them.  We  are  not  bound  bv  any  obligation 
of  law  or  of  duty  to  step  forward  as  insurers  against  the  loss,  the  cap- 
ture, or  the  detention  of  their  vessels.  It  is  laid  down  by  Chancellor 
Bibb,  of  Kentucky,  speaking  with  great  eloquence  of  what  had  been 
done  by  the  United  States  in  behalf  of  these  very  claimants,  that  no 
nation  ought  to  follow  its  adventurous  citizens  in  their  commercial 
speculations  to  such  an  extent  as  to  involve  the  nation  in  war  or  contro- 
versy. The  United  States  have  always  gone  further  in  this  direction 
than  any  other  nation.  We  protected  an  unnaturalized  foreigner,  who 
had  taken  the  first  oath  of  allegiance,  against  the  power  of  Austria. 
Great  Britain  and  the  United  States  have  carried  the  duty  of  enforcing 
the  rights  of  their  citizens  against  foreign  nations  further  than  any 
other  nations.  But  we  never  carried  this  further  than  we  did  in  be- 
half of  these  claimants. 

When  these  detentions  occm-red,  when  these  captures  were  made, 
we  were  not  only  remonstrating,  begging,  beseeching,  sending  our  emi- 
nent men  on  fruitless  visits  to  Paris,  but  we  were  waging  war,  captur- 
ing privateers,  making  reprisals,  doing  all  acts  that  were  necessary  to 
enforce  the  rights  of  our  citizens.  AVhen  all  these  efforts  had  failed, 
at  last,  in  1800,  we  were  compelled  to  abandon  the  negotiation ;  and 
now,  after  seventy-two  years,  we  are  required  to  review  the  conduct  of 
the  eminent  men  who  formed  part  of  the  history  of  the  times,  we  are 
called  upon  to  review  the  propriety  of  the  proclamation  of  neutrality, 
called  uj^on  to  ignore  and  reverse  the  law  of  1798,  and  take  the  French 
side  of  this  controversy,  in  order  to  make  a  claim  which  our  people 
have  disregarded  for  seventy-two  years. 

This  brings  me,  sir,  to  the  treaty  of  1800  ;  and  I  think,  if  I  am  for- 
tunate in  conveying  my  own  impressions,  I  can  show  that  all  that  oc- 
curred in  that  treaty  was  entirely  consistent  Avith  the  position  I  take 
here — that  there  was  no  single  act  or  declaration  implying  an  assump- 
tion of  these  claims.  ]^ow  let  us  look  at  it.  The  Senator  from  Mas- 
sachusetts has  stated  very  clearly  the  position  taken  by  the  French.  I 
take  his  own  language,  because  I  prefer  to  come  as  near  as  we  can  to 
this  point  of  the  controversy.  He  says  that  when  our  ministers  met 
those  of  the  French  in  1800,  they  were  met  by  an  ultimatum.  France 
was  then  much  exhilarated  by  factory.  It  was  at  the  very  time  or  on 
the  eve  of  the  battle  of  Marengo.  ISTapoleon  was  about  to  pass  off  to 
his  magnificent  conquests  and  great  victories.  I  think  it  was  during 
his  absence,  when  the  French  were  naturally  elated  with  the  progress 
of  events,  tliat  this  treaty  was  negotiated,  and  our  ministers  were  met 
by  this  ultimatum,  as  stated  by  the  Senator  from  Massachusetts,  and  as 
also  shown  by  the  official  documents  I  have  before  me. 

And  this  communication  concluded  with  a  formal  proposition  in  these  words: 
"  Either  the  ancient  treaties,  with  the  privileges  resulting  from  priority  and  the 
stipulation  of  reciprocal  iudemnities,  or  a  new  treaty  without  indemnity." 


FRENCH  SPOLIATION"  CLAIMS.  367 

Mark  it,  Mr.  President,  the  French  submitted  to  us  either  of  these 
things :  "  If  you  will  make  over  with  us  the  treaties  of  1778,  with  all 
the  stipulations  contained  in  them,  and  being  made  now  with  a  recog- 
nition that  this  is  the  kind  of  war  that  is  recited  in  the  treaties,  we  will 
pay  your  indemnities."  That  is,  "  If  you  will  acknowledge  that  you 
have  been  wrong  in  all  this  controversy,  and  that  we  were  right  in  mak- 
ing reprisals,  we  will  refund  the  value  of  these  reprisals  and  restore 
the  ancient  treaties."  And  the  alternative  was  "  a  new  treaty  without 
indemnity."  What  was  the  result  of  the  negotiation  ?  "We  accepted 
the  latter  proposition.  That  is  all  there  was  of  it.  They  would  not 
pay  one  dollai-  of  these  indemnities.  The  minister  who  negotiated  this 
treaty  said  he  would  resign  first,  and  he  treated  it  with  indignity  when 
we  proposed  indemnities  without  a  renewal  of  the  treaties.  I  had  the 
language  among  the  papers,  but  I  can  not  now  turn  to  it  without  occu- 
pying time.  He  said  he  would  never  regard  the  indemnities,  would 
not  pay  them. 

Various  propositions  were  made  back  and  forth.  It  is  said  that  we 
offered  them  something  like  two  or  three  million  francs  (§600,000)  for 
their  pretended  claim  under  the  old  treaties.  Suppose  we  did,  had  we 
not  the  right  to  buy  peace  on  these  terms  without  making  ourselves  re- 
sponsible for  all  the  depredations  committed  by  the  French  ?  Suppose 
we  offered  them  ten  millions  to  release  us  from  these  old  treaties, 
would  that  make  any  difference  ?  They  refused  our  offer  of  three 
million  francs.  They  made  various  offers  to  us.  They  were  finally 
rejected,  and  the  treaty  of  18(»0  was  made.  In  the  second  article  they 
postponed  the  consideration  of  the  indemnities  claimed  by  the  French 
under  the  old  treaties,  and  the  indemnities  claimed  by  our  citizens,  thus 
showing  a  purpose  to  do  what  the  French  proposed  in  their  ultimatum 
— abandon  the  old  controversies  and  commence  anew.  In  that  spirit 
they  adopted  the  second  article  of  the  treaty,  which  I  will  now  read, 
and  I  will  show  to  the  Senate  that  it  is  entirely  consistent  with  my  view 
of  the  case ;  and  yet  it  is  upon  the  striking  out  of  this  article  that  this 
whole  claim  rests : 

Art.  it.  The  ministers  plenipotentiary  of  the  two  parties  not  being  able  to 
agree  at  present  respecting  the  treaty  of  alliance  of  February  6,  1778,  the  treaty  of 
amity  and  commerce  of  the  same  date,  and  the  convention  of  14th  of  November, 
1788,  nor  upon  the  indemnities  mutually  due  or  claimed,  tlie  parties  will  negotiate 
further  on  these  subjects  at  a  convenient  time;  and  until  they  may  have  agreed 
upon  these  points,  the  said  treaties  and  convention  shall  have  no  operation,  and  the 
relations  of  the  two  countries  shall  be  regulated  as  follows. 

In  other  words,  they  abandoned  the  whole  theory  of  claims  on  both 
sides.  Now,  unless  we  were  bound  to  prosecute  our  claims  in  favor  of 
our  citizens  to  the  final  ultimatum  between  all  nations,  to  a  general  and 
universal  war,  we  had  gone  to  the  tether,  to  the  extent  of  our  liability. 

Now,  the  question  is,  can  we  abandon  such  claims  short  of  actual 
war  ?  for  that  this  was  an  abandonment  is  shown  by  the  plain  language. 
It  was  a  diplomatic  way  of  doing  it ;  and,  as  I  will  show  presently,  the 
Senate  preferred  a  more  direct  way ;  but  it  was  a  diplomatic  way  of 
abandoning  all  these  claims  on  grounds  of  public  policy,  not  on  the 
ground  of  an  assumption  or  a  contract,  but  simj)ly  from  an  inability  to 


368  SPEECHES  AND  REPORTS   OF  JOHN"  SHERMAK 

get  France  to  pay  tliem  short  of  our  recognizing  a  state  of  facts  that 
would  be  utter  destruction  to  the  National  Government. 

It  is  alleged  that,  because  our  Government  pressed  these  claims  of 
private  citizens  almost,  if  not  quite,  up  to  the  point  of  war,  it  assumed 
the  justice  of  the  claims ;  that  in  the  treaty  of  1800  it  ofiset  them 
against  claims  that  France  had  on  this  Government ;  and  that  thereby 
if  laid  itself  under  obligation  to  meet  the  claims  of  these  citizens.  But 
there  was  nothing  like  an  offset.  France  could  not  convince  us  that 
we  were  wrong  except  by  conquering  us ;  and  we  never  would  have 
restored  the  obligations  of  the  old  treaties  except  at  the  end  of  a  gen- 
eral war.  We  pressed  our  claims  against  France  to  actual  seizure  and 
capture,  but  we  could  not  convince  her  that  she  ought  to  pay,  and 
therefore  we  abandoned  the  claims  of  our  citizens. 

The  question  whether  the  acts  of  the  Government  of  the  United 
States  amounted  to  war  or  not,  is  one  of  the  great  questions  debated  in 
this  controversy ;  but  it  is  not  the  turning-point  of  the  controversy  in 
my  judgment.  These  claims  were  discharged  by  war,  but  I  do  not  put 
the  case  on  that  ground,  because  I  am  discussing  it  in  another  view.  I 
think  it  was  war.  If  it  was  not  war,  I  do  not  know  what  it  was.  In 
the  capture  of  their  vessels,  I  am  inclined  to  think  there  was  a  state  of 
war  as  defined  by  the  law  of  nations.  That  is  a  question  which  has 
been  much  debated.  Mr.  Webster  and  Mr.  Wright  had  one  of  the 
most  interesting  debates  on  that  subject  that  are  probably  to  be  found 
in  our  Congressional  history.  Mr.  Wright  insisted — the  whole  weight 
of  his  argument  in  the  debate  of  1835  was — that  war,  actual,  decisive 
war,  extinguished  these  claims,  and  therefore  that  there  was  nothing  to 
negotiate  about.  Mr.  Webster,  on  the  other  hand,  insisted  that  these 
were  only  acts  of  peace  consistent  with  a  state  of  peace ;  and  they  had 
a  very  learned  discussion  as  to  what  was  war  and  what  peace.  Mr. 
Wright  would  describe  some  of  the  acts  of  war,  and  would  ask  Mr. 
Webster,  ''  Is  this  peace  ? "  Mr.  Webster  would  describe  some  of  the 
acts  of  negotiation,  eating  dinners,  friendly  exchange  of  compliments 
between  the  French  and  American  ministers,  and  would  ask,  "  Is  this 
war  1 "  Upon  an  arena  in  which  men  like  Wright  and  Webster  de- 
bated, in  which  they  had  a  difference  of  opinion,  I  do  not  think  it  be- 
comes any  of  us  to  express  any  very  decided  opinion  about  it,  and  I  do 
not  think  it  material  at  all  to  the  controversy.  I  have  avoided  the  dis- 
cussion of  that  point  because  it  woiTld  lead  me  into  a  long  argument  as 
to  the  state  of  facts  and  as  to  the  various  acts  of  depredation,  capture, 
seizure,  etc.,  that  were  committed  by  both  Goverimients. 

Now,  Mr.  President,  I  find  on  reference  to  what  Mr.  Chancellor. 
Bibb  says  in  regard  to  the  obligations  of  the  United  States  just  the 
condition  of  affairs  we  found  France  in  in  1800  : 

But  for  damages  caused  by  a  foreign  power  no  right  accrues  to  the  citizen  to 
demand  and  liave  compensation  from  his  own  Government.  In  such  case  the'sov- 
ereign  onght  to  interpose,  as  far  as  the  situation  of  atfairs  and  the  common  interests 
and  safety  will  permit,  to  aid  the  citizen  in  demanding  and  receiving  satisfaction 
from  such  foreign  power.  The  Government  ought  to  show  an  ec^uitable  regard  for 
such  suffering  of  the  citizen  ;  but  the  extent  to  which  that  regard  shall  be  indulged 
is  a  question  of  sound  policy,  to  be  judged  by  the  State.  The  right  of  the  citizen  in 
this  behalf  belongs  to  the  class  of  imperfect  obligations. 


FRENCH  SPOLIATION"  CLAIMS.  369 

Then  lie  goes  on  : 

"When  we  consider  the  conduct  of  the  Government  from  1V93  down  to  the  rati- 
fication of  tlie  treaty  of  1800 — the  condition  of  tlie  United  States  (not  then  recov- 
ered from  the  exhaustion  of  tlie  Revolution),  the  assiduity  and  good  faith  with 
which  these  claims  were  pressed  upon  the  consideration  of  the  French  Government, 
the  want  of  success,  the  cause  of  that  quasi  war,  the  great  expenditures  of  the  Gov- 
ernment, the  dangers  of  being  drawn  into  the  vortex  of  the  European  war  as  a  bel- 
ligerent, the  great  losses  to  tlow  to  the  community  from  persisting,  and  the  prospect 
thus  presented  to  the  view  of  that  generation — we  may  well  conclude  that  the  Gov- 
ernment would  have  been  well  justified  in  abandoning  these  claims  for  the  purpose 
of  extricating  the  community  from  a  perilous  condition. 

It  can  not  be  admitted  that  the  Government  is  bound  to  be  the  insurer  of  the 
commercial  adventures  of  its  citizens  against  the  acts  of  foreign  governments;  that 
private  claims  upon  foreign  powers  must  be  ])ursued  by  war  ad  internee ionem  rcipvb- 
lica,  or  the  citizen  be  compensated  out  of  the  public  treasury  at  home,  if  the  for- 
eign aggressor  can  not  be  compelled  to  make  retribution.  The  community  is  bound 
to  take  care  that  no  injury  arises  to  the  citizen  by  the  ill  conduct  of  the  Govei'n- 
meut;  but  the  public  i-;  not  bound  for  the  ill  conduct  of  a  foreign  power.  ("Con- 
gressional Debates,"  vol.  ii.,  part  I.,  page  194.) 

That  was  the  view  taken  by  this  eminent  and  distinguished  citizen, 
a  Senator  from  the  State  of  Kentucky,  certainly  one  of  the  most  distin- 
guished men  produced  by  Kentucky,  an  ornament  to  the  bar  and  one 
of  the  chancellors  of  tliat  State. 

Mj  friend  from  Xew  Hampshire  used  a  word  which  I  think  he 
copied  from  the  report  of  the  honorable  Senator  from  Massachusetts 
[Mr.  Sumner],  the  word  "  set-otf."  It  is  a  very  common  transaction. 
In  ordinary  dealings  between  two  private  citizens  they  set  off  their 
obligations  to  each  other ;  but  the  idea  of  a  set-off,  in  the  view  that 
word  presents  to  you,  sir,  as  a  lawyer  [to  Mr.  Carpenter,  in  the  chair], 
never  occurred  to  the  men  wlio  negotiated  the  treaty  of  1800.  There 
is  no  allusion  to  a  set-off  or  a  balancing  of  accounts  in  that  way  in  all 
the  negotiations.  If  Senators  can  show  me  any  such  ground  upon 
which  either  the  French  or  Americans  put  tlris  controversy,  then 
there  is  an  end.  If  it  was  a  thing  that  was  boiled  down  to  a  few  dol- 
lars and  cents,  if  that  was  the  only  matter  between  France  and  the 
United  States,  it  was  a  very  small  basis  for  a  great  controversy. 
There  was  nothing  of  the  kind.  These  were  claims  by  the  nations, 
one  against  the  other,  neither  willing  to  recede,  neither  willing  to 
abandon. 

"We  firmly  refused  to  engage  again  in  the  treaties  of  1778.  Every 
proposition  by  the  French  to  renew  them  was  declared  by  our  minister 
utterly  inadmissible.  In  1800,  in  one  of  the  communications  where  a 
reference  was  made  to  them,  it  was  said  on  the  part  of  the  Government 
of  the  Ignited  States  by  its  commissioners,  "  Those  treaties  are  not 
operative ;  everv"  branch  of  our  Government  has  put  a  different  con- 
struction on  them,  and  we  are  bound  by  that.  We  can  not  introduce 
them  again  into  the  law  of  nations  between  France  and  the  United 
States  ;  they  are  utterly  inadmissible,"  to  use  their  own  language.  On 
the  other  hand,  when  we  presented  our  claims  to  the  French,  the  French 
minister  met  them  and  said  he  would  resign  his  ofiice  rather  than  pay 
them  ;  he  would  never  pay  them.  The  language  was  strong.  Finally 
our  minister  wrote  home  that  it  was  utterly  idle  to  present  these  claims, 
24 


370  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

tliat  tlieir  commercial  value  was  nothing ;  they  could  not  be  enforced. 
The  only  question  was  whether — putting  their  backs  to  the  past,  bury- 
ino-  in  the  grave  all  the  controversies  that  existed  between  tliem,  not 
settino-  them  off  like  a  barter  and  a  trade  between  two  sharp  traders — 
two  great  nations,  neither  willing  to  yield  to  the  other,  would  bury  in 
silence  all  controversies,  not  only  between  the  two  nations,  but  between 
their  citizens,  and  make  a  new  treaty  of  peace.  This  was  done.  They 
called  it  a  treaty  of  peace.  Whether  there  had  been  war  before  or  not 
is  a  debatal)le  question.  They  called  the  treaty  of  1800  a  treaty  of 
peace,  and  they  made  it,  simply  abandoning  and  turning  their  backs  on 
the  old  controversies. 

So  every  treaty  of  peace  that  is  made  between  nations  discharges 
some  liability  ;  one  nation  or  the  other  must  surrender  something,  and 
usually  both.  And  this  was  a  treaty  of  peace ;  all  the  old  controversies 
were  buried  in  the  grave.  Whether  the  second  article  was  in  or  out 
made  no  difference.  The  United  States  were  discharged  from  all  obli- 
gations under  the  treaties  of  IT 78.  There  was  no  guarantee  clause; 
there  was  no  definition  of  contraband  of  war ;  there  was  no  free  port 
for  privateers  ;  and  it  was  a  treaty  founded  on  the  general  principles  of 
Jay's  treaty.  It  took  immediate  effect.  The  question  came  before  the 
Senate  of  the  United  States,  and  I  now  appeal  to  Senators  on  it.  Sup- 
pose we  had  tliat  treaty  here,  and  were  acting  upon  that  treaty,  and 
found  in  it  article  two,  an  indefinite  promise  some  time  in  tlie  distant 
future  to  open  up  a  new  controversy  with  France  by  wliicli  claims,  re- 
jected by  both  and  negotiated  about  so  long,  were  continued  over,  what 
would  we  do  ?  All  the  interest  we  had  in  retaining  that  second  article 
was  the  right  to  enforce  the  private  claims  of  our  citizens  for  depreda- 
tions ;  but  we  knew  that  the  right  was  contested  by  France,  and  never 
would  be  yielded  unless  connected  with  a  stipulation  to  renew  the  old 
treaties  of  1778. 

My  honorable  friend  from  Pennsylvania,  in  his  very  excellent  speech 
yesterday,  spoke  about  France  recognizing  these  claims.  Why,  sir, 
France  never  recognized  these  claims  except  in  connection  with  the 
renewal  of  the  treaties  ;  she  always  put  the  two  together  from  the  be- 
ginning to  the  end.  The  very  first  time  Mr.  Monroe  presented  them 
to  the  French  Government,  the  French  replied,  "  JSTo ;  you  violated 
your  treaty  ;  tliese  were  acts  of  reprisal.''  They  ordered  in  some  cases, 
and  actually  passed  an  ordinance  for,  the  pajnnent  of  the  value  of  pri- 
vate property  taken  from  American  citizens,  where  it  was  food  and 
clothing  and  the  like. 

Besides,  in  this  treaty  of  1800  there  are  provisions  made  for  a  large 
amount  of  American  claims.  But  for  that  treaty  these  claims  would 
have  gone  into  the  general  wreck.  There  were  vessels  then  in  the 
ports  of  France,  and  others  not  condemned  ;  there  were  provisions  and 
supplies  to  the  amount  of  twenty  million  francs  then  in  those  ports. 
By  the  making  of  the  treaty  of  1800  these  were  all  released,  and  those 
actually  applied  to  the  use  of  France  were  paid  for ;  and  the  treaty  of 
1803  made  provision  by  which  twenty  million  francs  were  set  aside  to 
pay  these  identical  claims.  We  reserved  from  the  purchase  money  of 
Louisiana  twenty  million  francs  or  $1:,000,000  to  pay  these  claims,  and 


FRENCH  SPOLIATION  CLAIMS.  371 

we  paid  them.     In  the  treaty  of  1800  we  secured  our  private  citizens 
this  important  advantage. 

I  am  aware  that  in  the  present  bill  we  have  reserved  from  the  ap- 
propriation all  claims  which  were  paid  by  the  treaty  referred  to.  It 
is  not  in  that  view  that  I  allude  to  it.  I  am  merely  showing  that  the  • 
treaty  of  1800  was  an  advantageous  treaty  to  us ;  that,  while  we  could 
not  o-et  all  we  wanted,  we  not  onlv  relieved  ourselves  from  the  g-uaran- 
tees,  but  we  also  stipulated  for  the  payment  practically  of  twenty 
million  francs  to  our  own  citizens ;  and  more — not  only  did  we  get 
twenty  million  francs  in  money,  but  all  the  vessels  which  were  then  in 
the  ports  of  France  belonging  to  American  citizens  were  discharged, 
and  the  amount  of  benefit  to  our  commerce,  and  to  the  men  to  whom 
they  belonged,  was  more  than  ten  million  dollars  in  the  value  of  their 
vessels  and  the  amount  they  subsequently  recovered  where  the  property 
had  been  used  by  the  French  Government  or  l)y  French  citizens. 

When  the  treaty  of  1800  came  before  the  Senate  of  the  United 
States,  what  was  the  view  taken  of  it  ?  We  can  not  tell.  The  debates 
were  in  secret.  I  am  sorry  they  were.  I  believe,  if  the  debates  on 
that  treaty  were  now  kno\vn  to  the  world,  this  claim  would  be  forever 
barred.  What  was  the  reason  for  striking  out  the  second  article  ? 
Here  the  alleged  assumption  comes  in.  It  is  admitted  on  all  hands 
that  by  the  treaty  as  it  stood  there  was  no  assumption,  no  set-off,  no 
contract,  no  bargain,  no  partnership.  By  the  treaty  as  it  was  framed 
there  is  no  pretense  that  these  claims  were  applied  to  public  use.  I 
wish  Senators  on  all  sides  to  understand  that.  If  there  was  any  set-off, 
or  contract,  or  barter,  it  was  made  in  this  Senate  chamber ;  because, 
by  the  treaty  as  it  stood,  the  second  article  expressly  reserved  all  the 
claims  on  l)oth  sides,  whether  for  violations  of  the  treaties,  or  for 
seizures,  captures,  or  claims  by  the  citizens  or  subjects  of  either  party. 
They  were  reserved,  so  that  under  the  treaty  as  it  stood  there  was  no 
pretense  of  a  foundation  for  this  claim. 

Kow,  was  it  made  in  the  Senate  ?  Is  it  to  be  presumed  that  the 
men  who  then  composed  the  Senate  of  the  United  States  would,  with- 
out hearing  these  claims,  without  discussing  the  matter,  without  know- 
ing what  they  did,  make  a  contract  in  the  nature  of  an  assumjjsit  ?  I 
have  always  thought  that  these  commercial  words,  these  terms  which 
apply  only  to  contracts  made  between  citizens  or  contracts  made  be- 
tween States,  ought  not  'to  be  applied  to  the  action  of  a  Government 
when  dealing  according  to  the  public  exigencies.  Did  the  Senate, 
when  it  struck  out  the  second  article,  make  a  contract  or  a  set-off  ? 
There  is  scarcely  any  pretension  of  that  kind.  Where  is  the  evidence 
of  it  ?    j^one  is  produced. 

What  was  the  effect  of  striking  out  that  second  article  ?  It  was 
this,  and  no  more :  The  Senate  had  been  informed  in  this  official  com- 
munication that  it  was  utterly  idle  to  press  the  claims  for  indemnity, 
unless  connected  with  the  idea  of  restoring  the  old  treaties.  They 
knew  that  the  second  article  only  postponed  to  the  future  the  contro- 
versy. It  was  not  at  all  likely  that  France  would  be  more  willing  in 
the  future  than  in  the  past  to  pay  these  moneys.  They  knew  that  this 
stipulation  in  favor  of  indemnities  was  of  no  value  to  our  citizens  ;  it 


372  SPEECHES  AltTD  REPORTS   OF  JOHX  SHERMAN. 

■v^s  no  burden  to  us.  We  had  accomplished  our  purpose  ah*eady  by 
the  treaty,  whether  tlie  section  was  in  or  out.  "\Ye  had  got  rid  of  the 
old  treaties ;  the  new  treaty  superseded  them.  If  the  second  article 
was  in,  it  superseded  them  just  as  well  as  if  it  was  out. 

What  motive,  then,  could  induce  the  Senate  of  the  United  States 
to  strike  out  the  second  article  ?  AVliat  motive  had  we  to  apply  private 
property  to  public  use  ?  Why  should  we  then,  when  the  private  prop- 
erty of  our  citizens  was  protected  and  referred  to  a  future  negotiation, 
appropriate  it  for  what  we  had  already  got  ?  Did  we  strike  out  that 
article  in  order  to  get  a  release  from  the  French  treaties  i  We  had 
already  got  it ;  it  was  in  the  treaty.  AVhat  was  the  consideration  for 
which  we  assumed  these  claims  i  I  submit  to  you,  if  we  have  got  to 
talk  in  commercial  language,  in  tlie  language  of  lawyers  or  dealers, 
what  consideration  was  there  that  moved  the  United  Slates  to  assume 
an  obligation  unless  it  also  got  some  benefit  on  behalf  of  the  nation  ? 
It  is  said  that  we  got  a  release  from  the  guarantee,  but  we  had  that 
already  practically.  The  treaty  itself  in  all  its  terms  was  a  release  from 
it ;  and  unless  the  postponement  of  this  controversy  to  some  indefinite 
future  was  a  burden  that  the  Senate  were  anxious  to  get  rid  of,  there 
was  no  consideration. 

.  Sir,  the  only  motive  for  striking  out  that  second  article  in  the  Sen- 
ate was  a  desire  to  end,  once  for  all,  the  controversies  between  France 
and  the  United  States,  to  start  anew  on  tlie  field  of  friendship  and 
amity,  to  open  again  the  kind  affections  and  warm  feelings  of  grati- 
tude which  still  lingered  in  the  hearts  of  the  American  people  when 
the  name  of  France  was  mentioned.  Sir,  the  act  of  the  Senate  was  an 
act  worthy  of  the  Senate.  It  was  an  abandonment  of  all  these  old  con- 
troversies, in  the  hope  that  the  new  treaty  of  peace  which  had  been 
made  between  our  honored  envoys  and  the  Government  of  France 
would  start  anew  the  old  feelings  of  friendship.  The  idea  of  making 
this  action  of  the  Senate  a  contract  or  set-off  is  a  misnomer  of  terms. 

This  is  the  only  basis,  the  only  stand  on  which  this  old  claim  of 
seventy-two  years  rests.  It  rests  upon  the  assumption  that  tlie  Senate, 
by  striking  out  the  second  article,  appropriated  the  property  of  private 
persons  to  public  iise.  Where  was  the  exigency  ?  Where  is  the  decla- 
ration of  any  man  who  lived  at  the  time  that  this  was  done  ?  I  know 
my  honorable  friend  from  Massachusetts  has  quoted  quite  a  number  of 
remarks — one  made  by  Mr.  Madison  in  his  negotiation  with  Spain  ;  one 
made  by  Mr.  Pinckney,  who  gave  his  opinion  that  we  ought  to  i3ay ; 
one  made  by  Mr.  Clay,  who  thought  there  was  a  kind  of  equity  in  pay- 
ing the  claims.  These  words  are  from  the  second  generation  of  men, 
and  the  remark  made  by  Mr.  Madison  was  the  only  one  that  has  any 
bearing  on  it,  the  only  one  that  squints  that  way. 

But  suppose  Mr.  Madison  did  say  what  is  quoted ;  and  no  doubt  he 
did.  Why  was  it  that  Mr.  Madison  while  he  was  President  of  the 
United  States  for  eight  years,  and  afterward,  did  not  give  his  potential 
voice  in  favor  of  these  claims  when  they  might  have  been  paid,  and 
within  the  recollection  of  the  men  who  knew  all  about  them  i  If,  ac- 
cording to  Pinckney  and  Madison,  these  claims  were  just,  or  some 
equitable  consideration  had  arisen  from  the  striking  out  of  the  second 


FRENCH   SPOLIATION  CLAIMS.  373 

article,  why  were  not  tlie  claims  paid  ? '  And  yet,  as  I  will  show  in  a 
moment,  they  slept  dnring  the  whole  lives  of  the  men  who  participated 
in  this  controversy. 

Mr.  President,  I  am  sorry  that  I  have  detained  the  Senate  so  long, 
but  I  saw  no  other  Senator  disposed  to  enter  into  this  debate  after  a 
long  controversy,  and  I  thought  I  would  present  my  views ;  and  I  have 
presented  them  much  more  fully  than  I  intended  when  I  rose. 

I  have  not  overlooked  the  foot-note  of  Napoleon,  but  I  do  not  think 
his  declaration  in  ratifying  the  treaty  and  the  history  of  its  ratification 
change  at  all  the  effect  of  the  previous  act.  The  act  of  the  Senate  I 
have  already  mentioned.  The  treaty  was  sent  with  the  second  article 
stricken  out,  leaving  the  old  treaties  suspended  for  eight  years,  of  no 
force,  no  validity ;  the  guarantee  clause  suspended,  all  the  clauses  that 
we  complained  of  as  inconsistent  w^ith  Jay's  treaty  modified  or  stricken 
out.  Then  Napoleon,  in  approving  this  change,  adds  these  words: 
"  That  by  this  retrenchment  the  two  States  renounce  the  respective 
pretensions  which  are  the  object  of  the  said  article."  What  is  this  ? 
What  is  the  meaning  of  the  word  "  renounce  "  ?  What  is  the  meaning 
of  the  word  "  pretensions  "  ?  In  what  respect  does  this  language  differ 
from  the  legal  effect  of  tlie  action  of  the  Senate  already  ?  It  was  sim- 
ply, "We  will  abandon  those  claims;  we  will  no  longer  press  them 
upon  each  other ;  we  renounce  the  several  pretensions."  The  French 
renounced  the  pretension  that  the  old  treaties  were  in  force  against  us 
to  hamper  us  for  all  time  to  come,  and  we  renounced  the  pretension 
that  their  seizures  were  in  violation  of  international  law.  We  aban- 
doned all  these  controversies.  That  is  the  construction  I  put  upon  it, 
and  it  seemed  to  me  so  obvious  a  one  that  I  was  passing  it  by  jvithout 
notice. 

I  think  that  the  words  bear  the  construction  I  have  given,  and  are 
perfectly  consistent  with  the  construction  I  have  already  put  upon  the 
action  of  the  Senate.  Whether  this  foot-note  of  Napoleon— because  it 
is  not  jrablished  as  a  part  of  the  treaty,  it  is  published  in  the  correspon- 
dence— changed  the  treaty  or  modified  our  action  in  striking  out  the 
second  article,  I  leave  to  the  honorable  Senator  [Mr.  Frelinghuysen]  to 
discuss.  Admit  it,  in  what  respect  does  this  differ  from  the  action  of 
the  Senate  already  ?  Simply  an  abandonment  by  both  parties  of  any 
future  negotiation  involving  a  controversy  upon  which  tliey  could  not 
agree. 

They  renounced  the  prosecution  of  these  claims,  that  is  all.  We 
had  over  and  again  insisted  on  the  justice  of  the  claims ;  the  French 
over  and  over  again  had  insisted  that"  they  were  not  just,  that  their  acts 
were  acts  of  reprisal  for  our  violations  of  treaties ;  and  the  pretensions 
of  these  two  nations— that  is,  the  claims,  the  construction,  the  acts  of 
the  two  nations  in  construing  the  treaty,  the  several  claims,  pretensions, 
or  whatever  you  please  to  call  them— should  be  abandoned,  renounced, 
no  longer  prosecuted,  no  longer  pressed.  We  could  not  change  the  idea 
of  the  French  that  we  had  done  them  injustice.  We  did  not  ask  the 
French  to  abandon  their  opinion,  nor  did  they  ask  us  to  abandon  ours. 

Mr.  President,  I  come  now  very  briefly  to  consider  another  point. 
If  this  claim  rested  upon  a  clear  legal  right,  why  was  it  not  pressed 


374  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

upon  the  generation  of  men  wlio  knew  all  about  it  ?  You  will  find  at 
tlie  end  of  the  report  of  the  Senator  from  Massachusetts  the  whole  his- 
tory of  this  controversy.  There  was  no  action  that  had  any  bearing 
upon  it  until  1818.  The  petitions  that  were  presented  April  22,  1802, 
and  February  8,  1807,  had  no  bearing  on  the  controversy.  The  first 
time  the  subject  was  presented  to  the  Senate  of  tlie  United  States  was 
in  1818.  The  Committee  on  Foreign  Relations  was  then  composed  of 
the  following  eminent  Senators :  Macon,  of  Xorth  Carolina ;  Barbour, 
of  Virginia ;  King,  of  isew  York ;  Laycoek,  of  Pennsylvania  ;  Daggett, 
of  Connecticut ;  all  of  them  men  whose  names  are  still  remembered. 

Although  the  reputation  gained  in  political  life  as  a  matter  of  course 
is  very  transient,  yet  every  one  will  remember  the  names  of  these  emi- 
nent men.  They  gave  the  subject  a  patient  investigation,  and  here  I 
have  their  report,  and  that  report,  although  compared  with  the  volumi- 
nous documents  that  have  appeared  in  regard  to  French  sj^oliations  since 
it  is  very  small,  is  a  clear  and  fair  statement  of  the  whole  case,  decidedly 
adverse  to  the  claim,  and  they  put  it  upon  the  ground  upon  which  I 
rest  my  opinion,  that  the  action  of  the  Senate  and  the  action  of  Xapo- 
leon  in  qualifying  the  ratification  of  the  Senate  did  not  create  a  liability 
either  in  law  or  equity  on  the  part  of  the  United  States  to  pay  these 
claims.     I  will  not  take  time  to  read  the  report. 

The  next  time  the  question  came  before  Congress  was  January  31, 
1822,  when  another  report,  made  by  the  Committee  on  Foreign  Rela- 
tions of  the  Senate,  upon  this  class  of  claims,  was  again  advei-se  on  the 
very  same  ground,  and  on  other  grounds,  that  the  act  of  the  Govern- 
ment of  the  United  States  in  striking  out  the  second  article  of  the 
treaty  of  1800,  and  the  attending  circumstances  in  regard  to  Napoleon, 
did  not  create  any  liability  on  the  part  of  the  United  States.  No  one 
then  set  up  the  idea  of  a  set-oif  or  assumpsit ;  no  one  then  set  up  the 
idea  of  a  contract,  or  attempted  to  assimilate  this  matter  to  a  contract 
between  individuals,  but  they  denied  the  claim  on  the  broad  principle 
that  this  act  of  the  Government  of  the  United  States  did  not  create 
any  obligation  in  equity  or  right  on  us  to  assume  it. 

The  first  time  the  bill  passed  the  Senate  of  the  United  States  was 
in  1835.  I  have  the  debate  before  me.  Then,  for  the  first  time,  it 
passed  by  a  close  vote  of  30  to  25.  What  were  the  circumstances  of 
the  country  at  that  time  ?  All  the  claims  from  the  ante-revolutionary 
period  were  raked  up ;  the  Treasury  was  overflowing ;  Congress  was 
engaged  in  all  kinds  of  legislation  to  deplete  an  overflowing  Treasury. 
They  actually  passed  bills  for  the  distribution  of  money  among  the 
States.  The  public  debt  had  been  paid  off.  Every  claim  that  had  a 
shadow  of  equity  was  brought  up,  and  among  the  rest  this  French 
spoliation  claim,  nurtured  for  thirty-five  years.  The  advertisement  I 
have  read  you  shows  that  the  agency  established  in  Washington  com- 
menced its  operations  in  1822.  "^By  1835  they  had  created  a  kind  of 
opinion  in  favor  of  the  claims,  and  in  1835  they  were  discussed.  Then 
the  celebrated  report  of  Mr.  Clay,  made  in  1826,  containing  all  the 
documentary  information,  was  before  the  Senate.  I  would  be  per- 
fectly willing  to  take  that  debate  of  1835,  in  which  some  of  the  most 
eminent  men  of  this  country  participated,  and  allow  every  man  to  pass 


FEENCH  SPOLIATION   CLAIMS.  3Y5 

a  dispassionate  judgment  npon  it.  There  was  Webster,  with  his  great 
intellect,  throwing  "his  whole  weight  in  favor  of  the  claims,  reporting 
them,  advocating'them  strongly  and  ably.  He  was  supported  by  Pres- 
ton and  others.  On  the  other  hand  there  were  Wright  and  Benton, 
Bibb,  and  Hill  of  New  Hampshire,  and  other  eminent  men  who  took 
ground  against  them. 

I  have  read  the  debate  carefully,  and  I  do  believe  that,  but  for  the 
fact,  so  often  commented  upon,  that  there  was  money  in  the  Treasury 
and  the  time  had  arrived  when  all  claims  should  be  paid,  the  bill  would 
not  liave  passed  the  Senate ;  but  it  did.  It  passed  the  Senate  by  a 
vote  of  30  to  25.  It  went  to  the  House  of  Representatives,  but  the 
House  refused  to  pass  it.  It  was  continued  along  until,  I  think,  in 
1847  it  finally  got  through  the  House.  Having  first  passed  the  Sen- 
ate, the  Senate  voted  for  it  again  rather  as  a  matter  of  course  ;  and  it 
was  twice  vetoed,  and  for  seventy  years  lias  been  here  before  Congress. 

It  is  said  that  there  are  some  thirty  or  forty  reports  in  favor  of  it. 
Why,  sir,  how  incoiTect  that  is !  The  way  the  reports  came  to  be  in 
favor  of  this  bill  was  that  some  Senator  who  thought  his  constituents 
were  interested  would  move  a  select  committee,  to  whom  it  would  be 
referred.  A  majority  of  the  committee  had  to  be  in  favor  of  it.  That 
was  the  rule  of  parliamentary  law.  Most  of  the  reports  in  the  first 
instance  were  made  by  such  committees.  And  so,  year  after  year, 
from  1829  down  to  1861,  a  majority  of,  and  nearly  all,  the  reports  were 
made  by  select  committees  of  one  or  the  other  House,  packed,  as  I 
may  say — and  I  say  it  in  no  offensive  sense — packed  by  parliamentary 
law  in  favor  of  the  claims. 

At  one  time,  in  connection  with  the  report  of  the  majority,  there 
was  a  strong  statement  by  the  minority,  made  by  Mr.  Cambreleng.  I  do 
not  give  any  weight  to  these  reports  ;  I  do  not  see  that  they  have  any 
weight  on  either  side ;  but  when  it  is  said  that  this  claim  has  been 
passed  by  committee  after  committee,  I  reply  that  they  have  not  re- 
ceived at  any  time  the  sanction  of  law,  the  sanction  of  any  authority 
made  by  law  in  regard  to  the  public  Treasury,  and  I  hope  to  God  they 
never  will. 

The  Senator  from  Massachusetts  opens  his  beautiful  report  by  saying 
that  this  claim  will  never  die.  I  believe  it  never  will  die.  It  is  supported 
by  the  interest  of  corporations  ;  and  I  say  now  that  much  the  larger  por- 
tion of  the  benefit  to  be  derived  from  this  bill  is  to  go  to  insurance  com- 
panies, who  are  immortal.  They  are  coi'porations  that  never  die.  But 
for  the  fact  that  the  great  mass,  not  of  the  petitioners,  because  this  ad- 
vertisement shows  you  how  these  petitions  are  brought  here,  but  the  great 
mass  in  amount  of  the  claims  are  by  insurance  companies,  these  coi^po- 
rations  that  never  die,  they  would  have  died  out  by  inanition.  The  men 
who  originally  presented  the  claims,  their  children,  and  their  grandchil- 
dren have  been  swejDt  away  ;  and  now,  if  you  pass  t]^is  five-million  bill, 
to  whom  will  the  money  go  ?  How  will  those  men  and  the  children 
of-  those  men  who  suffered  by  the  depredations  of  the  French  furnish 
the  proof  ?  Where  are  the  records  that  enable  them  to  preserve  the 
trath  ?  The  family  is  scattered  or  dead  ;  the  papers  gone.  How  many 
papers  of  seventy  years  ago  now  exist  ?     But  in  the  records  of  these 


376  SPEECHES   AND  KEPORTS  OF  JOHN  SHERMAN. 

corporations,  in  tlieir  pigeon-holes  and  boxes,  stored  away  safely  for 
future  time,  witli  tlieir  agent  liere  in  Washington,  tlie  claims  are  kept 
alive. 

I  say  tins  is  an  argument  to  show  that  this  claim,  if  it  is  placed  on 
the  ground  of  equity,  is  not  one  that  the  Senate  ought  to  regard. 
What  is  the  condition  of  an  insurer  ?  An  insurer  takes  the  risk.  He 
is  paid  for  taking  the  risk.  It  is  sliown  here  by  these  documents  tliat 
insurance  ranged  at  that  time  from  twenty-live  to  lifty  per  cent.  ;  so 
that  if  one  vessel  was  lost  out  of  tliree  it  was  still  a  profitable  venture. 
It  is  also  shown  by  these  papers  tliat  at  that  time  the  largest  i)rotits 
were  made  by  American  connnerce  that  have  ever  been  made  in  the 
history  of  our  country.  These  insurance  companies  that  set  up  these 
claims  have  been  paid  for  their  risk.  They  have  made  money. 
Some  of  tlie  largest  fortunes  in  this  country  were  founded  on  the 
operations  of  insurance  prior  to  1800. 

Not  only  that,  sir ;  many  of  the  i)ersons  interested  in  these  insur- 
ance companies  were  Englishmen.  The  stock  was  mainly  owned  by 
Englishmen.  Englishmen  sought  to  protect  their  ventures  under  our 
flag,  and  the  French  complained  that  while  the  American  flag  was 
raised  over  the  vessel  it  was  the  property  of  Englishmen,  commanded 
by  Englishmen,  and  manned  by  Englishmen,  and  Englishmen  were 
their  enemies  who  were  seeking  to  starve  them  to  death.  That  was 
the  argument  of  the  French.  And  now  we  are  called  upon  after 
seventy-two  years  to  pay  to  the  subjects  of  one  of  these  belligerents  the 
investments  they  made  under  our  flag  for  injuries  done  by  another  of 
the  belligerents.  That  is  precisely  the  condition  in  Avhich  we  are 
placed. 

The  claim  of  insurance  companies  does  not  stand  upon  so  equitable 
a  ground  as  would  the  claim  of  an  individual.  Mr.  Webster  admits 
that  the  body  of  these  claims  is  owned  by  insurance  companies.  Mr. 
Millson,  in  a  very  able  speech  made  in  1855,  states  the  same  fact  at 
great  length,  and  gives  the  reasons  why  the  insurance  companies  owned 
these  claims.  Mr.  Webster  insists  that  the  insurers  are  subrogated  to 
the  rights  of  the  insured,  and  by  law  are  entitled  to  press  the  claims. 
I  do  not  know  about  it.  I  do  not  know  whether  the  law  of  subroga- 
tion applies  to  claims  that  can  not  be  enforced  in  the  courts.  Mr.  Web- 
ster says  it  does.  Perhaps  he  is  correct.  But,  sir,  I  say  if  we  are 
called  upon  on  the  ground  of  equity  to  pay  this  money,  to  satisfy  a 
kind  of  equitable  demand,  I  present  this  fact,  that  the  money  will  go 
to  insurance  companies  who  are  still  in  existence,  most  of  wliose  stock 
was  then  owned  by  British  merchants.  The  facts  are  fully  developed 
in  these  papers.  That  is  another  reason  why  we  should  be  reluctant  to 
pass  the  claim  merely  on  an  equitable  ground. 

But  there  is  another  objection  on  the  face  of  this  bill.  Who  are  to 
receive  this  money  'I     What  is  the  character  of  the  obligation  ? 

Claims  to  indemnity  upon  the  French  Government,  arising  out  of  illegal  captures, 
detentions,  seizures,  condemnations,  and  confiscations. 

Why,  sir,  how  vague  is  this  language  ;  how  indefinite  !  What  kind 
of  seizures  were  they  'i     How  can  we  tell  whether  a  seizure  made  eighty 


FKENCH  SPOLIATIOX  CLAIMS.  377 

years  ago  was  legal  or  illegal  ?  Where  is  the  evidence  ?  Perhaps  some 
of  the  seizures  were  really  the  seizures  of  English  vessels  under  the 
American  flag.  Perhaps  some  of  them  were  of  vessels  for  violating 
maritime  law,  violating  the  laws  of  nations,  seeking  cover  under  our 
flag  to  violate  that  law.  How  can  we  tell  i  All  seizures,  all  condem- 
nations, all  embargoes  will  be  embraced  by  this  broad,  sweeping  clause. 
Who  can  say  that  they  were  illegal  "i  Upon  the  Government  of  the 
United  States  will  depend  the  proof  that  they  were  illegal  ?  These 
men  will  show  that  their  cargoes  were  captured,  that  they  were  seized 
under  the  American  flag.  They  may  bring  a  case  under  the  French 
treat  J,  but  it  may  be  that  that  very  property  belonged  to  English  sub- 
jects, that  our  flag  was  used  as  the  mere  cover  of  English  property, 
ilow  can  that  be  found  out  ?  All  these  vague,  indeflnite  matters  are 
sent  to  a  connnission  without  any  means  to  try  them  except  to  parcel 
out  this  $5,000,000. 

But  we  are  told  the  amount  is  limited  to  $5,000,000,  and  we  ought 
not  to  take  any  great  interest  in  it ;  it  is  not  so  very  large  a  sum.  Five 
million  dollars  is  not  as  much  as  it  used  to  be ;  but  what  ground  have 
you  to  believe  that  this  $5,000,000  is  any  limit  to  this  claim  i  The 
Senator  from  Pennsylvania  [Mr.  Cameron]  said  yesterday  that  the 
amount  was  twenty  millions ;  the  Senator  from  Massachusetts  [Mr. 
Sumner]  says  it  was  fifteen  millions  seventy-two  years  ago,  and  the 
Senator  from  Massachusetts  quotes  law  that  I  can  not  gainsay  that  claims 
of  this  kind  bear  interest,  and  that  the  real  claims  of  these  persons  are 
fifteen  millions  with  interest  for  seventy-two  years.  But  you  say  you 
have  limited  them  to  five  millions  ;  they  must  dole  that  out ;  they  must 
divide  it  among  themselves.  But  suppose  they  find  a  board  of  com- 
missioners who  report  to  us  that  there  was  due  in  1800  $20,000,000  to 
these  claimants.  If  one  cent  was  due,  it  was  all  due.  What  right  have 
you  to  parcel  out  the  justice  of  the  American  j)eople  by  a  dividend  of 
twenty-five  per  cent.  ?     We  are  not  bankrupt. 

If  we  are  bound  to  pay  these  claims,  let  us  go  to  the  whole  extent 
and  pay  them  all.  Evidently  this  is  a  mere  effort  to  get  this  five  mil- 
lions on  a  controverted  question  ;  and  if  a  judgment  of  twenty  millions 
due  in  1800  is  rendered  against  us,  how  can  you  resist  the  payment  of 
the  interest  and  the  payment  of  the  balance  ?  Pemember  the  claims 
made  by  Massachusetts  for  interest  in  the  war  claims  of  1812 — and  they 
were  finally  paid. 

But  it  is  said  that  these  people  are  to  give  a  release.  What  is  the 
value  of  the  release  ?  Since  I  have  been  in  Congress  I  have  seen  at 
least  twenty  bills  passed  where  there  were  releases  on  file.  Take  the 
Chorpenning  claim ;  in  that  case  there  was  no^  only  a  release,  but  an 
actual  law  prohibiting  the  receipt  of  any  more.  So,  although  this  re- 
lease is  given,  the  claimants  will  come  back  and  say  it  was  done  under 
compulsion.  The  release  can  be  explained  away.  Even  a  release  under 
seal  is  held  not  to  bind  a  future  Congress.  How  can  Congress  know 
about  this  release  ?  For  although  this  claim  be  so  large  and  notorious, 
how  can  we  answer  the  question,  if  we  pay  five  millions  on  this  just 
claim  (because  we  thereby  acknowledge  its  justice)  ?  Why  not  pay  the 
whole  twenty  millions,  even  if  we  pay  it  without  interest  ?     There  is 


378  SPEECHES  AND  REPORTS  OF  JOHN"  SHERMAN. 

no  limit.  As  my  colleague  remarks  to  me,  and  I  have  no  doubt  lie  is 
correct,  although  I  have  not  examined  the  official  statement,  there  is 
no  evidence  on  the  files  of  the  Department  of  State  in  regard  to  the 
amount  of  the  claims,  except  the  ex  parte  evidence  of  the  claimants 
themselves. 

There  is  one  other  point  that  I  submit  to  Senators  :  whether  we 
can  do  this  with  a  just  regard  to  the  memory  of  the  men  who  preceded 
us  on  this  floor,  or  who  managed  the  Government  from  its  foundation. 
This  bill,  in  language  which  it  seems  to  me  is  offensive,  assumes  and 
declares  in  so  many  words  that  all  the  acts  of  the  United  States  Gov- 
ernment relating  to  this  controversy  before  1800  were  wrong.  I  will 
read  it  to  you.  It  goes  on  and  provides  for  this  commission.  Remem- 
ber, the  United  States  Government  never  acknowledged  the  binding 
operation  of  these  treaties  during  the  time  these  claims  accrued,  and 
yet  this  bill  declares  that  these  commissioners,  when  they  pay  these 
claims,  "  shall  be  governed  in  their  decisions  by  the  principles  of  jus- 
tice, tlie  law  of  nations,  and  former  treaties  between  the  United  States 
and  France,  to  Avit,  the  treaty  of  amity  and  commerce  of  the  6th  of 
February,  1778,  the  treaty  of  alliance  of  the  same  date,  and  the  consu- 
sular  convention  of  the  14th  of  November,  1788." 

Here  this  bill,  nearly  eighty  years  after  the  proclamation  of  neutral- 
ity, reverses  and  overrules  the  decision  of  George  Washington  and  his 
Cabinet  and  the  whole  American  people.  We  now  declare  that  we 
will  pay  these  claims,  recognizing  those  treaties  to  be  in  full  force  ;  in 
other  words,  that  the  seventeenth  and  twenty-second  articles  of  the  old 
treaty,  which  Washington  declared  to  be  inoperative,  and  the  guarantee 
of  the  West  India  islands,  which  was  declared  by  the  whole  Govern- 
ment to  be  applicable  only  to  a  state  of  defensive  war,  shall  be  en- 
forced. 

I  am  not  willing  to  legislate  in  any  such  view.  If  this  $5,000,000 
is  to  be  distributed  among  these  people,  let  it  be  so.  But  why  should 
we  revive  these  treaties  and  do  what  our  Government  refused  to  do 
over  and  over  again  ?  And  yet  that  is  what  we  do.  We  declare  that 
this  money  shall  be  distributed  upon  the  assumption  that  those  treaties 
were  in  force  in  1800,  and  for  the  distribution  of  this  money  we  revive 
all  those  treaties  which  our  Government  always  refused  to  do.  In 
other  words,  this  bill  is  based  upon  the  French  idea  of  our  controversy, 
and  not  upon  the  American  idea.  It  is  based  upon  the  assumption 
that  we  were  wrong  and  that  France  was  right,  and  that  we  are  re- 
quired to  pay  all  the  claims  that  grew  out  of  the  violation  of  the 
articles  of  a  treaty  that  was  declared  to  be  inoperative  upon  us,  not 
applicable  to  the  condition  of  affairs  ;  a  treaty  that  was  rejected  by  the 
executive  authority,  by  the  judicial  authority,  and  by  express  terms  of 
law  by  the  legislative  authority.  Aud  yet  we  revive  these  treaties  in 
order  to  distribute  this  monej^  among  our  citizens. 

These  claimants  have  no  equity  on  another  ground.  This  policy  of 
neutrality  was  adopted  at  their  instance,  for  their  benefit,  for  their 
safety,  for  their  protection,  and  although  they  lost  in  many  cases,  yet 
the  actual  profits  during  that  period  of  our  commerce  were  greater  than 
ever  before  in  American  history.     Senators  may  be  surprised  when  I 


FRENCH   SPOLIATION   CLAIMS.  379 

tell  them  that  our  exjDorts  and  imports  had  risen  from  $31,000,000  in 
1793  to  $100,000,000  and  over  in  1800.  Dm-ing  this  time  of  detentions, 
of  seizures,  of  captures,  our  commerce  had  sprung  into  the  greatest  ac- 
tivity that  it  had  ever  had.  Profits  and  fortunes  were  made  that  bear 
no  comparison  with  those  that  have  been  made  since.  Our  trade  sprung 
up  threefold  in  seven  years.  While  these  people  met  with  large  losses 
by  detentions  and  seizures  both  by  Great  Britain  and  France,  because 
Great  Britain  also  pursued  this  unlawful  foray  upon  our  commerce,  yet 
our  flag  was  the  only  neutral  flag  among  the  commercial  and  maritime 
nations,  and  our  merchants  made  enormous  profits.  Our  commerce  in- 
creased threefold,  and  for  the  first  time  we  appeared  aniong  the  nations 
of  the  earth  with  the  prospect  in  the  speedy  future  of  becoming  one  of 
the  great  commercial  nations.  Yes,  sir,  in  seven  years  our  commerce, 
both  external  and  internal,  increased  wonderfully  ;  our  imports  rose 
from  thirty-one  to  one  hundred  millions,  and  our  exports  in  the  same 
ratio.  Our  farmers  were  all  occupied.  The  wheat  and  the  grain  from 
America  fed  the  soldiers  and  the  citizens  of  France.  They  fed  Great 
Britain.  They  were  exported  to  all  the  countries  of  Europe  ;  and 
although  we  did  sufl^er  some  losses,  this  among  the  rest,  yet  the  general 
condition  of  our  country,  its  general  prosperity,  the  enormous  profits 
made  by  these  merchants  more  than  compensated  them  for  all  their 
losses.  I  have  no  doubt  these  very  claimants  would  have  been  glad  for 
more  spoliation,  more  wars  between  the  nations  of  Europe,  in  order  to 
give  them  an  increased  profit  from  the  neutral  carrying  trade  which 
they  then  enjoyed. 

Kow,  Mr.  President,  there  is  only  one  other  consideration  which  I 
desire  to  present,  and  then  I  will  relieve  the  Senate.  The  passage  of 
this  bill,  in  opening  up  antiquated  claims,  will,  I  think,  have  a  very 
serious  effect  in  many  other  directions.  If  a  claim  can  be  persistently 
urged  for  seventy  long  years,  under  the  adverse  circumstances  that 
surrounded  this  one,  and  finally  be  crowned  with  the  success  of  an 
appropriation  of  $5,000,000,  to  be  distributed  in  an  indefinite  way 
among  unknown  or  dead  claimants,  how  eager  will  other  men  be  to 
revive  old  claims !  '  They  are  scattered  through  our  whole  history. 
Why  do  you  not  redeem  the  continental  money ''(  Your  act  of  1792 
to  sustain  the  public  credit  reduced  that  money  to  the  value  of  one 
dollar  for  a  hundred.  Why  do  you  not  pay  the  children  of  the  revolu- 
tionary soldiers,  whose  fathers  fought  and  bled  and  died  for  us  and 
were  paid  off  in  continental  money  at  one  dollar  for  a  hundred  ?  You 
promised  the  oflicers  of  the  army  in  the  revolutionary  war  to  give  them 
half  pay  for  life  ;  in  some  cases  for  five  years.  Did  you  ever  perform 
that  obligation  ?  Why  did  you  not  do  it  ?  These  were  worthy  sub- 
jects for  your  consideration,  and  their  descendants  still  live  and  flourish 
among  you.  It  is  true  that  we  did  the  best  we  could  in  the  agreement 
with  the  soldiers  and  oflicers  of  the  Pevolution.  In  the  general  bill 
establishing  the  public  credit  we  did  give  the  oflficers  in  some  cases 
half  pay,  compounded  with  them,  compromised  with  them.  I  might 
go  through  our  list  and  name  an  immense  number  of  such  claims.  Sir, 
the  success  of  this  claim  of  seventy-two  years'  standing  will  give  en- 
couragement to  the  revival  of  a  great  mass  of  others. 


880  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

If  these  claims  are  just,  we  onglit  not  to  compound  with  the  claim- 
ants at  twentj-iive  cents  on  the  dollar,  after  keeping  them  out  of  their 
money  for  seventy-two  years.     Sir,  there  is  no  justice  in  the  claims. 

Mr.  President,  who  can  tell  tlie  effect  of  the  passage  of  this  bill 
upon  the  public  credit?  If  we  open  the  door  to  all  the  multitude  of 
claims  that  may  arise  it  will  very  seriously  impair  it.  We  have  been 
pursuing  the  policy  since  the  close  of  the  war  of  a  gradual  reduction 
of  taxes.  We  have  now  diminished  our  taxation  until  it  approaches 
very  near  to  our  expenditures.  AVe  can  not  now  revive  these  old  claims 
and  pay  them.     It  is  no  time  to  do  it.     It  will  affect  the  public  credit. 

Mr.  President,  I  believe  that  this  claim  has  no  merit  either  in  law 
or  in  equity.  I  believe  that  the  Government  of  the  United  States  never 
appropriated  these  claims,  but  did  all  they  could  to  enforce  them.  They 
were  abandoned  for  high  and  justifiable  public  reasons,  and  under  cir- 
cumstances that  gave  the  parties  no  claim  whatever  upon  the  Govern- 
ment. They  have  already  received  large  benefits  and  great  profits 
from  the  policy  adopted  by  the  Government.  This  money  is  to  go 
mainly  to  a  class  of  people  who  have  no  equitable  claim.  The  whole 
bill  is  framed  with  a  view  to  parcel  out  $5,000,000  among  a  lot  of  cor- 
porations who  have  kept  up  this  controversy  and  continued  it  year  after 
year  by  an  organization  in  the  city  of  Washington.  I  think,  therefore, 
the  Senate,  where  the  basis  of  the  claim  originated,  can  not  do  better 
than  at  once  to  disapprove  it.  I  hardly  expect  that,  because  I  know  a 
kindly  usage  has  sprung  up  in  the  Senate,  by  which,  because  one  Senate 
thii'ty  or  forty  years  ago  passed  a  bill,  therefore  this  Senate  must  do  it. 
That  has  got  to  be  a  general  idea,  and  this  French  spoliation  bill  has 
passed  the  Senate  on  something  like  that  idea.  It  passed  the  Senate  in 
1835,  and  therefore  it  must  pass  the  Senate  in  1892,  or  1950,  and  be 
sent  to  the  House.  But  I  do  think  after  the  lapse  of  time  that  has  oc- 
curred we  might  at  least  say,  "  Let  this  controversy  be  buried ;  let  these 
claims  be  abandoned ;  they  will  be  no  good  precedent." 


EEISSUE   OF  ISrOTES. 

IN-  TEE  SENATE,  JANUARY  U,  1873. 

Me.  Sheeman,  from  the  Committee  on  Finance,  submitted  the  following  report. 

The  Committee  on  Finance,  in  obedience  to  the  resolution  of  the  Senate  of  the 
6th  instant,  as  follows:  "Resolved,  That  the  Committee  on  Finance  be  directed  to 
inquire  whether  the  Secretary  of  the  Treasury  has  power,  under  existing  law,  to 
issue  United  States  notes  in  lieu  of  the  forty-four  million  dollars  of  notes  retired 
and  canceled  under  the  act  of  April  12,  1863,"  beg  leave  to  report: 

That  a  construction  of  the  act  of  April  12,  18Gn,  renders  necessary 
the  examination  of  the  several  acts  authorizing  legal-tender  notes.  The 
power  of  the  Secretary  of  the  Treasury  to  issue  the  notes  described  in 
the  resolution,  if  it  exists,  must  have  been  conferred  by  these  acts.    The 


EEISSUE  OF  NOTES.  381 

authority  of  Congress  to  authorize  their  issue  has  been  disputed,  but 
may  now  be  considered  as  settled  by  all  departments  of  the  Govern- 
ment. It  was  exercised  by  Congress  only  under  the  most  pressing 
necessity. 

As  an  incident  to  the  powers  to  borrow  money,  to  coin  money,  to 
declare  and  maintain  war,  and  to  provide  for  the  national  defense  and 
general  welfare,  it  was  first  asserted  and  exercised  by  Congress  February 
25,  1862,  when  to  coin  the  public  credit  into  money  seemed  the  only 
expedient  left  to  maintain  the  authority  of  the  Government  during  a 
pressing  war.  This  authority  was  again  exercised  July  11,  18G2,  and 
March  3,  1863.  The  several  acts  of  these  dates  declared  United  States 
notes  to  be  lawful  money,  and  a  legal  tender  in  payment  of  all  debts, 
public  or  private,  within  the  United  States,  except  for  duties  on  im- 
ports and  interest  on  the  public  debt ;  and  they  were  to  be  issued  only 
if  required  by  the  exigency  of  the  public  service  for  the  payment  of 
the  army  and  navy  and  other  creditors  of  the  Government.  The  amount 
of  each  issue  was  carefully  limited.  The  aggregate  could  not  exceed 
$450,000,000,  and  in  fact  never  exceeded  $133,160,569.  The  power 
thus  exercised  was  felt  to  be  a  dangerous  one,  liable  to  abuse,  and  was 
carefully  limited  and  guarded.  Though  the  war  continued  two  years 
and  more  after  the  passage  of  the  act  of  March  3,  1863,  and  immense 
sums  were  borrowed  upon  various  forms  of  security,  the  limit  of  United 
States  notes  was  not  enlarged.  By  the  proviso  in  section  2  of  the  act 
of  June  30,  1861,  under  which  the  national  debt  was  largely  increased, 
it  was  provided,  among  other  limitations,  "  nor  shall  the  total  amount 
of  United  States  notes  issued,  or  to  be  issued,  ever  exceed  $100,000,000, 
and  snch  additional  sum  not  exceeding  $50,000,000  as  may  be  tempo- 
rarily required  for  the  redemption  of  temporary  loan."  It  is  apparent 
that  this  provision  in  a  loan  act  was  not  only  a  limitation  upon  previous 
acts  authorizing  United  States  notes,  but  was  a  declaration  of  public 
j3olicy  and  a  pledge  of  the  public  faith  to  the  national  creditors  that 
their  securities  should  not  ever  thereafter  be  impaired  by  any  increase 
in  legal-tender  notes.  The  United  States  notes  were  regarded  as  a 
necessary  medium  or  means  to  borrow  money  during  war,  with  full 
knowledge  that  in  due  time  they  were  to  be  redeemed  in  coin,  and  that 
any  increase  would  impair  their  value  and  affect  the  value  of  all  public 
securities. 

The  close  of  the  war  was  followed  with  measures  by  both  the  exec- 
utive and  legislative  branches  of  the  Government  to  limit  and  reduce 
the  volume  of  legal-tender  notes  still  fm'ther.  All  forms  of  temporary 
loan,  including  the  legal-tender  interest-bearing  Treasury  notes,  were 
funded  into  bonds.  For  this  purpose  a  portion  of  the  $50,000,000  of 
reserved  United  States  notes  under  the  act  of  June  30,  1864,  was  used 
for  the  redemption  of  temporary  loan ;  but  these  notes  were  soon  re- 
deemed and  canceled,  with  the  avowed  policy  of  contracting  the  cur- 
rency. 

The  act  of  April  12,  1866,  referred  to  in  the  resolution  of  the  Sen- 
ate, was  passed  in  approval  of  and  in  accordance  with  the  avowed  pol- 
icy of  Mr.  McCulloch,  then  Secretary  of  the  Treasury,  to  retire  all 
short-time  liabilities,  by  f  anding  them  into  bonds,  and  to  reduce  the 


382  SPEECHES  AND  KEPORTS  OF  JOHN  SHERMAN. 

volume  of  United  States  notes,  so  that  those  outstanding  should  be, 
from  their  scarcity,  at  par  with  o^old.  The  only  limitation  made  to 
this  power  of  contraction  was  by  the  following  proviso  : 

Provided^  That  of  United  States  notes  not  more  than  ten  millions  of  dollars  may- 
be retired  and  canceled  within  six  months  from  the  passage  of  this  act,  and  there- 
after not  more  than  four  millions  of  dollars  in  any  one  month. 

It  is  clear  that  this  act  authorized  the  payment,  cancellation,  and 
destniction  of  "  all  ol)ligations  issued  under  any  act  of  Congress, 
whether  bearing  interest  or  not,"  and  the  issue  in  lieu  thereof  of  any 
description  of  bonds  authorized  by  the  act  of  March  3,  18G5.  The 
issue  of  the  bonds  necessarily  involved  the  destruction  and  cancellation 
of  the  obligations  received  in  exchange  for  them ;  for  the  act  declared 
that  it  should  not  be  construed  to  authorize  any  increase  of  the  pubhc 
debt.  To  hold  that  any  of  the  obligations,  "  whether  bearing  interest 
or  not,"  received  by  the  United  States  in  exchange  for  its  bonds,  can 
be  issued  again,  is  utterly  inconsistent  with  the  primary  object  of  the 
act — the  funding  of  the  debt — and  with  the  provision  that  the  debt 
shall  not  be  increased  by  the  exchange.  But  for  the  provision  limiting 
the  cancellation  of  United  States  notes,  all  of  them  might  have  been 
canceled  when  received  in  exchange  for  bonds. 

Subject  to  this  limitation,  the  act  of  April  12,  1866,  treats  United 
States  notes  as  one  of  the  numerous  forms  of  demand  or  short-time  ob- 
ligations which  it  was  public  policy  to  fund  and  retire,  with  a  view  to 
specie  payments.  The  bonds  were  to  be  issued  solely  for  the  purpose 
of  securing  the  cr.ncellation  and  final  pajmient  of  an  equal  amount  of 
other  indebtedness.  United  States  notes  could  be  issued  as  a  medium 
of  the  exchange ;  but,  if  so,  they  were  to  be  used  to  retire  other  obH- 
gations.  To  a  limited  extent  they  could  be  canceled  and  retired,  and 
to  that  extent  their  cancellation  was  as  complete  a  payment  and  ex- 
tinguishment as  if  a  compound-interest  note  was  canceled  and  retired. 
It  was  the  desire  of  the  Secretary  of  the  Treasury  to  retire  the  United 
States  notes  or  to  contract  the  currency  more  rapidly  than  Congress 
deemed  prudent,  and  the  object  of  the  proviso  was  to  limit  the  con- 
traction, but  at  the  same  time  to  provide  for  a  gradual  reduction  of  the 
currency,  with  a  view  to  specie  payments. 

To  construe  the  act  as  permitting  the  reissue  of  United  States  notes 
canceled  under  it  would  allow  the  Secretary  to  increase  the  debt  in  di- 
rect violation  of  the  act.  To  evade  the  act,  he  would  only  have  to 
receive  the  notes  in  papnent  of  a  bond  issued,  and  then  cancel  the 
notes  and  issue  others  in  their  place.  In  this  way  both  notes  and  bonds 
would  be  outstanding.  The  plain  intent  of  this  act  was  to  reduce  and 
contract  the  currency.  To  render  this  more  apparent,  we  refer  briefly 
to  what  preceded  the  passage  of  the  act  of  the  12th  of  April,  1866. 

In  December,  1863,  after  the  passage  of  the  acts  authorizing  the 
issue  of  legal-tender  notes,  and  when  the  temporary  deposits  reached 
$145,720,000,  for  meeting  which  $50,000,000  of  the  $450,000,000  Uni- 
ted States  notes  authorized  were  to  be  held  as  a  reserve,  Secretary  Chase, 
in  his  annual  report  (p.  IT),  said  : 

The  limit  prescribed  by  law  to  the  issue  of  United  States  notes  has  been  readied, 
and  the  Secretary  thinks  it  clearly  inexpedient  to  increase  the  amount. 


REISSUE  OF  NOTES.  383 

Speaking  of  the  purpose  for  wliicli  they  were  issued,  he  said : 

Congress  believed  that  four  hundred  millions  would  suffice  for  these  purposes, 
and  therefore  limited  the  issues  to  that  sum. 

He  also  recommended  the  increase  of  the  limit  for  temporary  de- 
posits, then  fixed  by  act  of  July  11,  1862,  at  $100,000,000,  to  $150,- 
000,000,  and  stated  that  $10,000,000  of  the  $50,000,000  reserve  had 
been  used  in  its  redemption  (p.  16).  It  was  after  these  recommenda- 
tions that  the  act  of  June  30,  1864,  was  passed  (13  Stat.,  p.  218),  which 
reenacted  this  recognized  limit  of  $400,000,000  of  United  States  notes 
"  issued  or  to  be  issued,"  and  increased  the  limit  of  temporary  deposits 
to  $150,000,000.  This  act  provides  the  same  reserve,  not  exceeding 
$50,000,000,  to  be  temporarily  used  for  the  redemption  of  such  tem- 
porary loan. 

After  this  act,  in  his  annual  report  in  December,  1864,  Secretary 
Fessenden  again  twice  (pp.  3  and  18)  recognizes  that,  even  prior  to  its 
passage,  the  limit  of  intended  circulation  was  $400,000,000  of  United 
States  notes. 

Secretary  McCulloch,  in  his  annual  report  in  December,  1865  (p.  11), 
says  "  that  the  circulating  medium  of  the  country  is  altogether  exces- 
sive," and  proceeds  to  combat  objections  urged. to  a  reduction  of  the 
currency.  After  making  various  recommendations,  all  tending  to  di- 
minish the  volume  of  circulating  notes,  he  adds  (p.  14) : 

It  is  the  opinion  of  the  Secretary,  as  has  been  already  stated,  that  the  process 
of  contraction  can  not  be  injuriously  rapid,  and  that  it  will  not  be  necessary  to 
retire  more  than  one  hundred,  or  at  most  two  hundred  millions  of  United  States 
notes,  in  addition  to  the  compound  notes,  before  the  desired  result  will  be  attained. 
But  neither  the  amount  of  reduction  nor  the  time  that  will  be  required  to  bring  up 
the  currency  to  the  specie  standard  can  now  be  estimated  with  any  degree  of  accu- 
racy.    The  first  thing  to  be  done  is  to  establish  the  policy  of  contraction. 

The  first  act  in  response  to  this  recommendation  was  the  following 
resolution,  introduced  into  the  House  of  Representatives  15th  March, 
1866,  and  passed  by  the  very  decided  vote  of  144  yeas,  6  nays  : 

Eesolved,  That  this  House  cordially  concurs  in  the  views  of  the  Secretary  of  the 
Treasury  in  relation  to  the  necessity  of  a  contraction  of  the  currency,  with  a  view 
to  as  early  a  resumption  of  specie  payments  as  the  business  interests  of  the  country 
will  permit ;  and  we  hereby  pledge  cooperative  action  to  this  end  as  speedily  as 
practicable. 

Afterward,  the  bill  was  introduced  in  the  House  of  liepresentatives, 
and  finally  passed,  and  was  approved  April  12,  1866.  It  was  discussed 
at  length,  and  during  the  whole  debate  its  purpose  was  avowed  to  be 
contraction  of  the  currency  and  resumption  of  specie  payments  as  a 
consequence.  Objections  to  the  great  power  conferred  upon  the  Sec- 
retary of  the  Treasury,  under  which  he  could  call  in  and  retire  the 
whole  of  the  legal-tender  notes,  resulted  in  a  recommittal  of  the  bill  to 
the  Committee  of  Ways  and  Means;  and,  in  reporting  it  back,  the 
chairman  stated  that  the  recommittal  was  considered  an  instruction  to 
place  a  limit  upon  the  power  of  contraction.  Hence  the  proviso  which 
limits  the  contraction  to  $10,000,000  in  the  first  six  months,  and  $4,000,- 
000  per  month  afterward. 

If  the  power  to  reissue  had  been  a  power  coexisting  with  that  of 


384:  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

retiring,  it  is  evident  that  the  act  of  February  4, 1868,  was  unnecessary ; 
for  the  evil  to  be  arrested  by  that  act  coukl  as  well  have  been  arrested 
by  the  reissue  of  the'  notes.  That  act  was  passed  when  it  was  alleged 
that  contraction  was  too  rapid,  and  was  not  intended  to  relieve  the 
stringency  by  authorizing  a  reissue,  but,  on  the  contrary,  only  suspended 
the  power  exercised  after  the  passage  of  the  act  of  1866. 

From  this  review  of  tlie  several  acts  relating  to  United  States  notes, 
we  may  fairly  conclude  that  the  intent  and  legal  effect  of  these  acts, 
when  fairly  constraed,  was  to  reduce  the  maxinmm  of  legal-tender  notes 
to  $356,000,000.  Xo  one  appears  to  have  asserted  that  the  Secretary 
had  power  to  increase  that  sum.  The  care  with  which  a  maximum  was 
always  prescribed  indicates  the  intention  of  Congress  to  preserve  one. 
The  only  contingency  for  an  excess  was  to  "  temporarily  "  meet  "  tem- 
porary loan,"  and  by  the  act  of  April,  1866,  the  temporary  loan  was 
funded.  AVhen  the  policy  of  contraction  was  entered  upon,  the  words 
used — "  retired  and  canceled  " — as  clearly  expressed  a  permanent  pay- 
ment and  contraction  as  any  words  could  do.  If  possible,  the  words 
were  made  stronger  by  forbidding  an  increase  of  the  public  debt ;  the 
issue  of  a  new  bond  was  to  be  accompanied  by  the  permanent  payment 
and  cancellation  of  an  equal  amount  of  the  old  debt.  The  general  un- 
derstanding of  the  business  community  was  that  the  maximum  of  United 
States  notes  was  $356,000,000,  subject  only  to  the  limited  power  to  use 
a  part  or  all  of  the  $50,000,000  reissue  for  payment  of  "  temporary 
loan,"  and  that  only  to  be  used  temporarily.  To  overthrow  this  con- 
struction, and  establish  the  authority  of  the  Secretary  of  the  Treasury 
to  issue  $44,000,000  at  his  discretion,  would  require  some  clear  and  un- 
equivocal expression  of  the  legislative  will,  and  ought  not  to  be  inferred. 

It  is  claimed  that,  under  a  clause  of  section  three  of  the  act  of  March 
3,  1863,  the  Secretary  of  the  Treasury  was  granted  the  power  to  issue 
new  United  States  notes  in  place  of  those  "  canceled  and  destroyed," 
and  that  he  therefore  might  at  his  discretion  issue  the  $44,000,000 
"  retired  and  canceled  "  under  the  act  of  April  12,  1866.  The  clause 
of  the  act  of  March  3.  1863,  is  as  follows : 

And  in  lieu  of  any  of  said  notes,  or  any  other  United  States  notes  returned  to  the 
Treasury  and  canceled  or  destroyed,  there  may  be  issued  equal  amounts  of  United 
States  notes  such  as  are  authorized  by  this  act. 

Does  this  authority  conferi'ed  in  1863  authorize  the  reissue  of  notes 
"retired  and  canceled"  under  the  act  of  April  12,  1866  ?  Your  Com- 
mittee think  not.  Such  a  construction  oveilooks  the  object  and  legal 
effect  of  the  acts  of  June  30, 1864,  April  12, 1866,  and  February  4, 1868, 
already  cited.  The  act  of  1863  provides  for  an  issue  and  reissue  of 
United  States  notes  for  Treasury  notes.  Treasury  notes  bearing  interest 
were  issued  and  United  States  notes  received  in  payment.  When  the 
Treasury  notes  became  due  they  were  paid  in  United  States  notes. 
Under  that  act  United  States  notes,  to  the  amount  of  $150,000,000,  were 
issued,  reissued,  canceled,  or  destroyed,  or  mutilated  notes  were  re- 
placed by  new  ones.  They  were  exchanged  at  par  for  Treasury  notes. 
This  process  often  led  to  the  cancellation  and  destruction  of  United 
States  notes,  and  the  law  provided  for  the  issue  of  new  notes  in  their 


EEISSUE  OF  NOTES.  385 

place.  This  cancellation  and  destruction  of  notes,  authorized  by  the 
act  of  March  3,  1863,  is  a  very  different  process  from  retiring  and  can- 
celing notes  under  a  law  which  provides  explicitly  for  a  reduction  of 
the  currency  at  the  rate  of  four  millions  a  month.  The  words  of  the 
two  acts  are  different.  All  the  provisions  are  different.  The  res  gestcb 
are  different.  One  provides  for  an  exchange  of  securities ;  the  other 
provides  for  "  retiring  and  canceling  "  a  specified  sum  each  month. 

Again,  this  clause  in  the  act  of  1863  must  be  construed  in  connec- 
tion with  the  limit  of  circulation  authorized  by  law. 

The  limit,  it  is  clear,  had  been  fixed  at  $400,000,000  by  the  act  of 
1864:,  and  we  find  in  the  act  of  March  3,  1865,  a  proviso  that  it  should 
not  be  constnied  to  authorize  the  issue  of  legal-tender  notes  iji  any 
form.  That  limit  being  kept  in  mind,  the  purpose  of  the  act  of  1866 
was  to  reduce  that  outstanding  amount. 

As  originally  introduced,  the  power  of  reduction  extended  to  the 
whole  legal-tender  circulation  then  issued.  Had  it  passed  in  that  form, 
as  it  was  urged  upon  the  House,  if  the  right  to  reissue  existed,  it  would 
have  presented  the  anomaly  of  Congress  announcing  the  policy  of  con- 
traction as  necessary  and  salutary,  and  leaving  the  power  in  the  Secre- 
tary's hands  to  defeat  that  policy  as  fast  as  it  operated,  by  reissuing  the 
notes  whenever  received  in  exchange  for  interest-bearing  bonds.  That 
power  is  totally  at  war  with  the  avowed  purpose  of  the  act,  and  it  can 
not  stand  with  it  to  the  extent  of  $44,000,000  any  more  consistently 
than  it  could  if  it  had  been  applicable  to  the  whole  $400,000,000. 

It  is  stated  that  since  the  passage  of  the  act  of  February  4,  1868, 
large  sums  of  United  States  notes  have  been  held  by  the  Treasury 
Department  as  a  surplus  fund,  in  excess  of  the  $356,000,000  in  circula- 
tion, for  the  purpose  of  meeting  any  sudden  demand  upon  the  Treasury. 
This  was  necessarily  so,  as  large  quantities  came  in  daily  for  redemption 
as  mutilated,  defaced,  or  endangered  by  successful  counterfeiting.  But 
no  issue  in  excess  of  $356,000,000  was  made  except  in  two  instances. 

In  one  of  these  one  million  and  a  half  was  issued  after  the  Chicago 
fire,  to  replace  that  amount  burned  and  destroyed  in  the  ofiice  of  the 
depositary  at  Chicago  during  the  fire.  This  is  scarcely  an  exception, 
for  the  new  notes  were  issued  only  in  advance  of  the  formal  proof  and 
allowance  for  the  destroyed  notes,  but  not  in  advance  of  the  certainty 
of  their  destruction. 

Tlie  other  case  is  stated  by  the  Secretary  of  the  Treasury  in  his  let- 
ter of  December  13,  1872,  to  the  House  of  Representatives,  as  follows : 

In  reply  thereto,  I  liave  to  say  that  the  amount  of  United  States  notes  in  circula- 
tion was  increased  in  October  last,  upon  the  order  of  Assistant  Secretary  Eichard- 
son,  then  Acting  Secretary,  in  the  absence  of  the  Secretary  of  the  Treasury,  in  the 
sum  of  about  $5,000,000  over  the  amount  outstanding  when  the  act  of  February  4, 
1868,  became  a  law. 

The  object  of  the  issue  was  the  relief  of  the  business  of  the  country,  then  suffer- 
ing from  the  large  demand  for  currency  employed  in  moving  the  crops  from  the 
Suuth  and  West.  The  condition  of  affairs  then  existing  in  the  country  seems  to  me 
to  have  warranted  the  issue  upon  grounds  of  public  policy. 

The  circumstances  under  which  this  issue  of  five  millions  was  made 
were  such  as  would  clearly  have  justified  its  exercise,  if,  as  was  honestly 


386  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

and  confidently  claimed  by  the  officer  wlio  made  the  issue,  he  had  the 
legal  authority  to  make  it.  It  was  his  plain  duty  to  exercise  every  power 
he  possessed  to  protect  the  j)ublic  in  tlie  emergency  stated,  and  your 
Committee  are  unanimously  of  the  opinion  that  the  Assistant  Secretary 
acted  according  to  what  he  conceived  to  be  his  legal  power  and  public 
duty  ;  but,  believing  that,  under  the  law,  he  could  not  issue  legal-tender 
notes  in  excess  of  $356,000,000,  we  must  regard  the  precedent  as  a  bad 
one.  No  sooner  was  this  power  claimed  than  it  w^as  at  once  contested. 
It  is  scarcely  possible  that,  if  such  a  power  existed,  it  would  not  have 
been  exercised  before,  in  times  of  greater  stringency.  His  action  may 
be  an  argument  why  some  power  ought  to  be  granted  to  issue  United 
States  notes  to  meet  an  emergency ;  it  was  based  not  so  much  upon  a 
construction  of  law  as  "  upon  grounds  of  public  policy,"  which  should 
control  the  action  of  legislative  and  not  executive  authorities. 

We  are  referred  to  two  decisions  of  the  Supreme  Court,  Banks  vs. 
Supervisors  (7  Wallace,  26)  and  Vezie  vs.  Fenns  (8  Wallace,  537),  as 
sustaining  the  power  of  the  Secretary  of  the  Treasury  to  issue  United 
States  notes  in  excess  of  $356,000,000.  A  careful  examination  of 
these  cases  shows  that  they  have  no  bearing  on  the  question  before  us. 
The  Chief  Justice  says  : 

That  under  the  act  of  March  3,  1853,  another  issue  was  authorized,  making  the 
whole  amount  authorized  $450,000,000,  and  contemplating  a  permanent  circulation, 
until  resumption  of  payment  in  coin,  of  ^400,000,000. 

The  Chief  Justice  was  not  called  upon  by  the  case  before  him  to 
pass  upon  the  subsequent  acts,  and  did  not  do  so.  In  point  of  fact, 
there  never  was  in  circulation  $450,000,000  of  United  States  notes ; 
and  it  is  safe  to  say  that  no  one  expected  to  resume  specie  j)ayments  in 
coin  with  so  large  a  sum  as  $400,000,000  United  States  notes  out- 
standing. 

A  power  over  the  currency  so  wide-reaching  as  the  power  to  issue 
$44,000,000  of  new  legal-tender  notes  is  one  that  ought  not  to  rest 
upon  implication.  It  should  not  rest  upon  a  doubtful  construction  of 
words  in  a  law  passed  three  years  before,  and  used  in  regard  to  loans 
negotiated  under  widely  different  circumstances.  Congress  might  well 
grant  a  power  during  war  that  it  would  not  confer  in  peace.  The  full 
exercise  of  such  a  power  would  undoubtedly  affect  the  nominal  value 
of  all  property  in  the  United  States  to  the  extent  of  at  least  10  per 
cent.,  and  the  real  value  or  burden  as  between  debtor  and  creditor  of 
at  least  10  per  cent,  on  all  contracts  to  be  performed.  Such  a  power, 
if  given,  would  be  by  clear  and  unambiguous  language,  and  should  not 
be  inferred  by  subtile  reasoning,  or  depend  upon  the  pressure  of  inter- 
ested parties  or  changing  views  of  public  policy. 

In  all  questions  of  construction  as  to  the  extent  of  power  conferred 
by  law  in  matters  which  affect  the  public  credit  or  public  securities,  a 
reasonable  doubt  as  to  a  grant  of  power  should  be  held  to  exclude  it. 
After  a  careful  review  of  the  subject,  your  Committee  are  of  the  opin- 
ion that  the  Secretary  of  the  Treasury  has  not  the  power  to  issue 
United  States  notes  in  excess  of  $356,000,000,  outstanding  when  the 
act  of  February  4,  1868,  took  effect ;  but  he  may  replace  with  new 


THE  CURRENCY— SPECIE  PAYMENTS.  387 

notes  all  mutilated  or  defaced  notes,  and,  within  the  limit  of  $356,- 
000,000,  may  exchange  or  replace  new  notes  for  old  pnes. 
And  your  Committee  report  the  following  resolution  : 

Eesolved,  That,  in  the  opinion  of  the  Senate,  the  Secretary  of  the  Treasury  has 
not  the  power,  under  existing  law,  to  issue  United  States  notes  for  any  portion  of 
the  forty-four  millions  of  the  United  States  notes  retired  and  canceled  under  the 
act  approved  April  12,  1866. 


THE  CURKEXCY— SPECIE  PAYMENTS. 

/iV  TffB  SENATE  OF  THE  UNITED  STATES,  JANUARY  16,  1873. 

Mk.  PKEsroENT :  The  Committee  on  Finance,  to  whom  was  re- 
ferred the  bill  (S.  ]^o.  1113)  supplemental  to  an  act  to  provide  a  na- 
tional currency  secured  by  a  pledge  of  United  States  bonds,  and  to 
provide  for  the  circulation  and  redemption  thereof,  approved  June  3, 
1864,  and  to  secure  an  elastic  currency,  to  appreciate  national  obliga- 
tions, and  to  reach  specie  payments  without  commercial  embarrass- 
ments, have  agreed,  I  may  say  unanimously,  on  a  substitute  which  they 
offer  as  an  amendment  to  the  bill  introduced  by  the  Senator  from  Con- 
necticut [Mr.  Buckingham].  The  substitute  of  the  Committee  proposes 
free  banking  after  the  1st  of  July  next  and  specie  payments  or  qualified 
specie  payments  after  the  1st  of  January  next,  and  is  the  result  of  the 
most  careful  consideration  given  to  this  whole  class  of  subjects,  em- 
bracing all  the  topics  connected  with  our  currency  and  the  resumption 
of  specie  payments.  In  order  that  the  general  views  of  the  Commit- 
tee, as  far  as  they  can  be  given  by  one  member,  may  go  out  with  this 
proposition,  I  have  condensed  as  far  as  I  could  in  the  fewest  words  the 
general  reasons  which  control  the  action  of  the  Committee. 

The  restoration  of  our  currency  to  a  specie  standard  is  an  object  of 
primary  importance.  The  present  condition  of  our  currency  governs 
and  controls  all  other  questions  of  political  economy,  and  until  we  make 
it  the  equivalent  of  money — of  gold  coin,  the  recognized  standard  of 
money  among  all  civilized  nations — we  can  not  rest  upon  a  solid  basis 
for  any  kind  of  business  or  for  public  or  private  credit.  Every  man 
now  buys  and  sells  ujDon  a  fluctuating  standard  of  measurement.  Every 
man  who  borrows  feels  that  he  may  be  compelled  to  pay  in  a  different 
money  from  what  he  receives.  Every  producer  feels  that  in  addition  to 
the  uncertainty  of  supply  and  demand  he  must  also  speculate  upon  the 
uncertainty  of  the  kind  and  value  of  the  money  with  which  he  is  to  be 
paid.  The  merchant  must  not  only  guard  against  dangers  by  fire  and 
water,  but  against  "  corners  "  or  artificial  stringency  of  money.  The 
people  at  large,  while  boasting  of  their  restored  credit,  of  vast  pay- 
ments on  their  public  debt,  yet  must  feel  that  that  debt,  held  by  them 
in  the  form  of  United  States  notes,  is  less  valuable  than  gold,  which  it 
promises  to  pay ;  it  is  less  valuable  than  any  other  form  of  public  debt, 
and  by  its  own  depreciation  forces  the  depreciation  of  the  notes  of 


388  SPEECHES   AND  EEPORTS   OF  JOHN  SHERMAN. 

banks  able  to  pay  in  specie.  The  notes  are  a  currency  rigid,  inflexible 
in  amount,  and  therefore  of  variable  value — to-day  worth  four  per  cent, 
a  year  and  to-morrow  worth  two  per  cent,  a  month.  They  are  the 
basis  for  a  banking  circulation  that  is  practically  irredeemable  because 
they  are  themselves  irredeemable. 

And  yet,  with  all  these  defects,  the  currency  of  the  United  States 
is  so  much  better,  safer,  and  more  satisfactory  than  any  we  have  had 
before  that  our  constituents  dread,  when  we  deal  with  acknowledged 
defects,  lest  in  curing  these  defects  we  deprive  them  of  a  currency  with 
which  they  have  made  greater  progress  than  ever  before  in  our  national 
history.  It  is  the  fear  that  in  some  way  we  may  impair  the  vast  bene- 
fits we  have  gained  from  our  national  currency  that  so  many  oppose 
raising  it  to  a  specie  standard.  It  is  feared  that  specie  payments  will 
produce  a  contraction  of  the  currency  and  those  kindred  panics  which 
in  our  past  history  caused  widespread  ruin  and  disaster.  It  is  for  Con- 
gress to  determine  whether  it  is  possible  while  maintaining  our  present 
system  of  national  currency  to  bring  it  by  wise  legislation  to  the  stand- 
ard of  gold  without  producing  the  evil  results  anticipated. 

Ko  one  in  dealing  with  such  a  question  on  which  there  is  so  gi'eat  a 
diversity  of  opinion,  and  so  varied  an  interest,  should  speak  with  as- 
sured coniidence.  The  only  safe  way  is  to  proceed  slowly  and  take  no 
step  that  will  not  tend  in  the  right  dh-ection,  and  to  reject  all  measures 
the  practical  results  of  which  can  not  be  clearly  marked  by  experience. 

I  propose  first  to  show  that  we  are  bound  by  every  obligation  of 
law,  of  promise,  of  judicial  authority  and  public  policy  to  make  the 
United  States  notes  equivalent  in  value  to  gold  coin. 

United  States  notes  were  issued  under  the  authority  of  the  acts  of 
Congress  passed  February  25,  1862,  July  11,  1862,  and  March  3,  1863. 
Other  acts  somewhat  modified  their  conditions,  but  these  were  the 
governing  acts.  They  were  issued  during  the  time  of  war,  when  all 
the  existing  banks  had  suspended  and  when  coin  was  inadequate  to 
meet  the  enormous  wants  of  the  Government.  They  were  made  law- 
ful money  and  a  legal  tender  in  payment  of  all  debts,  public  and 
private,  within  the  United  States,  except  for  duties  on  imports  and 
interest  on  the  public  debt.  During  the  entire  war  they  were  prac- 
tically receivable  at  par  in  payment  for  all  bonds  offered  by  the  United 
States,  and  for  a  part  of  the  time  they  were  in  terms  convertible  into 
bonds  at  the  pleasure  of  the  holder.  They  are  made  the  basis  of  the 
entire  system  of  national  banks,  whose  notes  are  payable  in  United 
States  notes.  The  amount  is  carefully  limited,  the  highest  limit  being 
four  hundred  and  fifty  millions  by  the  act  of  March  3,  1863,  somewhat 
restricted  by  the  act  of  June  30,  1864,  which  declared  that  the  total 
amount  of  United  States  notes  issued  or  to  be  issued  should  never  ex- 
ceed four  hundred  million  dollars  and  such  further  <6um  not  exceeding 
fifty  millions  as  might  be  temporarily  required  for  the  redemption  of 
temporary  loan.  They  were  still  further  restricted  by  virtue  of  the 
act  of  April  12,  1866,  under  which  all  the  temporary  loan  was  funded 
into  bonds,  and  forty-four  millions  of  the  notes  were  retired  and  can- 
celed. By  the  act  of  February,  1868,  the  amount  of  United  States 
notes  was' fixed  at  three  hundred  and  fifty-six  millions,  that  being  the 


THE   CURRENCY— SPECIE   PAYMENTS.  389 

sum  then  outstanding,  and  there  is  now  no  authority  in  law  for  their 
increase  or  reduction. 

Under  the  law  as  it  now  stands  we  have  three  hundred  and  tiftj-six 
millions  of  "  lawful  money."  It  is  inflexible  in  amount  and  irredeem- 
able except  as  Congress  may  provide  for  its  future  redemption. 

Aside  from  its  value  to  pay  internal  taxes  and  as  a  legal  tender  for 
debts,  it  has  the  promise  of  the  United  States  to  pay  it  in  coin.  The 
time  of  payment,  however,  is  not  fixed. 

By  the  first  act  of  General  Grant's  administration,  to  wit,  the  act  of 
March  18,  1869,  it  is  enacted : 

And  tlie  United  States  also  solemnly  pledges  its  faith  to  make  provision  at  the 
earliest  practicable  period  for  the  redem[)tion  of  the  United  States  notes  in  coin. 

This  act,  entitled  "  An  act  to  strengthen  the  public  credit,"  gave  the 
first  sj)ecific  ^^ledge  to  redeem  these  notes  in  coin.  But  the  several  acts 
under  which  the  notes  were  issued  authorized  the  promise  of  the  United 
States  to  pay  so  many  dollars,  and  the  law  in  force  declared  that  a 
dollar  should  consist  of  twenty-five  and  eight  tenths  grains  of  standard 
gold  nine  tenths  fine.  The  notes,  on  their  face,  contain  the  promise  of 
the  United  States  to  pay  so  many  dollars  to  the  bearer,  payable  at  the 
Treasury  of  the  United  States  in  'New  York.  The  Supreme  Court  of 
the  United  States  has,  in  two  cases,  held  that  these  notes  are  valid  obli- 
gations of  the  United  States  to  pay  in  coin.  In  the  case  of  The  Bank  of 
Kew  York  vs.  Supervisors  (7  Wallace  Kep.,  p.  30),  the  Chief  Justice 
says  of  the  United  States  notes : 

Every  one  of  them  expresses  upon  its  face  an  engagement  of  the  nation  to  pay 
to  the  bearer  a  certain  sum.  The  dollar  note  is  an  engagement  to  pay  a  dollar,  and 
the  dollar  intended  is  the  coin  dollar  of  the  United  States,  a  certain  quantity  in 
weight  and  fineness  of  gold  or  silver  authenticated  as  such  by  the  stamp  of  the 
Government.  No  other  dollars  had  before  been  recognized  by  the  Legislature  of 
the  National  Government  as  lawful  money. 

Every  Ignited  States  note  is,  then,  a  promise  to  pay  gold.  No 
time  is  fixed  for  the  payment,  and  no  provision  is  made.  A  promise  to 
pay  with  no  time  fixed  is  a  promise  to  pay  on  demand.  Such  an  obli- 
gation would  be  enforced  against  any  citizen  by  any  court  in  the  United 
States  of  competent  jurisdiction.  Every  United  States  note,  then,  is  a 
dishonored  obligation,  a  promise  to  pay,  but  witli  no  payment  or  j^ro- 
vision  for  payment.  It  is  also  a  depreciated  promise  ;  it  is  a  promise 
to  pay  gold,  and  yet  no  one  will  pay  gold  for  it ;  and  it  is  daily  sold  at 
a  discount  of  ten  to  fifteen  per  cent.  Tested  by  the  rules  of  law  be- 
tween individuals  it  would  be  enforced  by  sale  on  execution  and  by 
process  of  compulsory  bankruptcy.  Yet  it  is  the  promise  of  the  United 
States.  Surely  the  dishonor  of  this  broken  promise  can  have  no  longer 
an  excuse  in  the  Taecessity  of  war.  That  has  passed  away.  Nor  in  want 
of  ability,  for  a  single  year's  surplus  revenue  would  restore  these  notes 
to  par  in  coin.  It  is  now  four  years  since  we  solemnly  pledged  the 
national  faith  to  redeem  them  in  coin  at  the  earliest  ])racticable  period. 
Can  any  man  say  that  this  has  not  been  practicable  at  any  time  within 
four  years  ? 

Not  only  do  the  act  of  Congress  and  the  Supreme  Court  define  our 


390  SPEECHES  AND   REPORTS   OF  JOHN   SHERMAN. 

obligation,  but  tlie  organized  action  of  both  the  great  parties  has 
promised  specie  payments.  The  Kepublican  party  in  national  conven- 
tion expressed  the  hope  and  promise  of  perfecting  our  currency  by  a 
speedy  resumption  of  specie  ]myments,  and  the  Democratic  party  en- 
dorsed and  approved  the  promise  of  the  Cincinnati  convention  of  a  speedy 
resumption  of  specie  payments. 

AV^hile  no  doubt  some  of  our  constituents  shrink  from  the  apparent 
fall  of  ])rices  that  will  probably  tlow  from  resnmjition,  yet  it  is  mani- 
fest that  we  can  not  longer  postpone  a  fultillment  of  tiie  promises  that 
have  been  made.  To  delay  longer  is  to  tamper  with  the  public  honor 
and  familiarize  our  people  witli  an  open,  palpal)le,  long -continued 
breach  of  the  public  faith.  We  have  for  nearly  eight  years  since  the 
close  of  the  war  approached  resumjition  in  gradual  stages  by  the 
growth  of  our  industry,  th','  improvement  of  our  credit,  and  new  de- 
mands for  our  currency.  We  have  ])laced  our  debt  where  it  will  melt 
away  by  the  silent  operation  of  a  sinking  fund  ;  we  have  largely  re- 
duced its  volume ;  we  have  repealed  more  than  one  half  the  taxes  ;  we 
have  adjusted  those  that  remain  so  that  they  fall  as  lightly  as  possible 
upon  the  people,  and  are  now  in  a  position  of  such  strength  and  credit 
that  we  can,  if  we  will,  redeem  the  only  broken  promise  of  the  United 
States  by  a  resumption  of  specie  payments. 

I  have  presented  the  argument  of  public  faith  in  the  foreground, 
for  it  is  the  lii'st  to  be  considered ;  but  specie  payment  is  not  only  re- 
quired by  public  faith,  but  it  is  now  demanded  by  public  policy ;  or,  to 
use  a  narrower  phrase,  it  is  wise  political  economy. 

Experience  has  established  tliat  every  nation  using  a  depreciated 
currency  loses  in  exchanges  with  a  nation  having  a  better  currency. 
If  we  buy  abroad,  specie  is  the  standard  of  value,  and  the  cost  of  the 
article  to  us  is  at  once  increased  by  an  addition  of  the  depreciation  of 
our  money  and  a  percentage  for  exchange  and  risk.  AVhat  we  sell 
abroad  is  also  measured  by  the  specie  standard,  and  the  loss  by  ex- 
change, wdiether  M'e  buy  or  sell,  is  paid  by  us.  This  loss  is  more  severe 
when  applied  to  contracts  to  be  paid  in  the  future,  and  especially  to 
railroad  and  other  bonds  p:\yable  after  a  period  of  yeai-s.  These  bonds 
must  be  paid  in  gold,  whether  the  gold  is  stipulated  for  or  not,  and  yet 
the  price  paid  for  them  is  usually  in  currency.  We  pay  in  gold  and 
receive  in  currency,  and  thus  at  the  outset  siibmit  to  a  loss  of  the  en- 
tire depreciation  of  our  currency.  The  interest  paid  on  this  discount 
of  our  bonds  would  in  many  cases  if  applied  as  a  sinking  fund  pay  off 
the  whole  of  the  principal  before  it  accrues. 

That  a  depreciation  of  the  currency  always  injuriously  affects  a 
community  in  which  it  exists  was  shown  by  the  experience  of  the 
colonies  before  the  war  of  independence.  In  each  of  them  some 
form  of  depreciated  money  was  used.  The  value  of  the  pound  and 
shilling  in  current  use  was  only  from  one  half  to  par  of  the  value  of 
the  standard  coin  of  Great  Britain ;  and  this  depreciation  often  meas- 
ured the  poverty  or  necessity  of  the  colony  using  it.  With  the  cur- 
rency which  was  in  common  use  before  the  late  war,  and  M-hich  de- 
pended entirely  upon  the  law  of  the  State  authorizing  it,  the  notes  of 
the  Western  States  were  as  a  rule  depreciated,  and  those  States  suffered 


THE  CUREEXCY— SPECIE  PAYMENTS.  391 

the  loss ;  while  in  the  Eastern  States,  in  which  a  better  banking  system 
prevailed,  the  notes  were  maintained  at  the  specie  standard,  and  o-reat 
profits  and  accumulations  were  made  by  their  practical  monopoly  of  the 
banking  business.  The  great  body  of  our  people  do  not  pause  to  con- 
sider their  loss  by  the  use  of  depreciated  money.  It  is  lawful  money, 
it  buys  all  the  necessaries  of  life,  it  pays  debts,  it  is  convenient  to  carry, 
and  is  of  uniform  value  throughout  the  United  States,  and  is  amply 
secured.  These  advantages  are  ol)vious  and  satisfactory,  but  all  of  tliem 
can  be  better  secured  witli  a  currency  that  will  purchase  as  much  food 
or  clotliing  as  the  same  sum  in  gold  coin  ;  that  will  measure  tlie  prod- 
ucts of  all  other  nations  as  well  as  our  own,  and  is  not  subject  to  the 
fluctuations  and  speculative  changes  of  our  present  currency. 

Af^ain,  it  is  impossible  to  give  to  a  depreciated  currency  the  quality 
of  '•  nexibility."  A  suspension  of  specie  payments  necessarily  suspends 
all  redemptions  of  paper  money.  The  United  States  notes  being  irre- 
deemable the  national  bank  notes  are  irredeemable.  All  of  them  being 
now  paid  out,  there  is  no  object  to  return  them,  and  thus  not  only  the 
United  States  gets  the  benefits  of  a  forced  loan  from  the  people  with- 
out interest  and  without  the  burden  of  redemption,  but  the  banks  also 
get  the  benefit  of  a  forced  loan  from  the  people  without  interest  and 
without  the  burden  of  redemption. 

It  is  true  that  the  banks  are  rc<|uired  to  maintain  a  certain  reserve 
of  United  States  notes  to  secure  a  redemption  of  their  notes,  but  prac- 
tically we  know  that  no  notes  are  presented  for  redemption.  It  is  on 
this  ground  that  they  apply  to  us  to  relieve  them  from  the  burden  of 
maintaining  a  reserve. 

AVe  are  told  that  we  require  them  to  keep  idle  in  their  vaults  cur- 
rency sorely  needed  by  the  business  community  merely  to  secure  the 
redemption  of  notes  that  are  never  presented.  It  is  true  that  a  bank 
resen'e  is  unnecessary  and  indefensible  unless  for  the  redemption  of 
their  notes.  If  the  idea  of  redemption  is  abandoned  or  indefinitely 
postponed,  then  all  reserves  should  be  dispensed  with.  If  the  only 
object  is  to  make  currency  abundant  without  regard  to  its  value  com- 
pared with  coin,  then  any  reserve  is  folly.  Indeed,  the  whole  national 
banking  system  would  be  indefensible.  If  our  currency  is  to  be  per- 
manently irredeemable,  it  is  impossible  to  state  a  reason  why  the  whole 
of  it  should  not  be  issued  by  the  United  States,  or  why  any  of  it  should 
be  issued  by  a  bank.  The  only  benefit  the  public  derive  from  a  bank 
of  issue  as  distinguished  from  the  private  interest  of  its  stockholdei*s 
is  that  the  bank  note  is  the  convenient  representative  of  coin  ;  that  its 
capital,  resources,  and  reserve  furnish  a  security  for  the  redemption  of 
its  notes  in  coin,  and  that  it  is  a  convenient  agency  to  distribute  its 
notes  by  loans  to  those  engaged  in  producing  and  transporting  prop- 
erty. 

Any  policy  that  abandons  the  redemption  of  bank  notes  in  coin  will 
inevitably  lead  to  the  abandonment  of  banks  of  issue,  for  the  public 
will  not  long  allow  the  banks  to  derive  a  profit  from  issuing  notes  un- 
less they  assume  the  burdens  of  redeeming  them.  This  is  understood 
by  the  national  banks.  They  do  not  shrink  from  the  duty  of  redeem- 
ing their  notes,  but  say  that  while  the  notes  of  the  United  States  are 


392  SPEECHES  AND  KEPORTS  OF  JOHN   SHERMAN. 

lawful  money  and  a  legal  tentlcr,  and  are  both  depreciated  and  irre- 
deemable, the  banks  cannot  redeem  except  with  them.  It  is  the  United 
States  notes  that  stand  in  the  way  of  specie  i)ayments.  If  in  any  way 
they  were  maintained  at  par  with  coin  the  obligations  of  the  banks  to 
maintain  their  notes  in  coin  would  be  easily  enforced.  Then  the  snpe- 
rior  excellence  of  the  national  banking  system  would  be  demonstrated. 
It  would  no  longer  be  a  monopoly,  but  under  the  law  as  it  now  stands 
would  be  free  to  all  who  chose  to  engage  in  the  business.  The  plethora 
of  money  at  one  time  and  its  stringency  at  another  would  be  regulated 
bv  the  redem]>tion  of  notes  when  abundant  aiul  their  increased  issue 
when  re([uirc(l  by  new  demands.  Anv  attcmjjt  to  make  a  "  corner"  by 
locking  u])  currency  in  one  bank  would  be  met  l)y  its  issue  by  another. 
The  corresponding  privileges  and  burdens  of  a  bank  of  issue  would  re- 
lieve them  from  prejudice.  The  maintenance  of  these  notes  at  par 
with  gold,  together  with  tlieir  al)solute  security,  as  now,  would  be 
recognized  as  an  equivalent  for  the  privileges  they  enjoy. 

Again,  all  the  existing  laws  authorizing  Ignited  States  notes  and 
bank  notes  are  based  upon  the  theory  of  specie  payments.  The  notes 
were  only  issued,  however,  during  war,  when,  under  a  suspension  of 
specie  payments,  there  was  no  medium  of  payment  except  the  public 
credit.  We  could  not  utilize  the  public  credit  in  borrowing  money 
until  we  had  ])rovided  a  medium  of  payment.  For  that  purpose  we 
coined  the  public  credit  into  a  limited  amount  of  lawful  money ;  but 
promised  to  pay  this  money  in  coin.  When  the  lawful  money  was 
issued  we  did  not  anticipate  the  extent  of  its  depreciation,  and  con- 
stantly kept  in  view  its  speedy  redemption.  Ordiiuirily  the  functions 
of  a  government  in  furnishing  money  are  limited  to  stamping  upon  gold 
and  silver  of  certain  weight  and  tineness  its  intrinsic  value.  Here  its 
duty  ends.  But  in  war  this  process  of  coining  did  not  meet  the  ]nil)lic 
necessities,  and  the  United  States  coined  its  credit  into  money,  and  this 
process  has  been  upheld  by  all  departments  of  the  Government.  Still, 
this  money  is  but  another  form  of  public  debt,  a  promise  to  pay  specific 
quantities  of  gold  and  silver.  In  the  national  banking  act  Congress 
assumed  that  the  United  States  would  maintain  its  paper  money  at  par 
with  coin  as  soon  as  its  necessities  would  allow.  It  provided  for  an 
auxiliary  currency  also  to  be  at  par  in  gold  and  to  be  issued  by  banks. 
Every  provision  of  that  act  contemplates  that  both  United  States  notes 
and  bank  bills  should  be  equal  to  gold  and  to  each  other.  This  is  the 
reason  for  the  proWsions  for  redemption,  for  centers  of  redemption,  and 
for  a  large  reserve. 

The  banking  act  also  anticipated  that  the  United  States  might  with- 
draw its  notes,  and  then  that  bank  notes  were  directly  to  be  redeemed 
with  coin.  Still  the  bank  act  provided  for  the  existence  of  both  kinds 
of  notes  in  common,  and  experience  shows  that  both  may  be  maintained 
in  circulation  with  profit  to  the  United  Stalies.  While  no  provision  is 
made  for  the  redemj^tion  of  United  States  notes  the  provision  for  the 
redemption  of  bank  notes  is  nullified.  Our  whole  system  of  currency 
becomes  incongruous  by  our  failure  to  provide  for  the  redemption  of 
United  States  notes. 

If,  then,  public  faith,  public  policy,  and  the  spirit  of  our  laws  de- 


THE   CURREXCY— SPECIE  PAYMENTS.  393 

mand  that  our  currency  be  restored  to  the  specie  standard,  it  would 
seem  that  the  only  remaining  inquiry  should  be,  what  is  the  best  way 
to  resume  ?  But  here  we  meet  the  objections  of  many  business  men, 
the  most  active  and  enterprising  of  our  people,  who  tell  us  that  specie 
payment  with  them  adds  largely  to  the  burden  of  their  debts ;  that 
upon  the  basis  of  existing  law  and  tlie  condition  of  intiation  alwavs 
produced  by  depreciated  money  they  have  made  contracts,  contracted 
debts  payable  in  currency,  and  that  now  to  add  to  the  value  of  that 
currency  is  to  embarrass,  cripple,  or  ruin  them.  Some  tell  us  they  are 
prepared  to  meet  the  gradual  approach  to  specie  payments  caused  by 
the  increased  business  and  credit  of  the  country,  while  others  tell  us 
that  the  country  needs  more  currency ;  that  its  growth  in  population, 
expansion  in  business,  and  new  enterj^riscs  render  an  increase  of  cur- 
rency indispensable.  The  effect  of  any  measure  upon  the  interests  of 
active  business  men  should  be  carefully  studied,  but  individual  hardship 
is  not  sufficient  reason  for  a  violation  of  public  faith,  or  a  disregard  of 
the  general  interests  or  policy  of  the  whole  country.  All  our  citizens 
have  had  full  notice  of  the  policy  of  the  Government.  Tlic  acts  of 
Congress  already  cited,  the  decisions  of  the  Supreme  Court,  and  the 
promises  of  opposing  parties  ai-e  well  known  to  all  intelligent  men. 

And  tlie  eifect  of  specie  payments  is  greatly  exaggerated  as  to  the 
persons  it  will  injure.  Our  business  men  are  not  only  debtors  but  they 
are  creditors.  If  they  are  injured  by  adding  to  the  burden  of  their 
debts,  they  are  benefited  by  the  increased  value  of  their  credits.  No 
one  engaged  in  production  merely,  whether  as  a  farmer,  a  manufacturer, 
a  mechanic,  or  a  laborer,  is  injured ;  for,  if  the  nominal  value  of  his 
productions  is  diminished,  the  cost  of  living  and  all  that  enters  into  the 
cost  of  production  is  diminished  in  the  same  degree.  Experience  has 
shown  that  depreciated  money  is  most  injurious  to  laboring  men,  because 
it  produces  a  false  standard  of  value,  the  effect  of  which  is  not  noted 
by  a  laboring  man  as  by  a  trader  or  merchant.  Even  upon  current 
debts  and  credits  the  effect  of  a  specie  standard  will  scarcely  be  appre- 
ciable, for  the  nominal  loss  will  be  discounted  in  advance  or  be  divided 
during  the  gradual  appreciation  of  paper  money.  The  greater  burden 
will  fall  upon  debts  running  a  long  period  of  time,  as  upon  corporation 
bonds  and  mortgages.  As  to  those  in  existence  before  the  legal-tender 
act  took  effect,  it  is  but  right  that  they  be  paid  in  specie,  while  those 
contracted  since  have  been  issued  in  expectancy  of  specie  payments 
before  this  time.  Still,  while  the  effect  of  a  specie  standard  upon 
debtors  is  greatly  exaggerated,  it  cannot  be  denied  that  if  it  is  followed 
by  a  contraction  of  the  currency  it  will  create  distress  and  embarrass- 
ment to  very  many  who  have  contracted  debts  on  a  currency  basis. 
But  this  argument  of  hardship  will  apply  for  ever.  If  we  are  to  be 
controlled  by  it  we  can  never  pay  our  promises.  The  lapse  of  time  will 
not  make  it  easier.  Our  financial  condition  is  now  so  strong  that  we 
can  afford  to  do  right,  and  yet  in  such  a  way  as  to  injure  in  the  least 
possible  degree  those  who  contracted  debts  on  a  currency  liasis. 

Again,  the  effect  of  a  specie  standard  in  producing  a  contraction  of 
the  currency  is  greatly  exaggerated.  A  contraction  of  the  currency  is 
not  necessarily  a  result  of  specie  payments,  though  it  would  undoubt- 


394  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

edly  produce  them.  It  is  the  most  direct  road  to  specie  payments,  and 
if  the  paper  money  in  circulation  is  in  excess  of  the  wants  of  the  com- 
munity it  is  the  only  road.  We  in  1866  and  1867  greatly  contracted 
the  currency  by  funding  over  three  hundred  million  dollars  of  com- 
pound-interest and  other  notes,  most  of  which  were  a  part  of  the  cur- 
rency. If  in  1868  we  had,  as  was  proposed  in  the  Senate,  authorized 
United  States  notes  to  be  received  for  five  per  cent,  bonds  at  par,  we 
would  have  long  since  been  at  specie  payments.  The  notes  when  re- 
ceived could  have  been  paid  out  again  for  the  payment  of  current  ex- 
penses and  the  purchase  of  bonds,  precisely  as  now  when  gold  is  sold 
for  notes  and  notes  applied  to  the  purchase  of  bonds.  In  this  way  we 
would  have  reached  a  specie  standard  the  moment  our  five  per  cent, 
bonds  were  worth  par  in  gold.  The  advancing  credit  of  the  nation 
would  have  lifted  our  currency  to  par  in  gold  precisely  as  it  lifted  all 
forms  of  bonds  to  or  above  par  in  gold.  And  now  when  our  credit  is 
greatly  improved  by  the  rapid  payment  of  the  debt,  as  evidenced  by 
the  advanced  value  of  our  notes  in  gold,  we  can  raise  their  value  to  the 
specie  standard  much  more  readily  than  four  years  ago. 

One  fallacy  lies  at  the  foundation  of  the  common  objection  to  a 
specie  standard,  that  it  necessarily  compels  a  withdrawal  of  paper  cur- 
rency. This  depends  entirely  upon  the  amount  necessary  to  conduct 
the  business  of  the  country  and  the  degree  of  public  confidence  in  its 
redemption.  The  Comptroller  of  the  Currency,  in  his  last  annual 
report,  shows  that  in  January,  1862,  when  specie  payments  were  sus- 
pended, the  aggregate  circulation  of  coin  and  paper  was  $418,671,218, 
or  a  ratio  of  two  and  seventy-one  hundredths  per  cent,  of  the  wealth 
of  the  United  States,  and  that  the  circulation  of  the  United  States  in 
1870,  including  United  States  notes,  bank  notes,  fractional  currency, 
and  specie,  was  $790,000,000,  or  two  and  sixty-two  hundredths  per  cent, 
on  our  wealth.  The  circulation  in  the  United  States  jt^er  capita  is  now 
less  than  in  France  and  greater  than  in  Great  Britain,  but  greater  than 
in  either  in  pi-oportion  to  wealth.  When  we  consider  the  vast  extent 
of  our  country,  its  rapid  growth,  the  value  of  our  productions,  and  the 
general  use  of  paper  money,  is  it  not  reasonable  to  suppose  that  all  of  it 
now  outstanding  can  be  maintained  in  circulation  on  a  specie  standard  ? 

It  must  be  remembered  that  the  total  amount  of  United  States 
notes  is  now  $356,000,000  ;  that  very  large  sums  must  be  retained  by 
the  banks  as  their  reserve ;  that  large  gold  reserves  are  now  held  in  the 
Treasury ;  that  the  notes  are  widely  circulated,  have  the  confidence  of 
the  people,  and  can  be  supported  by  the  public  credit.  Under  these 
circumstances  it  is  scarcely  probable  that  any  considerable  sum  will  be 
presented  for  redemption.  If  presented  they  can  again  be  paid  out  in 
the  course  of  the  public  disbursements.  Specie  payments  can  thus  be 
resumed  without  a  contraction  of  the  currency  and  with  only  the 
change  of  nominal  values  for  the  real  standard  of  value  the  world  over. 

The  chief  i*equisite  is  that  the  i3ublic  should  have  assured  confi- 
dence in  our  abihty  to  maintain  resumption.  This  is  indispensable, 
and  when  it  exists  actual  redemption  by  payment  of  coin  will  be  com- 
])aratively  rare.  This  confidence  or  credit  can  be  given  by  either  of 
three  expedients  : 


THE   CURRENCY— SPECIE  PAYMENTS.  395 

1.  The  maintenance  in  the  Treasury  of  a  large  reserve  in  coin. 

2.  The  authority  in  the  Secretary  of  the  Treasury  to  sell  bonds  for 
coin  to  maintain  redemption, 

3.  To  authorize  an  alternative  redemption,  either  in  coin  or  bonds. 
The  lirst  is  subject  to  the  objection  that  it  keeps  idle  a  vast  sum 

only  needed  in  case  of  a  panic,  when  it  will  be  insufficient.  The 
second  is  subject  to  a  greater  objection,  that,  as  the  power  could  only 
be  used  in  a  stringent  money  market,  it  would  lead  to  great  sacrifices 
of  public  securities  and  add  fuel  to  the  existing  panic.  The  third 
mode  requires  no  reserve ;  it  could  operate  only  while,  from  panic  or 
unforeseen  causes,  our  bonds  were  below  par  in  coin,  and  as  a  tempo- 
rary suspension  of  specie  payments,  alike  beneficial  to  the  United 
States  and  to  the  business  community.  This  plan  implies  that  the 
United  States  will  make  its  provisional  redemption  in  a  bond  so  intrin- 
sically valuable  that  it  will  be  generally  at  par  in  gold. 

I  do  not  overlook  the  fact  that  resumption  by  the  United  States 
will  test  the  strength  of  the  national  banks  and  prove  whether  or  not 
they  are  entitled  to  public  confidence.  But  their  present  condition, 
with  an  aggregate  surplus  fund  far  beyond  the  difference  between  cur- 
rency and  coin,  justifies  the  conviction  that  they  will  meet  the  public 
expectations.  With  sj)ecie  redemption  the  system  becomes  free.  The 
fluctuations  of  their  currency  will  be  but  the  healthy  ebb  and  flow  of 
commerce.  Redemption  will  then  become  a  fact,  and  will  check  the 
tendency  of  the  country  banks  to  employ  their  currency  in  Wall  street 
speculations.  As  they  may  redeem  in  coin  or  United  States  notes, 
they  will  have  the  benefit  of  the  alternativ^e  redemption  provided  as  to 
United  States  notes,  so  that  the  sacrifice  of  these  securities  that  gener- 
ally follows  specie  payments  during  a  panic  can  go  no  further  than  the 
payment  of  their  bonds  for  their  notes  in  equal  values. 

Again,  a  specie  standard  will  also  bring  gold  and  silver  coin  into 
actual  use.  The  amount  now  hoarded  has  been  variously  estimated, 
and,  with  that  deposited  in  the  Treasury  and  in  circulation  in  Califor- 
nia, can  not  be  less  than  two  hundred  millions.  This  will  probably 
take  the  place  of  legal  tenders  as  bank  reserves,  and  thus  add  to  the 
present  volume  of  currency.  Even  if  specie  payments  should  cause 
the  retirement  or  funding  of  fifty  millions  of  United  States  notes,  their 
place  will  be  more  than  filled  by  the  coin  returned  from  its  present 
banishment.  I  therefore  conclude  that  fears  of  evil  results  from  a 
specie  standard  are  greatly  exaggerated ;  that  there  will  be  no  con- 
traction of  tlie  currency,  no  disturbance  of  real  values,  no  suspension 
of  business,  but  that  our  present  United  States  and  bank  notes  will 
pass  as  usual  in  the  ordinary  exchanges  of  life,  measuring  the  value  of 
all  property,  whether  produced  here  or  abroad,  equal  to  the  real  money 
of  the  world,  and  with  no  taint  of  dishonor  or  depreciation  about  it. 

There  is  one  incident  to  a  specie  standard  that  must  not  be  over- 
looked. It  is  the  widespread  injury  produced  by  a  sudden  panic,  when 
confidence  is  temporarily  dethroned  and  all  demand  specie  at  once. 
With  the  paper  currency  in  use  in  the  United  States  before  the  war 
such  a  panic  was  ruin  and  bankruptcy.  In  such  a  time  the  right  to 
demand  specie  created  evils  and  disasters  which  with  irredeemable  and 


396  SPEECHES  AND  EEPOETS  OF  JOHN  SHERMAN. 

depreciated  paper  money  only  caused  a  further  depreciation  until  gen- 
eral causes  restored  confidence.  It  is  commonly  said  that  with  specie 
payments  we  had  the  panics  of  1837,  1847,  and  1857,  while  with  irre- 
deemable greenbacks  we  have  met  a  war,  the  fire  at  Chicago,  and  other 
calamities  without  a  panic ;  ergo^  a  specie  standard  is  a  fallacy.  To  ex- 
press it  as  the  English  did  when  specie  payments  were  suspended, 
guineas  are  a  useless  incumbrance. 

This  reasoning  only  proves  that,  when  by  war  or  panic  specie  pay- 
ments are  suspended,  a  nation  may  by  the  use  of  paper  money  alone 
develop  its  resources  and  attain  high  financial  prosperity.  But  it  is 
also  true  that  history  furnishes  but  two  examples  of  such  success,  and 
in  both  cases  specie  payments  were  constantly  jDromised  and  kept  in 
■view,  while  the  public  credit  was  maintained  by  collecting  its  revenue 
and  paying  its  debt  in  coin.  In  Great  Britain,  during  her  wars  with 
Napoleon,  "the  Bank  of  England  notes  were  a  depreciated,  irredeema- 
ble paper  currency,  but  they  were  never  made  a  legal  tender  and  their 
credit  was  supported  not  only  by  promises  of  but  by  attempts  at  re- 
sumption. In  the  United  States  the  secret  of  our  success  with  paper 
money  was  the  careful  limitation  of  its  amount,  the  payment  of  our 
interest  in  coin,  the  collection  of  our  customs  duties  in  coin,  and  the 
promise  of  the  United  States  to  redeem  all  its  notes  in  coin  with  the 
confidence  of  our  people  that  this  would  be  done. 

Not  only  the  United  States,  but  otlier  nations  who  conducted  war 
with  paper  money  alone,  without  an  expectation  of  coin  redemption, 
met  with  disastrous  financial  ruin.  Such  was  the  experience  of  France 
with  her  assignats  and  mandats,  of  the  American  Colonies  with  con- 
tinental money,  and  of  the  Southern  Confederacy  with  their  Confederate 
notes.  Most  of  the  modern  nations  of  Europe  have  attempted,  at  some 
period  of  their  history,  to  bridge  over  their  difficulties  with  govern- 
ment paper  money,  and  with  disastrous  results.  Great  corporations 
with  the  power  of  the  government  behind  them  have  furnished  us 
with  examples  of  the  folly  of  sustaining  paper  money  except  by  specie 
redemption.  The  South  Sea  scheme  in  England,  the  Mississippi  Com- 
pany of  George  Law  in  France,  the  Bank  of  the  United  States,  and 
the  "  23et  banks  "  are  striking  examples. 

If  any  one  fact  is  proven  by  the  experience  of  mankind,  it  is  that 
gold  and  silver  are  the  best  possible  standards  of  value.  They  have 
been  so  recognized  by  every  nation  from  the  earliest  period  of  recorded 
time.  However  much  nations  might  differ  in  religion,  habits,  produc- 
tion, or  climate,  they  have  not  differed  in  this  primary  axiom  of  ex- 
change or  barter.  Experiments  have  been  tried  with  other  standards, 
fronithe  iron  of  Lycurgus  to  the  finest  bank-note  engraving  of  modem 
times,  but  all  have  resulted  in  the  conviction  that  gold  and  silver  is 
the  only  true  standard.  Paper  money  supported  by  the  credit  of  a 
government  is  a  convenient  substitute  greatly  facilitating  exchanges 
by  the  ease  and  safety  of  handling  and  transmitting  it,  but  it  is  not 
real  money ;  it  is  only  a  pi'omise  to  pay  money,  and  the  only  tost  of  its 
character  as  false  or  true  money  is  its  capacity  to  be  converted  into 
gold  or  silver  of  prescribed  weight  and  fineness. 

The  effort  to  continue  the  use  of  gold  as  the  standard,  and  paper 


THE   CUEEENCY— SPECIE  PAYMENTS.  397 

money  as  the  representative  of  gold,  has  been  for  two  hundred  years 
the  most  difficult  problem  of  political  economy.  Our  own  system, 
though  the  outgrowth  of  the  war,  is  believed  to  combine  some  advan- 
tages superior  to  any  now  in  use  in  the  world.  It  rests  upon  the  credit 
of  the  Government.  The  Government  promises  to  pay  not  only  United 
States  notes  but  the  bank  notes,  and  holds  security  for  the  payment  of 
the  latter.  It  combines  the  interests  of  the  Government  with  the  in- 
terests of  private  persons,  the  owners  of  the  banks.  The  paper  money 
is  as  well  distributed  as  the  nature  of  the  case  will  allow.  The  United 
States  prints  the  bills  of  uniform  style  and  guards  them  against  coun- 
terfeiting. Worn  or  mutilated  notes  are  at  once  replaced.  The  notes 
must  be  of  uniform  value  throughout  the  United  States.  All  that  is 
needed  to  complete  the  system  is  general  specie  redemj^tion,  but  with 
provision  for  temporarily  suspending  specie  payments  in  case  of  ex- 
treme necessity. 

It  was  the  want  of  some  power  legally  to  suspend  specie  payments 
that  led  to  the  evil  results  of  the  panics  of  1837,  18-1:7,  and  1857,  and 
probably  might  have  led  to  temporary  susj^ension  on  "  black  Friday  " 
or  after  the  Chicago  fire.  In  such  cases  a  temporary  suspension  or 
some  substitute  for  specie  pa^nnents  is  indispensable  unless  paper  cur- 
rency is  so  restricted  and  limited  in  amount  as  to  be  insufficient  for  the 
ordinary  exchanges  of  the  country.  All  paper  money  must  rest  to 
some  extent  upon  confidence.  When  a  panic  arises  by  some  unfore- 
seen event  which  destroys  confidence,  the  instinct  of  every  holder  of  a 
bill  or  depositor  in  a  bank  is  to  convert  his  money  into  gold.  This 
feeling  if  Avide-spread  and  long-continued  will  break  any  bank,  how- 
ever abundant  its  assets,  and  will  necessarily  lead  to  the  enforcement 
of  debts  and  to  general  distress.  Our  national  banking  system  amply 
protects  the  note-holder,  but  it  does  not  in  a  time  of  specie  payments 
sufficiently  protect  a  bank  from  an  enforced  sacrifice  of  its  assets  to 
maintain  specie  payments  at  a  time  when  the  j)ublic  good  as  well  as  the 
existence  of  the  bank  demands  a  temporary"  suspension.  The  same 
difficulty  might  arise  on  the  part  of  the  United  States  in  maintaining 
specie  payments  on  United  States  notes.  The  reserve  of  gold  in  the 
Treasury  might  be  exhausted  by  a  sudden  demand.  A  war  or  panic 
might  cause  such  a  demand  for  coin  that  the  United  States  might  be 
unable  to  redeem  in  coin.  Such  a  contingency  ought  to  be  provided 
for  in  advance.  The  expedient  adopted  in  England  of  allowing  the 
Bank  of  England  to  raise  the  rate  of  interest  on  its  loans,  thus  drawing 
in  its  assets  to  meet  anticipated  dangers  or  demands,  is  not  consistent 
with  our  public  policy.  A  discretionary  power  in  private  persons  or 
public  officers  over  so  delicate  a  subject  as  the  national  currency  ought 
to  be  avoided.  The  national  banks  already  possess,  in  the  custody  of 
the  Government,  the  means  to  meet  this  difficulty.  The  best  substitute 
for  specie  payment,  when  from  exceptional  causes  it  can  not  be  main- 
tained, is  the  public  credit.  If  the  United  States  can  not  pay  its  notes 
in  coin,  or  national  banks  can  not  pay  their  notes  in  coin  or  in  United 
States  notes,  payment  in  bonds  of  tlie  United  States,  bearing  interest 
at  such  rate  and  upon  such  terms  as  ordinarily  to  be  above  par  in  gold, 
would  provide  for  an  alternative  redem^^tion.     It  would  satisfy  the 


398  SPEECHES  AND  EEPORTS   OF  JOHN  SHERMAN. 

public  creditor,  and  even  prevent  for  a  time  any  considerable  deprecia- 
tion of  the  notes.  In  the  "mean  time  the  notes  would  be  a  legal  tender 
among  our  citizens,  would  pay  debts  and  fulfill  contracts,  and  would, 
the  moment  that  exceptional  causes  passed  by,  be  at  par  in  coin.  With 
authority  in  the  Secretary  of  the  Treasury  to  redeem  United  States 
notes  either  with  coin  or  with  the  five  per  cent,  bonds  now  offered  for 
sale,  and  with  like  authority  to  redeem  bank  bills  protested  for  non- 
payment in  specie  with  the  bonds  of  the  bank  deposited  with  the 
Treasurer  at  par,  we  would  have  specie  payments  except  when  bonds 
of  the  character  named  were  worth  less  than  par  in  specie. 

With  the  advancing  credit  of  the  United  States  we  may  safely  affirm 
that  such  bonds  will  always  be  at  par  in  gold,  except  at  such  times  as 
it  would  be  ruinous  to  maintain  specie  payments.  And,  with  such  pro- 
vision for  the  redemption  of  United  States  and  bank  notes,  no  large 
reserve  of  gold,  either  in  the  Treasury  or  in  the  bank,  would  be  re- 
quired. Such  a  provision  would  guard  against  the  sacrifices  which 
banks  and  people  alike  must  suffer  when  compelled  to  redeem  their 
notes  to  pay  their  debts  in  coin,  made  exceptionally  scarce  by  panic  or 
war.  It  would  reconcile  many  persons  to  a  specie  standard  who  dread 
that  an  artificial  or  temporary  scarcity  of  specie  might  require  them  to 
fulfill  their  contracts  with  money  impossible  to  be  obtained.  Banks 
who  now  fear  tliat  under  a  panic  their  bonds  and  securities  might  be 
sacrificed  for  specie  would  feel  that  their  securities  deposited  with  the 
Treasurer  would  at  least  j^ay  their  bills.  It  would  be  in  harmony  with 
the  banking  system  and  all  our  early  loan  laws  during  the  war,  which 
provided  for  a  voluntary  conversion  of  notes  into  bonds.  I  do  not 
claim  that  this  is  the  only  expedient  against  a  panic  and  for  temporary 
suspension,  but  I  do  claim  it  would  secure  us  against  the  Avide-spread 
bankruptcy  that  in  times  past  resulted  from  the  comj)ulsory  suspension 
of  specie  payments  in  the  United  States. 

Having  thus  shown  the  obligation  and  necessity  of  specie  payments, 
and  how  the  anticipated  evils  of  resumption  may  be  avoided,  it  remains 
to  examine  the  means  best  adapted  to  bring  it  about.  Among  the  in- 
numerable schemes  proposed  there  are  several  that  are  practicable. 

1.  To  authorize  legal-tender  notes  to  be  receivable  in  payment  for 
bonds  of  the  United  States. 

2.  To  authorize  them  to  be  receivable  in  payment  of  duties. 

3.  To  authorize  them  to  be  converted  into  demand  notes  bearing 
interest,  or  into  compound-interest  notes. 

4.  To  provide  for  direct  resumption  of  specie  payments  on  a  day 
in  the  future  to  be  fixed  by  law. 

5.  To  provide  a  graduated  scale  of  rates  at  which  the  notes  wall  be 
redeemed  in  coin,  advancing  to  par  in  coin  at  a  j^rescribed  day. 

The  examination  of  these  plans  would  lead  me  more  into  detail 
than  I  propose  to  go  at  this  time.  Each  of  them  would  immediately 
advance  our  notes  toward  a  specie  standard.  The  second  only  is  sub- 
ject to  the  objection  that  it  would  violate  the  public  faith,  now  pledged 
to  maintain  the  customs  revenue  in  coin  as  a  special  fund  for  the  pay- 
ment of  interest  on  the  public  debt.  A  careful  consideration  of  the 
whole  subject  leads  me  to  the  conviction  that  the  simplest  and  most 


THE  CUEEENCY— SPECIE  PAYMENTS.  399 

expedient  measure  is  to  declare  bj  law  that  on  and  after  the  1st  day 
of  January  next  the  United  States  will  redeem  its  notes  either  with 
coin  or,  at  the  option  of  the  Secretary  of  the  Treasury,  with  its 
bonds  of  convenient  denominations  bearing  five  per  cent,  interest  in 
coin.  This  will  be  a  recognition  by  the  United  States  of  its  solemn 
pledge,  made  March  18,  1868,  that  it  will  at  the  earliest  practicable 
period  redeem  its  notes  in  coin.  It  will  provide  also  for  the  possible 
but  not  probable  contingency  tliat  more  notes  will  be  presented  than 
can  conveniently  be  paid  in  coin.  In  that  event  the  United  States 
will  redeem  its  notes  in  bonds  now  worth  par  in  gold  in  the  money 
market  of  the  world.  The  objections  that  may  be  made  and  its  effect 
upon  the  national  banks  have  already  been  anticipated  in  what-  I  have 
said.  The  plan  is  founded  upon  the  plain  equity  that  if  we  can  not 
literally  perform  our  promise  by  payment  in  coin,  we  will  at  least  give 
to  the  public  creditor  who  holds  the  notes  of  the  United  States  a  bond 
bearing  a  commercial  value  equal  to  gold.  If,- then,  these  notes  are 
in  excess  of  the  wants  of  the  people  for  a  currency,  they  will  be  pre- 
sented for  redemption,  and  ought  to  be  redeemed ;  if  not,  their  value 
will  be  appreciated  to  the  gold  standard,  and  this  is  specie  payment. 
The  necessary  modifications  of  the  banking  act  can  properly  be  post- 
poned until  a  future  time,  when  the  practical  effect  of  a  specie  standard 
upon  United  States  notes  will  test  the  ability  of  the  banks  to  maintain 
their  notes  at  par  with  those  of  the  United  States.  Whether  they  should 
l)e  relieved  from  maintaining  so  large  a  reserve,  whether  there  should 
be  one  center  of  redemption,  are  questions  of  practical  legislation  for 
the  future.  The  moment  the  notes  are  redeemable  in  coin  the  banking 
system  ceases  to  be  limited  as  to  the  number  and  distribution  of  banks, 
and  will  stand  like  all  other  business  pursuits,  open  to  all  who  will  give 
the  requisite  security  for  their  notes  and  will  obey  the  general  law. 

In  submitting  these  remarks  at  this  time  I  feel  like  apologizing  for 
passing  by  arguments  worthy  of  consideration ;  but  my  only  purpose 
now  was  to  present  with  the  substitute  reported  by  the  Committee  of 
Finance  the  leading  reasons  in  favor  of  it.  My  hope  is,  and  it  is  a 
reasonable  one,  that  neither  Senators  nor  the  public  will  confine  their 
arguments  to  critical  objections,  but  will  suggest  some  plan  better 
suited  to  the  objects  we  have  in  view.  I,  for  one,  while  honestly  sup- 
porting this  plan,  will  readily  adopt  any  better  one  that  will  make  the 
now  broken  promise  of  the  United  States  to  pay  one  dollar  equal  to  the 
best  gold  dollar  of  the  mint. 

Mr.  President,  I  move  that  the  amendments  be  printed,  and  that 
the  bill  take  its  place  on  the  calendar ;  and  on  some  convenient  day, 
w^ien  the  Senate  is  ready  to  consider  a  question  like  this,  I  shall  move 
to  take  up  the  bill. 


400  SPEECHES  AXD  KEPORTS   OF  JOHN  SHERMAN. 

COINAGE  LAWS. 

m  THE  SENATE,  JANUARY  17,  1873. 

The  Senate  resumed  tlie  consideration  of  the  bill  revising  and  amending  the  laws 
relative  to  the  mints,  assay  offices,  and  coinage  of  the  United  States.  On  the  amend- 
ment offered  by  the  Finance  Committee  to  strike  out  the  following  words  :  "  And 
any  gold  coin  of  the  United  States,  if  reduced  in  weight  by  abrasion  not  more 
than  one  half  of  one  per  cent,  on  the  double  eagle  and  eagle,  and  one  per  cent,  on 
the  other  coins,  below  the  standard  weight  prescribed  by  law,  shall  be  received 
at  their  nominal  value  by  the  United  States  Treasury  and  its  offices,  under  such 
regulations  as  the  Secretary  of  the  Treasury  may  prescribe  for  the  protection  of  the 
Government  against  fraudulent  abrasion  or  other  practices;  and  any  gold  coins  in 
the  Treasury  of  the  United  States  reduced  in  weight  below  this  limit  of  abrasion 
shall  be  recoined,"  Mr.  Sherman  said : 

I  CAN  only  say  I  have  here  a  number  of  documents,  not  only  from 
tlie  Director  of  the  Mint  in  Philadelphia,  but  from  Prof.  Barnard  and 
the  Comptroller  of  the  Currency,  calling  our  attention  to  this  very  im- 
portant feature  of  the  bill ;  and  tlie  Committee  on  Finance,  after  a 
patient  examination  of  the  whole  matter,  decided  that  it  was  clearly 
inexpedient  and  wrono;  to  leave  in  this  provision  for  the  recoinage  of 
all  the  pi'esent  gold  coins  of  the  United  States. 

It  is  true,  we  have  provided  for  recoining  the  coin  in  the  Treasury 
of  the  United  States ;  but  we  go  no  further  than  that.  ISTo  nation  in 
the  world  has  gone  further  than  that.  I  do  not  wish  to  delay  the  Sen- 
ate by  reading  these  documents,  but  I  suggest  to  the  Senator  whether 
he  had  not  better  let  this  proposition  go  to  a  committee  of  conference 
rather  than  undertake  to  discitss  it  here,  because  if  we  are  compelled  to 
discuss  it  here  I  shall  be  obliged  to  have  these  letters  read,  which  en- 
tirely convinced  the  Committee  on  Finance  that  the  United  States  dare 
not  assume  the  loss  of  abrasion  beyond  the  legal  standard. 

There  is  a  legal  standard  within  which  the  United  States  make  the 
coin  good ;  but  when  coin  depreciates  below  the  standard  of  abrasion, 
then  neither  the  United  States  nor  any  other  nation  in  the  world  un- 
dertakes to  make  the  coins  good  except  for  their  intrinsic  value.  The 
ways  in  which  these  coins  might  be  abraded  by  fraud  were  shown  to 
us,  and  it  will  be  utterly  impossible  for  any  regulation  of  the  Secretary 
to  prevent  great  loss  to  the  Government  if  we  attempt  to  maintain 
these  coins  when  they  fall  below  the  limit  of  abrasion  and  redeem  them 
at  the  nominal  instead  of  the  real  value. 

The  law  now  provides  for  recoining  abraded  coin  in  the  Treasury 
of  the  United  States.  There  is  no  necessity,  therefore,  for  ])utting  it 
in  here  again.  Indeed,  when  this  clause  was  inserted  in  the  House  the 
law  providing  for  that  recoinage  had  not  been  passed.  It  was  passed 
in  an  appropriation  bill  on  my  own  motion,  I  think,  at  the  last  session 
of  Congress.  The  Mint  was  authorized  to  recoin  the  abraided  coins  in 
the  Treasury  of  the  United  States,  some  of  which  were  taken  at  their 
reduced  value. 


COINAGE  LAWS.  401 

All  nations  retain  the  nominal  value  of  abraded  coin  to  a  certain 
standan!,  but  when  it  falls  below  that,  the  loss  falls  on  the  individual 
who  holds  it.  That  has  been  the  custom  of  all  countries.  The  coin 
that  is  held  by  the  Treasury  of  the  United  States  is  received  at  its 
nominal  value  if  it  is  within  the  limits  of  abrasion  fixed  by  the  law ; 
but  if  it  falls  below  the  limits  the  loss  falls  on  the  holder  of  the  coin, 
and  much  of  that  which  is  now  being  recoined  was  taken  at  the  abraded 
value,  that  is,  reduced  value ;  and  when  we  issue  it  again,  we  shall  issue 
it  in  coin  up  to  the  standard.  The  question  as  to  whether  we  shall  re- 
coin  our  own  coin  and  the  question  whether  we  shall  recoin  the  coin  in 
the  hands  of  citizens  are  very  different  things. 

Within  a  certain  degree,  one  thousandth  per  cent.,  a  small  de- 
gree, the  Government  maintains  the  coins  at  their  nominal  value  even 
if  abraded,  but  when  they  are  abraded,  below  that,  the  loss  falls  on  the 
holder,  and  every  man  who  receives  a  coin  must  look  to  it  that  it  has 
not  been  abraded  beyond  the  legal  limit.  If  it  is  so  abraded,  he 
can  refuse  to  take  it,  or  if  he  takes  it  at  all,  he  should  take  it  for  what 
it  is  intrinsically  worth.  The  recoinage  of  the  gold  coin  now  in  circu- 
lation, although  not  very  large,  would  involve  an  amount  of  one  or 
two  million  dollars.  As  a  matter  of  course,  as  soon  as  our  attention 
was  called  to  this  fact  we  struck  out  this  clause.  I  do  not  wish  to  go 
any  furtlier  into  the  details  of  the  matter.  I  think  the  action  of  the 
Committee  on  Finance  was  clearly  right,  and  it  would  be  very  wrong 
indeed  to  undertake  in  this  ambiguous  way  to  make  good  all  the  coin 
now  outstanding. 

On  the  question  of  a  coinage  charge  for  gold,  Mr.  Sherman  said: 

I  must  confess  my  regret  that  this  disputed  question  should  be 
raised  at  this  stage  of  the  bill,  just  as  it  was  about  on  its  passage.  The 
Senate  of  the  United  States  deliberately,  after  full  discussion,  decided 
to  retain  the  charge  for  coinage  of  one  fifth  of  one  per  cent.  It  is 
now  one  half  of  one  per  cent.,  but  we  reduced  it  to  one  fifth  of  one 
per  cent.  The  Senate,  by  a  very  decided  vote,  after  a  full  debate,  set- 
tled that  question.  The  bill  went  to  the  House  of  Kepresentatives, 
and  there  there  was  another  effort  made  by  the  members  from  the 
Pacific  coast  to  repeal  the  coinage  charge,  and  there,  after  full  debate, 
it  was  settled  by  an  overwhelming  majority  to  retain  the  charge  of  one 
fifth  of  one  per  cent. 

If  this  question  about  the  coinage  charge  is  to  be  opened  and 
pressed,  it  will  compel  those  of  us  who  are  in  favor  of  retaining  the 
coinage  charge  to  enter  into  an  elaborate  debate.  I  did  so  when  it  was 
here  before,  and  many  other  Senators  participated  in  that  discussion. 
The  question  has  been  settled,  and  this  bill  has  now  gone  to  its  last 
stage.  This  bill  passed  the  Senate  a  few  years  ago,  and  was  fully  dis- 
cussed, and  the  charge  of  one  fifth  of  one  per  cent,  was  retained. 
This  point  is  beyond  our  consideration  practically.  We  ought  not  to 
undertake,  at  this  period  of  the  session,  to  review  that  decision. 

The  people  of  California  are  very  largely  interested  in  the  revision 
of  the  Mint  laws.  Indeed  I  have  received  more  letters  from  that  State 
about  this  coinage  bill,  desiring  it  to  pass,  than  from  any  other  portion 
26 


402  SPEECHES  AND  KEPOKTS  OF  JOHN  SHERMAN. 

of  the  country.  I  can  see  tlie  great  importance  of  it  to  them,  and  I 
believe  it  to  be  one  of  great  importance  to  the  whole  people  of  the 
United  States.  Therefore  I  do  not  wish  to  enter  into  a  discussion  in 
regard  to  this  coinage  charge  that  may  probably  weary  the  Senate  and 
delay  the  passage  of  the  bill.  I  promised  that  the  bill  would  not  take 
more  than  an  hour,  and  when  I  made  that  promise  I  supposed  these 
amendments  which  have  been  acted  upon  would  be  acted  upon  sub 
silentio^  and  that  other  questions  which  had  been  settled  would  not  be 
revived. 

I  therefore  prefer  not  to  say  anything  on  the  question  except  that 
the  coinage  charge  has  not  been  and  ought  not  to  be  repealed  entirely. 
We  have  reduced  it  now  to  the  lowest  rate  of  any  nation  in  the  world 
except  only  Great  Britain, 

The  bill  became  the  coinage  act  of,  1873. 


THE  CUEEENCY  AND   SPECIE  PAYMENTS. 

IN  TEE  SENATE,  JANUARY  16,  187 Jt. 

The  bill  to  provide  for  free  banking,  to  secure  an  elastic  currency,  to  appreci- 
ate national  obligations,  and  to  reach  specie  payments  without  commercial  embar- 
rassment, being  before  the  Senate,  Mr.  Sherman  said : 

Mk.  President  :  It  was  my  purpose  not  to  address  the  Senate  until  I 
had  the  benefit  of  the  opinions  of  all  Senators  who  wished  to  express 
their  opinions ;  and  then  I  proposed,  in  closing  the  debate,  to  state  the 
general  reasons  that  influenced  the  Committee  on  Finance  to  report 
this  resolution.  But  as  the  Senator  from  Illinois  [Mr.  Logan]  tells  me 
he  is  not  very  well  to-day,  and  other  Senators  are  not  prepared,  I  pre- 
fer, rather  than  cause  delay,  to  state  as  best  I  can  those  reasons  now. 

And,  sir,  at  the  outset  of  my  remarks  I  wish  to  state  some  general 
propositions  established  by  experience,  and  the  concurring  opinions  of 
all  writers  on  political  economy.  They  may  not  be  disputed,  but  they 
are  constantly  overlooked.  They  ought  to  be  ever  present  in  this  dis- 
cussion as  axioms,  the  truth  of  which  has  been  so  often  proved  that 
proof  is  no  longer  requisite. 

The  most  obvious  of  these  axioms,  and  one  which  lies  at  the  foun- 
dation of  the  argument  I  wish  to  make  to-day,  is  that  a  specie  standard 
is  the  best  and  the  only  true  standard  of  all  values,  recognized  as  such 
by  all  civilized  nations  of  our  generation,  and  established  as  such  by 
the  experience  of  all  commercial  nations  that  have  existed  from  the 
earliest  period  of  recorded  time.  While  the  United  States,  and  all 
other  nations,  have  for  a  time,  under  the  pressure  of  war  or  other  ca- 
lamity, been  driven  to  establish  other  standards  of  value,  yet  they  have 
all  been  impelled  to  return  to  the  true  standard ;  and  even  while  other 
standards  of  value  have  been  legalized  for  the  time,  specie  has  mea- 
sured their  value  as  it  now  measures  the  value  of  our  legal-tender  notes. 


THE  CURRENCY  AND  SPECIE   PAYMENTS.  403 

This  axiom  is  as  immutable  as  the  law  of  gravitation  or  the  laws  of 
the  planetary  system,  and  every  device  to  evade  it  or  avoid  it  has,  by 
its  failure,  only  demonstrated  the  universal  law  that  specie  measures  all 
values  as  certainly  as  the  surface  of  the  ocean  measures  the  level  of  the 
earth. 

It  is  idle  for  us  to  try  to  discuss  with  intelligence  the  currency 
question  until  we  are  impressed  with  the  truth,  the  universality,  and 
the  immutability  of  this  axiom.  Many  of  the  crude  ideas  now  ad- 
vanced spring  from  ignoring  it.  The  most  ingenious  sophistries  are 
answered  by  it.  It  is  the  governing  principle  of  finance.  It  is  proved 
by  experience,  is  stated  clearly  by  every  leading  writer  on  political 
economy,  and  is  now  here,  in  our  own  country,  proving  its  truth  by 
measuring  daily  the  value  of  our  currency  and  of  all  we  have  or  pro- 
duce. To  establish  it  I  might  repeat  the  history  of  finance  from  the 
shekels  of  silver,  "  current  money  with  the  merchant,"  paid  by  Abra- 
ham, to  the  last  sale  of  stock  in  New  York.  I  might  quote  Aristotle 
and  Pliny,  as  well  as  all  the  writers  on  political  economy  of  our  own 
time,  and  trace  the  failure  of  the  innumerable  efforts  to  establish  some 
other  standard  of  value,  from  the  oxen  that  measured  the  value  of  the 
armor  of  Homeric  heroes  to  the  beautifully  engraved  promise  of  our 
day ;  but  this  would  only  be  the  hundred-times-told  tale  which  every 
student  may  find  recorded,  not  only  in  school-books,  but  in  the  writ- 
ings of  Humboldt,  Chevalier,  Adam  Smith,  and  others  of  the  most 
advanced  scientific  authorities.  They  all  recognize  the  precious  metals 
as  the  universal  standard  of  value.  Neither  governments,  nor  parlia- 
ments, nor  congresses  can  change  this  law.  It  defies  every  form  of 
authority,  but  silently  and  surely  asserts  itself  as  a  law  of  necessity, 
beyond  the  jurisdiction  of  municipal  law. 

Other  mediums  of  exchange  have  been  devised,  and  are  in  general 
use,  but  their  value  is  measured  every  moment  by  the  true  standard  of 
the  precious  metals.  And  this  standard  will  measure  the  value  of  your 
three  sixty-five  convertible,  elastic,  irredeemable  bonds,  and  of  any 
currency  we  may  issue,  before  they  are  issued,  the  moment  they  are 
issued,  and  at  every  hour  while  they  are  in  circulation.  The  ignorant 
and  the  credulous  will  measure  their  labor,  their  productions,  and  their 
property  by  that  or  any  other  standard  you  may  devise  ;  but  the  saga- 
cious and  prudent  will  test  it  by  the  sj)ecie  standard.  The  barometer 
in  Wall  Street  will  measure  it  by  the  specie  standard,  and  every  banker 
and  broker  will  have  more  to  do  with  fixing  its  daily  changeable  value 
than  any  of  you.  If  we  will  now  but  recognize  and  act  upon  the  fun- 
damental truth  that  there  is  and  can  be  but  one  true  standard  of  value, 
and  that  the  specie  standard,  we  shall  have  advanced  a  great  way  in 
the  solution  of  the  question  upon  which  we  are  called  upon  to  act. 

The  reasons  for  this  are  obvious.  The  innumerable  wants  of  every 
civilized  man,  however  moderate  his  income,  demand  the  labor  of 
thousands  of  persons.  The  slave  who  toiled  for  his  daily  bread  and 
scanty  clothing  consumed  more  or  less  of  the  products  of  the  labor  and 
capital  of  an  army  of  farmers,  artisans,  and  capitalists,  and  the  ex- 
changes of  all  these  productions  can  be  made  only  by  the  use  of  some 
recognized  standard  of  value  which  will  measure  the  value  of  a  pin  as 


404:  SPEECHES   AND  REPORTS   OF  JOHN  SHERMAN. 

well  as  of  the  highest  production  of  art.  This  standard  must  be  of  in- 
trinsic value,  durable,  divisible,  easily  transported,  of  universal  use, 
and  of  the  same  qualities  wherever  found.  Gold  and  silver  alone  unite 
all  these  qualities.     To  use  the  language  of  another  : 

Though  far  from  invariable,  the  value  of  these  metals  changes  only  by  slow  de- 
grees ;  they  are  readily  divisible  into  any  number  of  parts,  which  may  be  reunited 
by  means  of  fusion  without  loss  ;  they  do  not  deteriorate  by  being  kept ;  their  firm 
and  compact  texture  makes  them  difficult  to  wear ;  their  cost  of  production,  espe- 
cially of  gold,  is  so  considerable  that  they  possess  great  value  in  small  bulk,  and 
can,  of  course,  be  transported  with  comparative  facility ;  and  their  identity  is  per- 
fect, the  pure  gold  and  silver  supplied  by  Russia  and  Australia  having  precisely  the 
same  qualities  with  that  furnished  by  California  and  Peru.  No  wonder,  therefore, 
when  almost  every  property  necessary  to  constitute  money  is  possessed  in  so  emi- 
nent a  degree  by  the  precious  metals,  that  they  have  been  used  as  such  from  a  very 
remote  era.  Their  employment  in  this  function  is  not  ascribable  to  accident,  to  the 
genius  of  any  individual,  or  to  any  peculiar  combination  of  circumstances.  It  grew 
naturally  out  of  the  wants  and  necessities  of  society  on  the  one  hand,  and  the  means 
of  supplying  them  possessed  by  these  metals  on  the  other.  They  became  universal 
money,  as  Turgot  has  observed,  not  in  consequence  of  any  arbitrary  agreement 
among  men,  or  of  the  intervention  of  any  law,  but  by  the  nature  and  force  of 
things. 

Of  late  years  much  difficulty  has  grown  out  of  the  slightly  varying 
value  of  silver  and  gold,  as  compared  with  each  other,  and  the  tendency 
of  opinion  has  been  to  adopt  gold  alone  as  the  standard  of  value.  The 
United  States  has  twice  changed  the  relative  value  of  these  metals,  and 
other  modern  nations  have  been  driven  to  similar  expedients.  At  the 
Paris  monetary  conference,  held  in  1867,  which  I  had  the  honor  to 
attend,  the  delegates  of  twenty  nations  represented  agreed  to  recom- 
mend gold  alone  as  the  standard  of  value.  The  United  States,  and 
nearly  all  the  commercial  nations,  have  adopted  this  standard,  and 
reduced  the  use  of  silver  to  a  mere  token  coinage  of  less  intrinsic  value 
than  gold,  but  maintained  at  par  with  gold,  because  paid  out  only  in 
exchange  for  gold.  So  that  for  all  practical  purposes  we  may  regard 
gold  as  the  only  true  standard,  the  true  money  of  the  world,  by  which 
the  value  of  all  property,  of  all  productions,  of  all  credits,  and  of  every 
medium  of  exchange,  and  especially  of  all  paper  money,  is  tested. 

Specie,  in  former  times,  was  not  only  the  universal  standard  of 
value,  but  it  was  also  the  general  medium  of  all  exchanges.  In  modem 
times  this  is  greatly  changed.  Specie  is  still  the  universal  standard  of 
value,  but  it  has  ceased  to  be  even  the  usual  medium  of  exchange.  The 
failure  to  discriminate  between  the  standard  of  value  and  the  medium 
of  exchange  occasions  many  of  the  errors  into  which  so  many  fall,  and 
nearly  every  Senator  who  has  spoken  on  one  side  of  the  question  has 
fallen  into  this  error.  Specie  has  lost  a  jDortion  of  its  sovereign  power, 
for  with  the  enormous  increase  of  exchanges  it  was  found  that,  valuable 
as  it  is,  it  is  too  heavy  to  transport  from  place  to  place  as  a  medium  of 
exchange.  The  perils  of  the  sea,  the  dangers  of  theft  and  robbery,  led 
to  devices  to  substitute  promises  to  pay  gold  in  jDlace  of  the  actual 
gold. 

In  this  way  bills  of  exchange,  drafts,  promissory  notes,  checks,  and 
similar  commercial  paper  came  into  use,  so  that  now,  even  in  this  age 
of  paper  money,  it  is  computed  that  fully  95  per  cent,  of  all  the  ex- 


THE   CUKRENCY  AND  SPECIE  PAYMENTS.  405 

changes  in  commercial  cities  is  made  by  such  promises  to  pay.  Only 
5  per  cent.,  one  twentieth  part,  of  the  payments  in  New  York  is  made 
in  money,  and  this  chiefly  in  paper  money  and  not  in  gold.  If  gold 
were  now  the  only  legal  standard  of  value  it  would  not  be  used  as  a 
medium  of  exchange  for  1  per  cent,  of  the  transactions  of  daily  life. 
The  convenience  and  portability  of  commercial  paper  and  paper  money 
have  caused  them  to  supersede  gold  as  a  medium  of  exchange,  but  have 
left  it  as  the  fixed,  the  only  true  standard  of  value,  by  which  the  value 
of  all  mediums  of  exchange  is  tested. 

In  England,  where  the  specie  standard  of  values  is  jealously  main- 
tained, and  where  no  Bank  of  England  note  can  issue  beyond  a  pre- 
scribed limit  except  upon  a  deposit  of  an  equal  amount  of  gold,  specie 
is  not  used  as  a  medium  of  exchange  to  an  amount  exceeding  2  per 
cent,  of  the  aggregate  payments.  Ninety-eight  per  cent,  of  all  pay- 
ments is  in  commercial  paper  or  bank  bills,  but  the  fixed  and  unalter- 
able standard  of  value  of  all  this  paper  money  is  gold  coin.  Sometimes 
the  daily  payments  in  London  alone  exceed  all  the  gold  in  Great 
Britain,  but  only  about  1  per  cent,  is  actually  paid  in  gold,  and  about 
5  per  cent,  in  Bank  of  England  notes.  In  France,  until  the  recent 
German  war,  gold  and  silver  were  more  used  as  a  medium  of  exchange 
than  in  any  country  of  our  day.  She  had  in  circulation  from  1868 
to  1870  an  amount  of  gold  and  silver  greater  than  the  aggregate  of 
the  gold  and  silver  of  Great  Britain,  the  United  States,  and  Prussia. 
Her  specie  circulation  amounted  to  $700,000,000.  Driven  by  the 
necessities  of  that  war  she  has  substituted  paper  money  amounting  to 
$520,000,000  as  a  medium  of  exchange  for  the  gold  and  silver  formerly 
circulated,  but  with  wise  statesmanship  she  now  maintains  her  present 
vast  volume  of  paper  money  at  or  near  par  in  gold.  She  has  adopted 
another  medium  of  exchange,  but  she  maintains,  in  harmony  with 
reason  and  experience,  the  gold  standard  of  value. 

All  modern  experience  teaches  the  importance  of  the  division  of 
labor.  Indeed,  that  is  the  favorite  topic  of  every  writer  on  political 
economy.  Every  man  to  his  trade,  and  if  the  trade  can  be  subdivided 
into  many  specialties,  then  every  man  to  his  specialty.  I  was  in  Mr. 
Gillott's  celebrated  manufactory  of  steel  pens,  and  saw  that  the  labor 
of  thirty  men  and  women  contributed  to  the  making  of  this  implement. 
Each  one  was  skillful  in  his  part,  and  that  part  was  perfectly  done. 
The  subdivision  of  labor  and  skill  gave  increased  wages  and  value  to 
the  work  of  each  laborer,  secured  a  fortune  to  the  o^vners,  and  a  per- 
fect pen  to  the  world.  The  same  law  which  demands  a  division  of 
labor  applies  to  professional  and  scientific  pursuits.  The  law  has  many 
specialties.  The  honors  of  science  are  won  only  by  those  who  devote 
their  mental  faculties  to  one  branch  of  study. 

The  same  law  extends  to  all  leading  productions,  as  cotton,  wool, 
wheat,  corn,  and  gold.  The  purposes  for  which  each  of  these  com- 
modities is  best  fitted  are  established  by  experience.  In  this  way  the 
experience  of  centuries  in  former  generations  established  gold  as  both 
the  standard  of  value  and  as  the  medium  of  exchange ;  but  modern 
necessities  have  now  established  paper  money,  credit  money,  whether 
in  the  form  of  bills  of  exchange,  checks,  bank  bills,  or  notes  of  the 


406  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN.  • 

State,  as  the  best  medium  of  exchange,  leaving  gold,  however,  as  the 
best  and  only  true  standard  of  the  value  of  all  paper  money,  as  well  as 
of  all  commodities. 

I^ow,  it  has  often  happened,  not  only  in  the  United  States,  but  in 
other  countries,  that  credit  money  has  proved  worthless.  This  is  an 
unavoidable  incident  of  such  money.  So  far  as  it  consists  of  checks  or 
like  credits  it  must  depend  upon  the  voluntary  contracts  of  individuals. 
Each  person  is  at  liberty  to  accept  or  refuse  all  such  mediums  of  ex- 
change, and  if  he  suffers  a  loss  by  the  failure  of  a  banker  or  broker  it 
is  his  misfortune,  for  which  the  Government  is  not  responsible,  and  can 
give  him  no  relief,  except  through  the  laws  for  the  collection  of  debts. 
But  a  different  rule  applies  to  paper  money  issued  by  a  State  or  by  a 
corporation  authorized  by  the  State  to  issue  money.  Whether  this 
money  is  a  legal  tender  or  not,  it  is,  by  usage  and  custom,  money,  and 
its  receipt  and  payment  are  practically  as  compulsory  as  if  it  were  gold 
coin.  No  man  can  refuse  it  unless  he  is  a  capitalist,  who  may  resort  to 
the  law  to  enforce  payment  in  legal  tenders.  The  laborer  must  take  it 
from  necessity  or  get  no  employment.  The  merchant  must  take  it  or 
keep  his  goods.  Usage  in  such  matters  is  stronger  than  law.  It  is  this 
kind  of  money  that  it  is  the  duty  of  the  State  to  protect  from  deprecia- 
tion and  loss.  It  must  protect  it  by  the  best  security  possible,  and  that 
security  in  every  well-ordered  government  is  the  "  public  faith."  Upon 
this  principle  Great  Britain,  France,  and  the  United  States  have  found- 
ed their  financial  systems. 

But  another  duty  rests  upon  the  government  undertaking  to  issue, 
or  to  authorize  the  issue  of  paper  money,  and  that  is  to  maintain  this 
paper  money  at  the  gold  standard.  Great  Britain  and  France  recognize 
this  duty,  and  perform  it.  The  United  States  recognizes  its  duty,  but 
does'  not  perform  it.  Our  currency  is  founded  upon  the  public  faith. 
The  pubhc  faith  of  the  United  States  is  pledged  to  pay  United  States 
notes  in  coin.  The  national-bank  notes  are  amply  secured  by  bonds 
more  than  sufficient  to  redeem  them  in  coin ;  and  yet  they  are  all  de- 
preciated ;  now  at  10  per  cent,  discount,  to-morrow  at  11,  and  yesterday 
at  8.  It  is  the  depreciation  of  our  paper  money  which  is  the  standing 
reproach  of  our  financial  system,  which  lies  at  tlie  foundation  of  all  our 
troubles,  and  to  remedy  which  is  now  the  most  important  and  diflicult 
duty  of  Congress. 

Mr.  President,  thus  far  my  remarks  are  founded  upon  the  experi- 
ence of  ages,  applicable  to  all  countries  and  to  all  commercial  nations 
of  our  time.  I  present  them  now  as  axioms  of  universal  recognition. 
And  yet  I  have  heard  these  axioms  denounced  in  this  debate  as  "  plati- 
tudes," useless  for  this  discussion  in  the  Senate  of  the  United  States. 
The  wisdom  of  ages,  the  experience  of  three  thousand  years,  the  writ- 
ings of  political  economists,  are  whistled  down  the  wind  as  if  we  in 
this  Senate  were  wiser  than  all  who  have  reasoned  and  thought  and 
legislated  upon  financial  problems — as  if  all  this  accumulated  wisdom 
consisted  of  "  platitudes  "  unworthy  to  influence  an  American  Senate 
in  the  consideration  of  the  affairs  of  our  day  and  generation. 

Sir,  I  do  not  think  so.  If  we  disregard  these  "platitudes,"  we  only 
demonstrate  our  own  ignorance  and  punish  our  constituents  with  evils 


'     THE  CURRENCY   AND  SPECIE  PAYMENTS.  407 

that  we  ought  to  avoid.  I  purpose  now  to  pursue  the  argument  fur- 
ther, and  to  prove  that  we  are  bound  both  by  public  faith  and  by  good 
policy  to  bring  our  currency  to  the  gold  standard ;  that  such  a  result 
was  provided  for  by  the  financial  policy  adopted  when  the  currency 
was  authorized ;  that  a  departure  from  this  policy  was  made  after  the 
war  was  over,  and  after  the  necessity  for  a  depreciated  currency  ceased ; 
and  that  we  have  only  to  restore  the  old  policy  to  bring  us  safely,  sure- 
ly, and  easily  to  a  specie  standard. 

First,  I  present  to  you  the  pledge  of  the  United  States  to  pay  these 
notes  in  coin  "  at  the  earliest  practicable  period."  In  the  "  act  to 
strengthen  the  public  credit "  passed  on  the  18th  day  of  March,  1869, 
I  find  this  obligation  : 

And  the  United  States  also  solemnly  pledges  its  public  faith  to  make  provision  at 
the  earliest  practicable  period  for  the  redemption  of  the  United  States  notes  in  coin. 

Without  renewing  the  discussion  in  regard  to  the  nature  of  these 
notes,  or  quoting  the  decision  of  the  Suj^reme  Court  of  the  United 
States,  or  the  declaration  of  the  various  acts  of  Congress  from  1862 
down,  I  rest  upon  this  pledge  of  the  public  faith.  Under  what  cir- 
cumstances was  it  made  'i  The  condition  of  our  currency,  the  obliga- 
tion of  our  bonds,  the  nature  of  our  promises,  had  been  discussed  be- 
fore the  people  of  the  United  States  in  the  campaign  of  1868 ;  various 
theories  had  been  advanced ;  and  the  result  was  that  those  who  regard- 
ed the  faith  of  the  nation  as  pledged  to  pay  in  coin  not  only  the  bonds 
of  the  United  States,  but  the  notes  also,  prevailed,  and  General  Grant 
was  elected  President  of  the  United  Spates.  On  the  eastern  portico  of 
the  Capitol  on  the  Irth  of  March,  1869,  he  made  this  declaration : 

A  great  debt  has  been  contracted  in  securing  to  us  and  our  postei'ity  the  Union. 
The  payment  of  this,  principal  and  interest,  as  well  as  tlie  return  to  a  specie  basis, 
as  soon  as  it  can  be  accomplished  without  material  detriment  to  the  debtor  class  or 
to  the  country  at  large,  must  be  provided  for.  To  protect  the  national  honor  every 
dollar  of  Government  indebtedness  should  be  paid  in  gold,  unless  otherwise  expressly 
stipulated  in  the  contract.  Let  it  be  understood  that  no  repudiator  of  one  farthing 
of  our  public  debt  will  be  trusted  in  public  place,  and  it  will  go  far  toward  strength- 
ening a  credit  which  ought  to  be  the  best  in  the  world,  and  will  nltimately  enable 
us  to  replace  the  debt  with  bonds  bearing  less  interest  than  we  now  pay. 

The  Congress  of  the  United  States,  in  order  to  put  into  form  its 
sense  of  this  obligation,  passed  the  act  "  to  strengthen  the  public  credit," 
and  the  last  and  most  important  clause  of  this  act  is  the  promise  which 
I  have  just  read,  that  these  notes  shall  be  paid  "  at  the  earliest  practi- 
cable period"  in  coin. 

What  w\as  the  eifect  of  this  promise  ?  Why,  sir,  I  have  here  the 
daily  register  of  the  sales  of  our  greenbacks  in  New  York,  because  that 
is  the  legal  effect  of  transactions  in  gold.  We  have  called  our  false 
standard  the  true  standard,  by  calling  the  dollar  of  our  broken  promises 
the  standard  of  value,  when  every  man  of  intelligence  who  bought  and 
sold  anything,  even  our  own  domestic  products,  knew  that  gold  was 
the  true  standard,  and  measured  our  greenbacks  by  it.  I  have  here  the 
daily  sales,  and  what  do  they  show?  On  the  day  we  made  that  prom- 
ise, the  18th  of  March,  1869,  the  greenbacks,  the  notes  of  the  United 
States,  were  worth  T5f  cents  in  gold ;  or,  in  other  words,  gold  was  at  a 


408  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

premiiim  of  32  per  cent.  That  was  the  measure  of  the  credit  of  these 
notes  when  we  made  this  promise.  It  took  nearly  four  dollars  of  green- 
backs to  buy  three  dollars  of  gold.  What  was  the  result  ?  After  you 
enacted  that  law  pledging  the  faith  of  the  people  of  the  United  States 
that  you  would  redeem  this  promise — the  value  of  your  greenbacks  ad- 
vanced, not  rapidly  but  gradually,  and  in  one  year,  to  within  12  per 
cent,  of  par  in  gold. 

The  causes  of  the  rise  are  not  material  to  my  argument.  The  fact 
is,  that  in  one  year  from  the  time  that  promise  was  made  the  value  of 
our  greenbacks  was  over  89  cents  in  gold.  I  have  here  the  quotations 
of  the  18th  of  March,  1870,  which  give  gold  at  a  premium  of  llf ,  so 
that  a  greenback  in  market  value  was  worth  more  than  89  in  gold. 
Thus,  in  a  single  year,  from  the  18th  of  March,  1869,  to  the  18th  of 
March,  1870,  the  credit  of  the  United  States  rose,  so  that  the  barometer 
of  the  money  market,  which  you  can  not  control,  measured  the  depreci- 
ation of  your  note  at  only  11  per  cent.,  instead  of  25  per  cent,  the  year 
before. 

Mr.  President,  we  see,  then,  the  effect  of  this  promise.  And  I  here 
come  to  what  I  regard  as  a  painful  question  to  discuss — how  have  we 
redeemed  our  promise  ?  It  was  Congress  that  made  it,  in  obedience  to 
the  public  voice ;  and  no  act  of  Congress  ever  met  with  a  more  hearty 
and  generous  approval.  But  I  say  to  you  with  sorrow,  that  Congress 
has  done  no  single  act  the  tendency  of  which  has  been  to  advance  the 
value  of  these  notes  to  a  gold  standard  ;  and  I  shall  make  that  clearer 
before  I  get  through.  Congress  made  this  promise  five  years  ago. 
The  people  believed  it  and  business  men  believed  it.  Four  years  have 
passed  away  since  then,  and  your  dollar  in  greenbacks  is  worth  no  more 
to-day  than  it  was  on  the  18tli  of  March,  1870  ;  and  no  act  of  yours  has 
even  tended  to  advance  the  value  of  that  greenback  to  par  in  gold, 
while  every  affirmative  act  of  yours  since  that  time  has  tended  to  de- 
preciate its  value  and  to  violate  your  promise. 

Mr.  President,  these  are  simple  facts,  although  it  may  be  painful 
for  us  to  discuss  them.  I  do  not  say  that  Congress,  in  this  matter,  dis- 
regarded the  will  of  the  people,  because  there  was  a  public  feeling 
against  any  measure  which  tended  to  advance  the  value  of  the  green- 
backs to  the  gold  standard.  I  am  not  complaining  of  Senators  or  Mem- 
bers who  represent  their  constituents,  but  I  do  say  that  the  fact  stands 
out  as  clear  as  light,  that  the  Congress  of  the  United  States  which  made 
this  promise  has  done  no  single  act  the  tendency  of  which  even  leads 
one  to  suppose  that  it  will  ever  redeem  its  promise. 

Sir,  let  us  see  what  has  been  done.  "We  have  paid  $400,000,000  of 
the  public  debt,  and  we  boast  of  it — of  debt  not  due  for  years.  We 
have  paid  to  redeem  that  debt  a  premium  of  $40,000,000.  In  other 
words,  we  have  paid  $110,000,000  to  redeem  four  hundred  millions  of 
debt  not  yet  due,  and  we  have  not  redeemed  a  single  debt  that  was  due 
in  March,  1869;  but,  on  the  contrary,  we  have  increased  the  kind  of 
debts  then  due  in  greater  proportion  than  the  increase  of  our  popula- 
tion. And,  sir,  while  our  promise  did  advance  the  credit  of  our  bonds 
and  of  our  notes  alike,  and  while  the  execution  of  that  promise  as  to 
our  bonds  has  advanced  our  bonds  to  above  par  in  gold,  yet  we  have 


THE   CURRENCY   AND   SPECIE   PAYMENTS.  409 

done  notliing  whatever  to  redeem  the  second  clause  of  that  pledge ; 
but,  on  the  other  hand,  all  we  have  done  has  been  done  with  the  inten- 
tion and  witli  the  effect  of  depreciating  the  value  of  our  notes. 

I  am  not  here  to  find  fault  with  individuals ;  but  I  do  say  that  the 
Congress  of  the  United  States  in  the  measures  which  have  been  adopted 
has  not  done  what  it  ought  to  redeem  the  pledge  of  the  public  faith  to 
pay  these  notes  in  coin  "  at  the  earliest  practicable  period."  Why,  sir,  at 
this  moment  we  are  living  in  daily  violation  of  this  pledge.  I  said  a 
moment  ago  that  instead  of  adopting  measures  looking  toward  specie 
payments  we  have  increased  the  volume  of  our  currency  in  every 
branch  of  it.  I^ow  let  us  see  if  this  be  true.  I  have  here  a  statement 
taken  from  the  official  report  of  the  Secretary  of  the  Treasury  of  the 
amount  of  the  currency  on  the  30th  of  June,  1869.  I  can  not  find  a 
statement  for  the  1st  of  March,  1869,  but  it  was  the  same,  because  it 
was  fixed  by  law.  I  find  that  on  the  30th  of  June,  1869,  we  had  three 
hundred  and  fifty-six  millions  of  greenbacks,  the  same  amount  that  we 
had  on  the  18th  day  of  March.  That  was  the  maximum  amount,  as  it 
was  supposed,  fixed  by  law.  When  the  act  of  the  18th  of  March,  1869, 
was  passed,  no  one  dreamed  that  there  existed  a  power  to  issue  forty- 
four  milhons  more. 

Our  greenbacks  were  then  $356,000,000.  On  the  1st  of  January, 
1874,  according  •to  the  last  statement  of  the  public  debt,  they  were 
$378,481,339.  We  had,  then,  increased  this  form  of  our  currency 
$22,481,000.  And  that  is  not  all.  Since  that  time,  and  up  to  the  10th 
of  January,  according  to  a  New  York  newspaper — and  I  suppose  it  is 
correct — I  find  that  the  amount  of  legal-tender  notes  outstanding  in- 
creased to  $381,891,000,  or  an  increase  since  the  1st  of  January  of 
something  like  $3,400,000,  or  at  the  rate  of  $400,000  a  day.  Every 
dollar  of  this  new  issue  of  paper  money  directly  tended  to  depreciate 
that  outstanding,  and  was  issued  in  violation  of  the  spirit  and  the  letter 
of  the  law  of  1869.  I  am  not  now  speaking  of  the  legal  power  of 
the  Secretary  of  the  Treasury  to  make  this  issue,  because  I  have  al- 
ready given  my  opinion  fully  on  this  subject  in  an  official  report,  but 
only  to  call  your  attention  to  the  fact  that  by  our  acquiescence  we  have 
actually  watered,  debased,  and  depreciated  by  new  issues  the  very  notes 
we  promised  to  pay  in  coin  at  the  earliest  practicable  period. 

Nor  is  this  all.  Under  authority  clearly  conferred  by  law  on  the 
Secretary  of  the  Treasury,  we  have  increased  the  fractional  currency 
from  $27,508,928,  at  which  it  stood  on  the  30th  of  June,  1869,  to  $48,- 
554,792,  or  an  increase  of  fractional  currency  of  $21,046,000.  Again, 
sir,  driven  by  a  local  demand  which  we  could  not  resist,  founded  upon 
a  palpable  injustice  growing  out  of  the  mistake  of  an  officer  of  the 
Government  long  ago  in  the  distribution  of  the  national-bank  circula- 
tion, we  did  authorize  by  law  an  increase  of  the  bank  circulation  of  the 
South  and  West  to  the  amount  of  $54,000,000.  The  amount  of  bank 
notes  issued  at  the  time  we  made  this  pledge  was  $299,789,000  ;  and 
to-day  the  amount  outstanding  is  $339,081,000,  showing  an  increase  in 
this  kind  of  notes  of  $39,300,000,  or  an  increase  in  the  currency  since 
the  promise  to  pay  it  in  coin  at  the  earliest  practicable  period,  and  all 
legal  tender  in  effect,  of  $82,827,000  ;  and  now  this  process  of  inflation 


410  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

is  going  on  daily,  first,  by  tlie  issue  of  the  remainder  of  the  forty-four 
million  reserve,  and  secondly  by  the  issue  of  new  bank  notes  as  banks 
are  organized  under  the  act  of  July,  1870  ;  and  yet  there  is  a  cry  for 
more,  more. 

It  is  true  that  the  bank  notes  could  only  be  issued  as  the  3  per  cent, 
certificates,  another  form  of  Government  indebtedness,  were  retired. 
But,  sir,  at  the  time  the  law  of  March  18,  1860,  was  passed,  it  was 
just  as  well  known  as  at  a  later  period  that  these  3  per  cent,  cer- 
tificates were  a  demand  indebtedness  which  the  Government  was  ex- 
pected to  pay  at  its  pleasure  and  its  will.  The  Government  could  have 
paid  the  3  per  cent,  certificates  at  any  time  with  the  money  that  was 
used  for  paying  the  bonded  debt  of  the  United  States,  and  thus  have 
advanced  toward  a  specie  standard. 

I  am  willing  to  take  my  share  of  the  responsibility  for  results,  for  I 
certainly  am  guilty  of  aiding  in  the  passage  of  the  law  to  equalize  the 
distribution  of  bank  circulation  under  which  there  was  an  increase  of 
bank-notes.  I  have  no  criticisms  to  make  upon  what  was  done  by  the 
executive  authorities.  What  I  say  is,  that  Congress  has  not  sufficiently 
kept  in  its  view  that  obligation — approved  by  the  people  in  1868,  and 
declared  by  Congress  in  1869 — that  the  United  States  would  redeem, 
at  the  earliest  practicable  period,  these  notes  in  coin. 

l:sow,  sir,  I  ask,  has  it  not  been  practicable  at  anj^time  in  the  last 
four  years  to  advance  in  some  degree  these  notes  toward  the  specie 
standard  i  My  honorable  friend  from  Indiana  says  that  for  the  last 
four  or  five  years  we  have  had  a  time  of  unbounded  plenty  and  great 
prosperity  ;  we  have  built  thousands  and  tens  of  thousands  of  miles  of 
railroad  ;  we  have  built  furnaces ;  we  have  expanded  onr  enterprises 
and  proved  our  energy.  All  this  we  have  done.  AV^e  have  gone 
through  a  period  of  prosperity  almost  unexampled ;  but  it  seems  we 
never  were  prosperous  enough  during  all  this  time,  according  to  tlie 
Senator  from  Indiana,  to  fulfill  any  part  of  this  obligation  which  we 
made  on  the  18th  of  March,  1869.  Sir,  when  will  it  be  practicable  ? 
Was  it  when  the  Treasury  was  overflowing  and  we  were  seeking  new 
outlets,  new  modes  of  expending  money,  new  modes  of  paying  debts 
not  yet  due  ?  When  will  it  be  practicable,  according  to  the  Senator's 
construction  ?  I  press  that  question  upon  him,  not  for  answer  now, 
but  let  him  say  to  the  business  men  of  the  country  when  it  will  be 
practicable  to  restore  the  gold  standard.  If  it  can  not  be  done  in  sea- 
sons of  plenty,  of  pros]3erity,  of  overflowing  revenues,  shall  it  be  done 
in  times  of  adversity  and  trial  and  tribulation  ?  What  condition  of 
affairs  would  justify  us  in  redeemiifg  the  sacred  obligation  which  im- 
pels us  to  return  to  the  specie  basis  at  the  earliest  practicable  period  ? 

I  am  of  opinion  that  at  any  time  since  the  promise  was  made  steps 
could  have  been  taken  to  redeem  it,  and  that  now,  under  the  pressure 
of  panic,  when  debts  are  greatly  diminished,  is  a  favorable  time  for  en- 
tering, by  decisive  measures,  upon  the  policy  of  resumption.  But  I 
suppose,  according  to  the  Senator's  ideas,  we  are  to  issue  more  paper 
money,  make  more  good  times,  start  the  ball  of  inflation,  with  a  view 
that  some  time,  may  be,  in  the  dim  future,  we  will  undertake  to  per- 
form our  promise. 


THE   CURRENCY   AND   SPECIE  PAYMENTS.  411 

But  now  let  us  come  to  tlie  specific  question  of  tlie  time  for  re- 
sumption. Shall  the  redemption  of  this  pledge  be  postponed  until  the 
public  debt  is  paid  ?  Why,  sir,  one  tenth  of  the  money  we  have  used 
to  pay  the  public  debt  not  due  would  have  brought  us  to  a  specie 
standard.  No  one  supposes  that  under  an  ordinary  state  of  affairs  the 
currency  of  the  country — the  greenbacks — need  be  reduced  below  three 
hundred  millions  in  order  to  bring  us  to  a  specie  standard.  I  have 
heard  some  of  the  ablest  and  most  experienced  business  men  of  the 
country  declare  that,  whenever  the  right  to  convert  greenbacks  into 
gold  or  its  equivalent  should  be  secured  so  that  prudent  men  would 
see  that  the  Government  had  the  power  to  maintain  its  specie  standard, 
there  would  be  no  reduction  of  the  currency  to  any  appreciable  extent. 
But,  whether  that  be  so  or  not,  no  one  has  claimed  that  the  amount  of 
greenbacks  need  be  reduced  below  ^300,000,000  in  order  to  bring  that 
remaining  $300,000,000  up  to  the  standard  of  gold.  That  would  be  a 
reduction  of  $56,000,000.  Fifty-six  millions  of  the  money  that  we 
have  applied  to  the  payment  of  debt  not  yet  due  would  have  brought 
all  the  remaining  greenbacks  up  to  par  in  gold,  would  have  made  our 
bank  notes  convertible  into  the  standard  ol  gold,  and  we  should  have 
had,  almost  without  knowing  it,  specie  payment — a  solid,  safe,  and 
secure  basis.  The  $40,000,000  of  greenbacks  we  jDaid  as  a  premium 
for  our  bonds  would  have  accomplished  this  result.  Thousands  of  men 
who  have  been  rained  by  the  false  ideas  that  sprang  from  this  fever- 
heated,  depreciated  paper  money  would  be  now  useful,  able,  and  suc- 
cessful business  men,  instead  of  having  been  ruined  by  bankruptcy. 

Sir,  we  gain  nothing  by  postponing  the  fulfillment  of  our  promise 
with  a  view  to  reduce  the  public  debt.  We  have  to  pay  the  debt  in 
coin  anyway,  and  the  same  coin  that  pays  it  now  would  pay  it  after  our 
cuiTency  had  been  restored  to  par.  If  the  old  idea  of  Mr.  Pendleton 
had  prevailed,  that  these  bonds  should  be  paid  in  greenbacks,  then  there 
would  be  a  motive  for  us  to  deiDreciate  the  greenbacks  in  order  to  pay 
off  our  bonds  at  the  cheapest  rate.  But  this  promise  to  pay  in  coin 
extended  to  the  bond-holder.  We  promised  to  pay  the  bond-holder  gold 
for  his  bond  and  the  people  gold  for  their  greenbacks.  We  haveful- 
filled  our  promise  to  the  bond-holder.  We  have  paid  him  in  gold.  We 
have  bought  the  gold.  We  have  paid  him  at  a  premium  of  10  per  cent, 
on  our  cm-rency.  JSTot  a  single  effort,  not  a  single  measure,  has  suc- 
ceeded in  either  House  of  Congress  that  looks  to  the  redenqDtion  of  the 
promise  to  the  people  who  hold  these  greenbacks,  which  measure  their 
daily  toil  in  their  productive  avocations.  We  can  not  postpone  this 
obligation  until  the  payment  of  the  public  debt,  because,  although  we 
have  rapidly  advanced  in  the  payment  of  the  public  debt,  it  will  be 
many  long  years  before  that  "  consummation  devoutly  to  be  wished  " 
will  be  reached. 

Shall  we  postpone  the  redemption  of  our  greenbacks  until  we  can 
accumulate  enough  gold  in  our  Treasury  to  pay  them  ?  We  know  the 
effect  of  that  policy.  Any  attempt  to  accumulate  great  masses  of  gold 
in  the  Treasury  will  not  only  excite  popular  opprobrium,  by  holding 
idle  in  the  vaults  of  the  Treasury  money  that  ought  to  draw  interest, 
but  it  will  create  a  stringency  in  the  gold  market.     It  will  advance  the 


412  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN". 

value  of  the  very  thing  we  wish  to  get.  Accumulate  gold  in  great 
masses,  and  it  will  advance  the  price  of  gold  all  over  the  world.  We 
could  not  now,  with  all  our  teeming  productions,  draw  to  this  country 
$200,000,000  in  gold  without  disturbing  the  Bank  of  France,  the  Bank 
of  England,  and  all  the  money  centers  of  the  world.  Therefore  the 
idea  of  postponing  the  day  of  specie  payments  until  we  could  accunni- 
late  enough  gold  to  redeem  the  greenbacks  would  be  the  idlest,  vainest 
delusion  and  the  most  foolish  hope. 

AYhat  then  ?  Shall  we  postpone  the  payment  of  our  notes  in  coin, 
shall  we  put  off  tlie  fuliillment  of  our  promise,  until  the  mysterious 
"balance  of  trade"'  is  in  our  favor?  There  never  was  a  greater  hum- 
bug in  the  world  than  this  idea  of  the  balance  of  trade.  Why,  sir,  the 
balance  of  trade  is  now  largely  in  our  favor,  and  according  to  this 
theory  we  ought  now  to  be  prosperous  and  happy.  The  balance  of 
trade  is  in  our  favor ;  our  exports  exceed  our  imports ;  we  ought  now 
to  be  supremely  happy.  But  a  year  ago  the  balance  of  trade  was  $100,- 
000,000  against  us.  We  sent  our  exports  to  Europe,  it  is  true ;  but  we 
imported  silks  and  satins  and  wines.  All  the  luxuries  of  the  Orient, 
all  the  rich  goods  of  every  clime,  came  pouring  into  this  countrj^  The 
balance  of  trade  was  against  us ;  and  yet,  according  to  the  argument  of 
my  friend  from  Indiana  yesterday,  the  last  two  or  three  years,  when 
the  balance  of  trade  was  against  us,  was  a  happy  time,  halcyon  days, 
when  we  had  prosperity  in  all  branches  of  industry,  and  were  building 
many  thousands  of  miles  of  railroad  every  year. 

Mr.  President,  this  fallacy  of  the  balance  of  trade  ought  not  to 
enter  into  the  calculations  of  prudent  men.  When  the  balance  of  trade 
is  in  our  favor,  it  indicates  thrift  and  economy.  It  shows  we  are  ex- 
porting our  sui*plus  products  and  getting  a  fair  price  for  them,  and 
taking  solid  gold  or  paying  debts  in  exchange  for  them,  instead  of  taking 
silks  and  satins.  But  this  is  not  conclusive  evidence  that  when  we  are 
importing  more  than  we  are  exporting  we  are  necessarily  carrying  on  a 
losing  trade.  These  imports  iimj  be,  in  actual  wealth-producing  prop- 
erty, such  as  capital,  machinery,  or  the  like,  more  valuable  to  us  than 
the  burden  of  the  interest  we  pay  on  the  balance  of  trade.  The  whole 
theory  depends  upon  the  nature  of  the  imports  for  which  we  run  in 
debt.  In  this  respect  the  balance  of  trade  is  precisely  like  the  balance 
of  trade  between  the  merchant  and  the  farmer.  If  the  farmer  buys 
less  than  he  sells,  he  is  surely  on  a  safe  footing ;  if  he  buys  more 
than  he  sells,  the  result  will  depend  entirely  upon  what  he  buys, 
whether  luxuries  consumed  in  the  using  or  materials  for  actual  pro- 
ductive improvements  on  his  farm.  If  the  latter,  he  is  prosperous  and 
happy,  though  "  the  balance  of  trade  "  may  be  against  him.  It  is  not 
a  question  of  "  balance  of  trade,"  but  a  question  of  prudence  and  judg- 
ment in  the  trade  itself.  Only  a  year  ago  I  had  a  controversy  with  a 
fellow-Senator,  who  is  now  present,  about  this  balance  of  trade.  He 
insisted  that  when  the  balance  of  trade  was  against  any  nation  it  was 
an  evidence  of  decay.  I  said  this  was  a  fallacy.  He  replied  that  no 
country  could  be  prosperous  unless  the  balance  of  trade  was  in  its 
favor.  I  asked  him  if  he  thought  Great  Britain  was  a  prosperous 
country,  and  he  said  it  was  a  very  prosperous  country,  and  that  the 


THE  CURRENCY  AND  SPECIE  PAYMENTS.  413 

balance  of  trade  was  always  in  favor  of  Great  Britain.  We  made  a 
friendly  bet  on  the  subject,  and  it  turned  out  that  the  balance  of  trade 
was  against  Great  Britain  to  the  tune  of  over  $300,000,000  per  annum, 
and  had  been  for  twenty  years.  By  the  fallacious  theory  of  the  "  bal- 
ance of  trade  "  Great  Britain  was  on  the  high  road  to  iniin.  Yet  the 
whole  of  this  balance  of  imports  was  in  commodities  sent  to  pay  in- 
terest on  Englisli  investments  in  foreign  countries — prohts  of  trade, 
and  so  forth.  The  profits  of  the  trade  were  all  in  favor  of  Great 
Britain,  which  imported  raw  articles  and  exjDorted  high-priced  produc- 
tions, while  the  balance  of  trade  only  represented  increased  and  in- 
creasing wealth,  instead  of  ruin  and  poverty ;  so  that  all  this  talk  about 
the  balance  of  trade  is  the  sheerest  nonsense. 

Sir,  there  is  no  time  unfit  to  fulfill  a  sacred  obligation,  and  there 
has  been  no  day  since  this  obligation  was  declared  by  Congress  when 
we  should  not  have  directed  our  attention  toward  redeeming  it.  The 
only  question  for  Congress  is  to  say  with  what  rapidity  it  will  advance 
toward  specie  payments.  When  you  tell  me  you  have  the  right  to 
choose  the  time  and  the  occasion,  I  sav  you  have  done  nothing.  You 
have  buried  your  talent  and  are  an  unfaitliful  steward.  I  ask  the 
honorable  Senator  from  Indiana  what  single  act  of  Congress,  since  this 
pledge  was  made,  has  even  tended  toward  specie  payments  ?  Let  him 
look  over  the  statute-books,  examine  them  all,  and  he  will  answer, 
none.  I  hav^e  sought  in  vain  for  acy  legislation  to  show  that  Congress 
has  been  mindful  of  this  obligation ;  I  cannot  find  a  single  measure 
that  even  tended  toward  specie  payments. 

We  are  told  that  we  are  all  for  specie  payments.  Even  my  friend 
who  now  occupies  the  chair  [Mr.  Ferry,  of  Michigan]  tell  us  he  wants 
to  issue  one  hundred  millions  more  of  paper  money  to  prepare  us  for 
specie -payments.  He  looks  to  specie  payments  as  the  ultimate  result 
of  his  one  hundred  millions.  We  are  all  for  specie  payments  some 
time,  may  be.  We  are  not  in  favor  of  it  in  times  of  plenty.  We  are 
not  in  favor  of  it  in  times  of  great  prosperity.  We  are  not  in  favor 
of  it  in  view  of  the  panic.  A\  hen  shall  we  be  in  favor  of  it  (  That 
is  the  question  that  Senators  ought  to  be  prepared  to  answer  to  the 
business  men  of  this  country.  There  is  not  a  man  who  buys  and  sells, 
who  deals  in  exchanges,  a  banker  or  a  broker,  but  measures  daily  the 
depreciation  of  your  notes.  He  is  compelled  to  take  them,  and  he 
eagerly  asks  you,  as  you  have  promised  to  redeem  them  at  the  earliest 
practicable  period,  if  you  cannot  fix  the  time,  to  state  under  what 
circumstances,  under  what  condition  of  trade,  under  what  condition 
of  plenty,  under  what  condition  of  surplus  revenue,  you  will  pay 
them. 

The  very  uncertainty  of  such  an  obligation,  as  it  is  now  construed, 
would  prevent  the  richest  man  in  the  city  of  iSTew  York  from  borrow- 
ing a  dollar  upon  it.  Mr.  Astor,  with  his  untold  wealth,  could  not 
borrow  a  thousand  dollars  of  any  gentleman  who  now  hears  me  upon 
a  promise  so  vague  and  indefinite  as  you  seek  to  make  this.  And  yet 
the  people  of  this  country  have  been  compelled  to  submit  to  a  forced 
loan,  and  the  business  men  of  this  country  are  compelled  to  take  such 
paper  as  the  standard  of  their  values  and  of  all  values,  when  no  living 


414:  SPEECHES  AND  EEPORTS  OF  JOHN  SHEEMAN. 

man  can  guess  tlie  time  when,  or  the  circumstances  under  whicli,  this 
promise  will  be  redeemed, 

I  say,  therefore,  that  if  the  ideas  of  these  gentlemen  are  to  prevail 
in  the  Senate,  they  ought  to  tell  the  country  when  and  under  what 
circumstances  they  will  redeem  this  promise.  I  say  to  Senators  that  if 
now,  in  this  time  of  temporary  panic,  a  great  part  of  which,  as  I  shall 
show  you,  has  already  passed  over,  we  yield  one  single  inch  to  the 
desire  for  paper  money  in  this  country,  we  shall  cross  the  Rubicon, 
and  there  will  be  no  power  in  Congress  to  check  the  issue.  If  you 
want  forty  millions  now,  how  easy  will  it  be  to  get  forty  millions 
again  !  If  you  want  one  hundred  millions  now,  convertible  into  three 
sixty-five  currency  bonds,  how  soon  will  you  want  one  hundred  mil- 
lions more !  •  Will  there  not  alway*  be  men  in  debt  ?  Will  not  always 
men  with  bi-ight  hopes  embark  too  rashly  on  the  treacherous  sea  of 
credit  ?  Will  there  not  always  be  a  demand  made  upon  you  for  an 
increase  ?  And  when  you  have  crossed  the  Rubicon  and  have  fulfilled 
the  pledges  you  have  already  made  to  the  people  of  the  United  States, 
where  can  you  stop  ?  Where  our  ancestors  stopped  at  the  close  of  the 
Revolution ;  where  the  French  people  stopped  in  the  midst  of  their 
revolutionary  fervor ! 

Sir,  I  regard  it  as  the  proudest  achievement  of  the  American  peo- 
ple that  so  soon  after  the  war  they  so  faithfully  and  honorably  re- 
deemed their  obligation  to  the  bond-holder.  I  demand  the  same  hon- 
orable fulfillment  of  your  promise  to  the  note-holder.  ISTow  is  the  time 
to  make  the  stand,  not  only  to  prevent  any  further  violation  of  law  and 
of  our  promise,  but  to  retrace  our  steps  and  to  give  some  decisive  token 
that  you  will  pay  our  paper  money  in  coin,  as  we  agreed  to  do. 

This  is  all  I  desire  to  say  in  regard  to  this  pledge  of  the  public  faith. 
But  I  wish  to  go  a  little  further.  I  wish  to  show  you  that  the  policy  of 
the  country,  adopted  at  the  time  these  notes  were  issued,  contemplated 
that  they  should  be  maintained  at  par  in  gold ;  that  that  policy  was 
only  temporarily  abandoned  under  the  pressure  of  war.  The  act  of 
February  25,  1862,  is  the  fundamental  constitution  of  our  jDresent 
financial  system.  It  was  passed  after  the  greatest  deliberation  in  both 
Houses  of  Congress.  It  contains  every  ]3i*inciple  and  element  of  our 
whole  financial  system.  There  is  not  an  idea  advanced  during  the  war 
that  operated  successfully  that  is  not  contained  in  the  act  of  February 
25,  1862.  That  act  provided  for  the  issue  of  five-twenty  bonds;  it 
provided  for  the  issue  of  the  greenbacks  ;  it  provided  for  the  issue  of 
certificates  of  indebtedness  ;  it  provided  that  your  internal  taxes  should 
be  paid  in  paper  money  and  that  your  duties  should  be  paid  in  gold ;  it 
established  your  sinking  fund  ;  it  secured  the  interest  on  the  public  debt 
always  to  be  paid  in  coin ;  it  set  aside  the  coin  from  customs  duties  to 
pay  it.  That  act  provided  that  the  greenbacks  issued  under  it  should 
be  maintained  at  as  near  par  in  gold  as  possible  during  the  war,  but  at 
all  events  at  par  with  the  best  bond  tliat  could  be  issued  by  the  Govern- 
ment of  the  United  States.  I  will  ask  the  Secretary  to  read  the  stipu- 
lations that  were  made  in  regard  to  these  notes.  They  will  show  how 
sacredly  the  notes  were  regarded  and  how  carefully  their  security  was 
watched. 


THE  CURRENCY  AND   SPECIE  PAYMENTS.  415 

Th'e  Chief  Clerk  read  as  follows : 

And  such  notes  herein  authorized  shall  be  receivable  in  payment  of  all  taxes, 
internal  duties,  excises,  debts,  and  demands  of  every  kind  due  to  the  United  States, 
except  duties  on  imports,  and  of  all  claims  and  demands  against  the  United  States 
of  every  kind  whatsoever,  except  for  interest  upon  bonds  and  notes,  which  shall 
be  paid  in  coin,  and  shall  also  be  lawful  money  and  a  legal  tender  in  payment  of  all 
debts,  public  and  private,  within  the  United  States,  except  duties  on  imports  and 
interest  as  aforesaid.  And  any  holders  of  said  United  States  notes  depositing  any 
sum  not  less  than  fifty  dollars,  or  some  multiple  of  fifty  dollars,  with  the  Treasurer  of 
the  United  States  or  either  of  the  assistant  treasurers,  shall  receive  in  exchange 
therefor  duplicate  certificates  of  deposit,  one  of  which  may  be  transmitted  to  the 
Secretary  of  the  Treasury,  who  shall  thereupon  issue  to  the  holder  an  equal  amount 
of  bonds  of  the  United  States,  coupon  or  registered,  as  may  by  said  holder  be  de- 
sired, bearing  interest  at  the  rate  of  six  per  cent,  per  annum,  payable  semi-annually, 
and  redeemable  at  the  pleasure  of  the  United  States  after  five  years,  and  payable 
twenty  years  from  the  date  thereof.  And  such  United  States  notes  shall  be  received 
the  same  as  coin,  at  their  par  value,  in  payment  for  any  loans  that  may  be  hereafter 
sold  or  negotiated  by  the  Secretary  of  the  Treasury,  and  be  reissued  from  time  to 
time  as  the  exigencies  of  the  public  interests  shall  require. 

I  have  had  this  clause  read  to  show  you  that  the  foundation  of  the 
greenback  was  coin.  Although  it  could  not  at  the  moment,  during  the 
war,  be  converted  into  coin — for  the  wants  of  the  Government  were 
greater  than  all  the  coin  of  the  United  States,  or  perhajts  than  all  the 
coin  of  the  world,  attainable  during  war — yet  the  Government  based  the 
whole  upon  coin.  Every  bond  that  was  issued  was  issued  only  upon  the 
sacred  pledge  contained  in  this  act  that  the  interest  of  that  bond  should 
be  paid  in  coin ;  and  the  principal  should  l)e  paid,  when  due,  in  coin. 
The  fifth  section  of  the  act  provided  that  all  duties  on  imported  goods 
shall  be  paid  in  coin ;  and  that  this  money  shall  be  set  aside  as  a  special 
fund  to  pay  the  interest  on  the  bonded  debt  in  coin.  Then,  in  order 
to  secure  the  greenbacks,  it  authorized  any  holder  of  greenbacks  to  pay 
any  Government  debt  with  them ;  it  authorized  the  holder  of  green- 
backs to  pay  any  debt,  public  or  private,  with  them  ;  and  every  citizen 
of  the  United  States  was  bound  to  take  them.  Then  it  authorized  them 
to  be  converted  into  six  per  cent,  bonds  of  the  United  States,  payable, 
principal  and  interest,  in  gold.  If  the  policy  provided  for  by  this  act 
had  been  maintained,  we  should  long  since  have  arrived  at  specie  pay- 
ments, without  any  series  disturbance  of  our  monetary  affairs. 

I^ow,  Mr.  President,  I  proceed  to  show  the  Senate  how  this  provi- 
sion, the  convertible  clause  of  the  act  of  Febmary  25, 1862,  was  repealed. 
On  the  3d  of  March,  1863,  Congi-ess  passed  "  An  act  to  provide  ways 
and  means  for  the  support  of  the  Government."  This  act  was  passed 
during  the  dark  hours  of  the  war.  The  currency  of  the  country  did 
not  flow  into  the  Treasury  rapidly  enough  to  pay  our  army.  I  re- 
member that  at  about  the  time  this  act  was  passed  there  were  very 
large  unpaid  requisitions.  The  Secretary  of  the  Treasury,  instead  of 
issuing  any  more  six  per  cent,  bonds,  desired  to  float  a  ten-forty  five 
per  cent,  bond ;  in  other  words,  to  reduce  the  burden  of  interest  upon 
the  public  debt.  At  this  time  there  were  three  hundred  millions  of 
circulation  outstanding ;  and  with  all  the  rights  and  all  the  privileges 
conferred  upon  the  greenbacks,  they  did  not  flow  into  the  Treasury 
fast  enough  to  furnish  means  to  carry  on  the  operations  of  the  war. 
The  Secretar}^  reasoned  somewhat  in  this  way :  he  said  that  the  holder 


416  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

of  greenbacks  liad  the  right  to  convert  them  at  any  time  into  bonds 
bearing  six  per  cent,  interest ;  but  as  that  right  could  be  exercised  at 
any  time,  the  people  were  apt  to  postpone  the  exercise  of  it,  and  he 
believed  it  would  advance  the  conversion  of  these  notes  into  bonds  by 
taking  away  the  absolute  legal  right  to  convert.  In  other  words,  the 
suspension  of  this  convertibility  clause  was  passed  with  a  view  to  pro- 
mote conversion;  and,  if  possible,  to  reduce  a  conversion  into  a  live 
per  cent,  gold  bond  instead  of  a  six  per  cent.  bond.  When  the  Secre- 
tary of  the  Treasury  presented  this  view  to  Congress  he  was  at  once 
met  with  the  pledge  of  the  public  faith,  with  the  promise  printed  upon 
the  back  of  the  greenbacks  that  they  could  be  converted  into  six  per  cent, 
bonds  at  the  pleasure  of  the  holder ;  and  it  was  urged  that  we  could  not 
take  away  that  right.  This  difficulty  was  met  by  the  ingenuity  of  the 
then  Senator  from  Vermont  [Mr.  Collamer].  He  said  that  no  man  ever 
exercised  a  right  which  could  not  properly  be  barred  by  a  statute  of  lim- 
itations ;  and  if  this  right  was  injurious  to  the  people  of  the  United 
States,  and  prevented  the  conversion  of  these  notes  into  bonds,  we 
might  require  the  holders  to  convert  them  within  a  given  time  ;  that 
we  could  give  them  a  reasonable  time  within  which  they  could  convert 
the  notes  into  six  per  cent,  bonds,  and  after  that  take  away  the  right. 
The  act  of  March  3,  1863,  was  amended  by  inserting  this  clause : 

And  the  holders  of  United  States  notes,  issued  under  or  by  virtue  of  said  acts, 
shall  present  the  same  for  the  purpose  of  exchanging  the  same  for  bonds  as  therein 
provided  on  or  before  the  1st  day  of  July,  1863 ;  and  thereafter  the  right  so  to  ex- 
change the  same  shall  cease  and  determine. 

In  reviewing  the  history  of  our  times  I  am  not  sure  but  that  in  this 
we  made  a  mistake.  I  am  not  sure  but  that  it  would  have  been  better 
to  submit  to  any  sacrifice  rather  than  palter  with  the  public  faith.  If 
there  was  any  wrong  done  by  Congress  at  that  time,  I  am  willing  to 
share  the  responsibility  of  it,  although  I  felt  at  the  time  the  danger  of 
the  measure.  But,  sir,  under  the  pressure  of  war  we  could  not  con- 
sider as  carefully  as  we  can  now  all  the  obligations  that  rest  upon  us. 
The  life  of  our  country  was  at  stake  ;  every  man's  property  was  felt  to 
be  insecure  if  the  Union  was  destroyed  ;  everything  was  imperiled ; 
and  we  did  a  great  many  things  in  those  times  of  peril  and  excitement 
and  trial  that  we  would  not  like  to  do  now.  Thousands  of  men  rushed 
to  the  battle-field  and  surrendered  their  lives  ;  others  gave  up  their 
property  ;  mothers  their  children.  There  were  acts  of  heroism  done  at 
those  times,  and  sometimes  acts  of  wrong. 

I  am  willing  to  take  my  share  of  the  responsibility  for  the  passage 
of  this  act ;  but  theorists  can  demonstrate  very  easily  that  in  this  very 
act  we  laid  the  foundation  of  the  long  delay  in  the  return  to  a  specie 
standard.  If  the  right  to  convert  greenbacks  into  bonds  had  been  re- 
tained as  the  permanent  policy  of  the  country  during  the  war,  then  no 
man  would  have  been  bold  enough  or  bad  enough  to  take  that  provi- 
sion away  in  time  of  peace.  But  mark,  sir,  while  the  legal  right  to 
convert  notes  into  bonds  was  taken  away,  no  one  contemplated  a  denial 
of  the  actual  conversion.  The  notes  were  still  received  par  for  par  for 
bonds  during  the  war  and  after  the  war  was  over.  The  right  to  con- 
vert them  into  a  particular  form  of  bonds,  that  is,  the  five-twenties, 


THE   CURRENCY   AND   SPECIE  PAYMENTS.  417 

was  denied ;  still  tliey  were  converted  at  pai*  into  seven  and  tliree-tentlis 
Treasury  notes,  into  ten-forty  gold  bonds,  and  into  every  form  of  se- 
curity except  only  the  five-twenties.  So  that  although  we  repealed  the 
technical  right  to  convert  after  a  given  time  those  notes  into  one  class 
of  bonds,  we  never  did  deny  in  practice  the  right  to  convert  them  into 
some  form  of  interest-bearing  security. 

After  the  passage  of  the  act  of  March  3,  1863,  Secretary  Chase  be- 
lieved that  he  could  negotiate  a  ten-forty  loan,  and  he  tried  to  do  it. 
One  hundred  million  dollars  were  taken,  and  they  were  taken  by  the 
conversion  of  these  notes,  Avhich  were  received  at  par.  Afterward  we 
issued  $830,000,000  of  three-year  Treasury  notes  bearing  7*3  per  cent, 
currency  interest,  and  when  due  convertible  into  6  per  cent,  bonds ; 
and  they  were  sold  at  par  in  greenbacks.  So  that  although  the  legal 
privilege  of  the  note-holder  to  convert  was  taken  away,  yet  in  fact  his 
right  to  convert  existed  except  as  to  the  five-twenty  bonds.  During 
the  war,  and  up  to  1866,  there  was  no  hour  when  any  holder  of  green- 
l)acks  could  not  present  them  to  the  Treasury  of  the  United  States,  or 
to  any  banker  or  broker,  and  buy  some  form  of  United  States  interest- 
bearing  security  at  par.  After  the  passage  of  this  act  the  five-twenties 
]:»egan  to  rise  above  par  in  currency.  Then  the  measure  of  the  value 
of  the  greenback  was  the  ten-forty  bond.  When  the  Government, 
fearing  to  issue  a  larger  amount  of  gold-bearing  bonds,  again  began  to 
issue  currency  securities,  seven  and  three-tenths  notes,  the  greenbacks 
were  received  at  par  for  them. 

ISTow,  Mr.  President,  I  have  shown  that  the  greenbacks  were  based 
upon  coin  bonds;  that  the  holders  had  the  right  to  convert  them  into 
coin  bonds  ;  that  that  right  was  taken  awa}^  as  to  the  five-twenty  bonds ; 
but  that,  in  practice  and  in  effect,  the  greenback  was  convertible  into 
an  interest-bearing  bond  of  the  United  States  wp  to  1866,  and  until  the 
passage  of  the  law  to  which  I  will  now  refer. 

My  friend  from  Indiana  [Mr.  Morton]  inquires  what  law  is  the 
worst  of  all  the  laws  we  have  passed  in  relation  to  the  greenback.  In 
my  judgment  more  evil  effects  have  resulted  from  the  "  act  of  the 
Government"  passed  on  the  12th  of  April,  1866,  than  from  any  other 
act  that  was  ever  passed  in  regard  to  our  financial  system.  Indeed, 
it  is  the  only  one  that  I  desire  to  criticise. 

Mr.  President,  what  was  the  condition  of  affairs  when  the  war  was 
over  ?  We  had  then  outstanding  every  form  of  liability.  We  had  six 
per  cent,  bonds  ;  five  per  cent,  bonds ;  seven-thirty  bonds  ;  certificates  of 
indebtedness ;  and  two  or  three  issues  of  greenback  notes ;  we  had 
eight  or  ten  different  forms  of  Government  securities.  Then  it  was 
that  Congress  was  called  upon  to  make  provision  for  funding  this 'debt. 
At  that  time  there  was  a  large  circulation  ;  there  were  some  forms  of 
interest-bearing  notes  that  were  a  legal  tender  for  the  principal ;  we 
had  almost  every  class  of  securities.  The  act  of  the  Government 
'rt'hich  was  most  injurious  to  the  public  credit  was  an  act  of  omission 
and  not  an  act  of  commission.  If  in  the  first  session  of  Congress  dur- 
ing Andrew  Johnson's  administration  we  had  passed  a  funding  bill 
authorizing  any  holder  of  any  form  of  Government  security  to  convert 
it  into  a  five  per  cent,  bond,  all  the  evils  that  have  flowed  out  of  our  dis- 
27 


418      SPEECHES  AND  REPORTS  OF  JOHN  SHI^MAN. 

ordered  currency  would  have  passed  away;  the  questions  that  after- 
ward were  raised  to  endanger  the  public  credit  never  would  have 
arisen ;  all  tliis  long  agony  of  endeavoring  to  do  what  we_  have  prom- 
ised to  do,  and  never  performing  it,  would  have  been  avoided.  If  in 
December,  1865,  after  our  soldiers  had  returned  to  their  homes  and  the 
war  was  over,  we  had  authorized  any  holder  of  any  form  of_  security, 
greenback  or  bond,  to  convert  it  at  his  pleasure,  at  his  will,  into  some 
proper  security  of  the  United  States,  say  a  five  per  cent,  bond,  there 
would  have  been  no  difficulty.  The  condition  of  the  pubHc  credit,  the 
advancing  credit  of  the  nation,  the  triumph  of  our  arms,  all  causes 
cooperated  ;  but,  sir,  it  could  not  be  done.  At  that  time  came  up  the 
controversy  between  the  President  of  the  United  States  and  Congress, 
and  the  fierce  and  angry  passions  that  it  excited,  the  eager  debates,  the 
bitter  excitement,  the  quasi  civil  war  that  existed,  prevented  any  con- 
sideration of  our  finances.  Efforts  were  made  at  that  time  to  pass 
some  proper  funding  bill,  but  it  was  impossible  to  attract  public  atten- 
tion to  it.  Congress  would  not  look  at  it.  Finally,  after  a  debate  of 
not  more  than  an  hour  in  the  Senate,  and  a  short  debate  in  the  House, 
the  act  of  April  12,  1866,  was  passed,  conferring  upon  the  Secretary 
of  the  Treasury  a  power  that  was  never  conferred  upon  mortal  man 
before.  I  will  ask  the  Secretary  to  read  this  act. 
The  Chief  Clerk  read  as  follows: 

An  act  to  amend  an  act  entitled  "  An  act  to  provide  ways  and  means  to  support  the 
Government,"  approved  March  3,  1865. 

Be  it  enacted  hy  the  Senate  and  House  of  Eepresentatima  of  the  United  States  of 
America  in  Congress  assembled,  That  the  act  entitled  "  An  act  to  provide  ways  and 
means  to  support  the  Government,"  approved  March  3,  1865,  shall  be  extended  and 
construed  to  authorize  the  Secretary  of  the  Treasury,  at  his  discretion,  to  receive 
any  Treasury  notes  or  other  obligations  issued  under  any  act  of  Congress,  whether 
bearing  interest  or  not,  in  exchange  for  any  description  of  bonds  authorized  by  the 
act  to  which  this  is  an  amendment ;  and  also  to  dispose  of  any  description  of  bonds 
authorized  by  said  act,  either  in  the  United  States  or  elsewhere,  to  such  an  amount, 
in  such  manner,  and  at  such  rates  as  he  may  think  advisable,  for  lawful  money  of 
the  United  States,  or  for  any  Treasury  notes,  certificates  of  indebtedness,  or  certifi- 
cates of  deposit,  or  other  representatives  of  value,  which  have  been  or  which  may 
be  issued  under  any  act  of  Congress,  the  proceeds  thereof  to  be  used  only  for  retir- 
ing Treasury  notes  or  other  obligations  issued  under  any  act  of  Congress;  but  no- 
thing herein  contained  shall  be  construed  to  authorize  any  increase  of  the  public  debt : 
Provided,  That  of  United  States  notes  not  more  than  $10,000,000  may  be  retired 
and  canceled  within  six  months  from  the  passage  of  this  act,  and  thereafter  not 
more  than  $4,000,000  in  any  one  month:  And  provided  further.  That  the  act  to 
which  this  is  an  amendment  shall  continue  in  full  force  in  all  its  provisions,  except 
as  modified  by  this  act. 

Seo.  2.  And  be  it  further  enacted,  That  the  Secretary  of  the  Treasury  shall  re- 
port to  Congress  at  the  commencement  of  the  next  session  the  amount  of  ex- 
changes made  or  money  borrowed  under  this  act,  and  of  whom,  and  on  what  terms; 
and  also  the  amount  and  character  of  indebtedness  retired  under  this  act  and  the 
act  to  which  this  is  an  amendment,  with  a  detailed  statement  of  the  expense  of 
making  such  loans  and  exchanges. 

Under  the  enormous  powers  conferred  by  this  act  the  Secretary  of 
the  Treasury,  Mr.  McCulloch,  adopted  what  is  called  the  contraction 
policy ;  that  is,  he  authorized  the  funding  of  all  forms  of  interest- 
bearing  securities  into  six  per  cent,  gold  bonds  of  the  United  States, 


THE  CUKRENCY  AND  SPECIE  PAYMENTS.  419 

while  he  proposed  to  raise  the  greenback  up  to  par  in  gold  by  con- 
tracting it  by  gradual  stages  limited  by  the  law.  This  act,  and  the  very 
first  thing  done  under  it,  se23arated  forever  the  gold  bonds  of  the 
United  States  from  the  legal  tenders,  and  abandoned  all  idea  of  the 
power,  the  right,  and  the  practice  to  convert  the  greenback  into  a  bond. 
I  remember  that  the  honorable  Senator  from  Michigan  [Mr.  Chandler] 
and  I  tried  hard  to  prevent  the  passage  of  this  law,  and  to  attract  pub- 
lic attention  to  it,  but  we  could  not.  Everybody  was  then  fighting 
Andrew  Johnson.  And  so,  sir,  the  law  was  passed  after  a  brief  de- 
bate, and  all  this  enormous  power  was  conferred  upon  the  Secretary  of 
the  Treasury.  The  law  did  not  even  stipulate  what  the  bond  to  be  is- 
sued should  be,  whether  it  should  be  a  forty-  or  twenty-year  bond,  or 
whether  it  should  run  five  years.  The  only  limitation  was  that  the 
rate  of  interest  on  the  gold  bond  should  not  be  over  six  per  cent.,  but 
no  duration  as  to  time  was  prescribed.  Under  that  act  the  Secretary 
funded  the  Treasury  notes,  and  all  the  various  forms  of  interest-bearing 
notes,  into  six  per  cent.,  bonds,  swelling  the  amount  of  our  six  per  cent, 
indebtedness  from  about  $700,000,000  to  about  $1,600,000,000.  All 
the  Treasury  notes  payable  in  currency  were  converted  into  six  per 
cent,  gold  bonds,  and  the  money  of  the  people,  the  greenbacks,  were 
left  to  be  canceled  and  retired  under  the  last  clause  of  the  act,  which 
authorized  the  Secretary  to  cancel  $10,000,000  by  a  certain  time,  and 
$4,000,000  in  each  month  afterward.  Thus  the  bond-holder  was  pro- 
vided for,  and  the  note-holder  was  left  without  any  legal  right  except  a 
naked  promise  to  pay  in  the  indefinite  future. 

If  this  act  had  contained  a  simple  provision  restoring  to  the  holder 
of  the  greenback  the  right  to  convert  his  note  into  bonds  there  would 
have  been  no  trouble.  Why  should  it  not  have  been  done  ?  Simply 
because  the  then  Secretary  of  the  Treasury  believed  that  the  only  way 
to  advance  the  greenbacks  was  by  reducing  the  amount  of  them  ;  that 
the  only  way  to  get  back  to  specie  payments  was  by  the  system  of  con- 
traction. If  the  legal-tender  notes  could  have  been  wedded  to  any 
form  of  gold  bond  by  being  made  convertible  into  it,  they  would  have 
been  lifted  by  the  gradual  advance  of  our  public  credit  to  par  in  gold, 
leaving  the  question  of  contraction  to  depend  upon  the  amount  of 
notes  needed  for  currency.  Sir,  it  was  the  separation  of  our  greenbacks 
from  the  funding  system  that  created  the  difficulty  we  have  upon  our 
hands  to-day ;  and  I  say  now  that,  in  my  judgment,  the  only  true  way 
to  approach  specie  payments  is  to  restore  this  principle,  and  give  to  the 
holder  of  the  greenback,  who  is  your  creditor,  the  same  right  that  you 
give  to  any  other  creditor.  If  he  has  a  note  which  you  promised  to 
pay  and  can  not,  and  he  desires  to  secure  interest  on  that  note  by  sur- 
rendering it  for  an  interest-bearing  security,  why  should  you  not  give 
him  the  privilege  ?  'No  man  can  answer  that.  It  is  just  as  much  a 
debt  as  any  other  portion  of  the  debt  of  the  United  States. 

I  have  always  insisted  that  it  was  the  duty  of  the  Government  to 
redeem  this  broken  promise  by  making  the  note  equal  to  par  in  gold 
before  attempting  to  force  it  on  anybody  in  payment  of  a  bond.  We 
have  no  right  to  compel  any  holder  of  a  bond  to  take  a  greenback  in 
payment  of  his  bond  until  we  comply  with  that  obligation  which  we 


420  SPEECHES  AND   EEPORTS   OF  JOHN  SHERMAN. 

assumed,  long,  long  ago,  to  make  it  equal  to  par  in  gold.  Then  it  would 
be  a  matter  of  indifference  whether  a  greenback  or  gold  was  jDaid.  But, 
sir,  it  was  the  act  of  March  18,  1869,  that  settled  all  this  controversy 
about  the  obligation  of  the  Government  to  the  holders  of  the  greenback 
and  the  bond. 

By  the  act  of  1866  $10,000,000  of  greenbacks  were  to  be  retired  in 
six  months  and  canceled,  and  $4,000,000  every  month  thereafter.  Such 
progress  was  made  under  the  operation  of  the  act  that  within  less  than 
two  years  $44,000,000  of  these  notes  had  been  retired  and  canceled  in 
pursuance  of  the  contraction  policy. 

The  act  was  then  suspended ;  and  the  Secretary  could  not  cancel 
anymore  notes  after  the  passage  of  the  act  of  1868.  But  I  ask  whether 
that  revives  into  life  and  being  the  $44,000,000  that  were  retired  and 
canceled  under  the  law  ? 

To  the  suspension  act  I  heartily  assented.  I  do  not  doubt  at  all  that 
the  policy  of  getting  to  specie  payments  by  a  contraction  of  the  cur- 
rency in  the  way  proposed  was  a  very  unwise  one.  I  aided  in  the  re- 
peal of  the  act  of  1866.  But  that  is  not  the  point.  When  in  1869  we 
pledged  the  public  faith  to  redeem  our  outstanding  paper  in  coin,  the 
only  amount  that  then  legally  existed,  or  which  there  was  any  authority 
to  issue,  was  the  $356,000,000,  to  which  amount,  by  the  policy  of  the 
law  of  1866,  the  currency  had  been  reduced  when  that  reduction  was 
suspended.  The  argument  I  make  is  that  when  we  made  the  pledge  of 
the  public  faith  to  redeem  our  notes  in  coin,  the  only  currency  that  was 
legally  outstanding  was  the  $356,000,000.  All  above  that  had  been 
retired  and  canceled.  If  there  are  any  words  in  our  language  that  ex- 
press the  destruction,  the  annihilation,  the  non-existence  of  anything, 
the  words  "  retired  and  canceled  "  do.  They  are  the  very  same  words 
that  are  used  in  regard  to  the  cancellation  of  all  our  bonds.  There  have 
been  $3,000,000,000  of  bonds  in  various  forms  "  retired  and  canceled." 
Is  there  any  power  to  reissue  them  ?     ISTone  at  all. 

The  claim  of  the  Secretary  of  the  Treasury  that  he  had  the  power 
to  issue  them  was  submitted  to  Congress,  and  neither  House  of  Con- 
gress negatived  by  a  vote  tlie  assertion  of  the  power ;  and  therefore  it 
may  be  said  with  great  propriety,  and  I  freely  accord,  that  under  the 
circumstances,  following  the  decision  of  the  Department,  the  present 
Secretary  might  be  justified  in  issuing  them ;  but  the  argument  I  am 
making  to-day  is  not  to  arraign  the  Secretary,  not  to  find  fault  with 
him.  In  the  written  report  made  by  the  Committee  on  Finance  on 
this  subject  we  expressly  relieved  the  Secretary  of  the  Treasury  from 
all  fault  in  the  matter,  and  submitted  the  matter  to  Congress.  I  say 
that  Congress,  by  its  silent  acquiescence,  now  daily  permits  the  viola- 
tion of  the  only  act  that  looked  to  the  advance  of  greenbacks  to  par 
with  gold.  The  Secretary  of  the  Treasury  submitted  to  us  the  claim 
that  he  has  asserted  and  exercised,  and  it  has  never  been  denied  by 
Congress  or  by  either  House  of  Congress,  and  therefore  I  do  not  find 
fault  with  him ;  but  I  say  that  Congress  does  permit  this  act,  which  in 
my  judgment  is  a  violation  of  law  and  an  exercise  of  authority  not 
delegated  to  the  Secretary  of  the  Treasury,  to  go  on,  and  we  are  now 
daily  living  upon  notes  issued  without  authority  of  law. 


THE   CURRENCY  AND   SPECIE  PAYMENTS.  421 

Mr.  President,  I  have  gone  into  this  argument  to  show,  first,  that 
we  are  bound  by  the  obligation  that  we  assumed  on  the  18th  of  March, 
1869,  to  resume  specie  payments,  or  to  do  something  to  advance  our 
notes  to  the  par  of  gold.  I  have  endeavored  to  show  that  such  was  the 
legal  and  established  policy  of  the  Government  when  the  notes  were 
first  issued.  JS^ow,  I  have  only  to  say,  very  briefly,  that  there  are  vari- 
ous modes,  to  none  of  which  do  I  intend  to  commit  myself  until  the 
whole  subject  is  finally  discussed,  by  which  this  can  easily  be  accom- 
plished. There  are  three  modes  that  have  been  proposed  in  debate  in 
the  Senate,  and  a  multitude  come  to  us  from  the  people,  but  I  will 
group  them  into  three  classes. 

There  is,  first,  the  proposition  to  accumulate  gold  in  the  Treasury 
with  a  view  to  the  actual  redemption  of  our  notes  in  coin.  This  is 
supported  by  two  bills  now  before  the  committee ;  one  introduced  by 
the  Senator  from  Yermont  [Mr.  Morrill]  and  the  other  by  the  Senator 
from  New  Jersey  [Mr.  Frelinghuysen].  What  are  the  objections  to 
this  plan  ?  They  seem  to  me  to  be  these :  In  the  first  place,  any  at- 
tempt to  accumulate  large  masses  of  gold  in  the  Treasury,  lying  idle  to 
await  some  future  event  not  fixed  by  act  of  Congress,  would  not  be  a 
wise  use  of  the  public  moneys.  In  the  next  place,  I  entirely  object  to 
conferring  upon  the  Secretary  of  the  Treasury  the  power  of  issuing  one 
hundred  millions  or  any  less  sum  of  6  per  cent,  bonds  with  a  view  of 
buying  gold  to  hoard  in  the  Treasury  to  maintain  resumption.  I  believe 
that  it  is  impossible,  in  the  very  nature  of  things,  to  maintain  the  re- 
sumption of  specie  pa^anents  at  all  times  and  under  all  circumstances ; 
and  if  anything  has  been  established  by  modern  experience,  it  is  that 
all  a  nation  that  issues  paper  money  can  do  is  to  maintain  it  at  a  specie 
standard  in  ordinary  times  ;  but  in  times  of  panic,  such  as  by  periodical 
revulsions  come  over  every  comitry,  specie  payments  cannot  be  main- 
tained. They  can  scarcely  be  maintained  in  England,  and  are  not  now 
maintained  in  France,  although  they  are  approached.  Therefore,  every 
plan  for  specie  payments  ought  to  have  some  provision  for  the  tempo- 
rary suspension  of  such  payments,  or  to  provide  some  means  by  which 
in  times  of  great  panic  and  financial  distress  there  may  be  a  temporary 
departure  from  the  specie  standard.  I  say  this,  not  that  it  ought  to  be 
so,  but  simply  because  it  is  a  matter  of  experience  demonstrated  by  the 
history  of  almost  all  the  commercial  nations  of  Europe. 

The  second  plan  is  the  actual  payment  and  cancellation  of  the 
United  States  notes  ;  in  other  words,  the  plan  of  contraction.  In  the 
first  place,  this  plan,  while  it  operates,  does  so  with  such  severity  as,  in 
a  popular  government  like  ours,  to  cause  its  suspension  and  repeal. 
Undoubted!}^,  the  most  certain  way  to  reach  specie  payments  is  by  re- 
tiring the  notes  that  are  dishonored,  paying  them  off  and  taking  them 
out  of  circulation.  But  the  trouble  is,  the  process  of  contraction  is 
itself  so  severe  upon  the  ordinary  current  business  of  the  country  that 
the  people  will  not  stand  it ;  and  in  this  country  the  people  rule.  The 
policy  of  Mr.  McCulloch,  already  commented  upon,  if  it  had  been  con- 
tinued further,  would  have  undoubtedly  brought  us  to  a  specie  standard  ; 
but  with  great  distress,  great  impoverishment,  and  with  more  difficulty 
than  was  really  necessary  to  accomplish  the  object. 


422  SPEECHES  AND  EEPORTS   OF  JOHN  SHEPvMAN. 

These  are  the  difficulties  that  occur  to  me  as  against  these  two 
pohcies. 

There  is  a  third  plan.  This  plan,  which  in  my  judgment  presents 
the  easiest  and  best  mode  of  attaining  specie  payments,  is  to  choose 
some  bond  of  the  United  States  which  in  ordinary  times,  by  current 
quotations,  is  shown  to  be  worth  par  in  gold  in  the  money  markets  of 
the  world,  where  specie  is  alone  the  standard  of  value,  and  authorize 
the  conversion  of  notes  into  it. 

I  do  not  intend  to  consume  much  time  in  the  discussion  of  these 
different  plans,  because  they  are  all  open  for  debate,  and  I  do  not  intend 
to  commit  myself.  I  have  no  pride  of  opinion  as  to  modes  if  I  can 
secure  the  substance.  I  want  to  get  at  some  measure  which,  without 
contraction,  without  undue  distress,  will  make  us  redeem  our  promise. 
This  mode  of  reaching  the  specie  standard  was  reported  favorably  by 
the  Committee  on  Finance  at  the  last  session.  I  will  glance  at  the  re- 
sults that  would  have  been  accomphshed  by  that  plan  in  the  present 
condition  of  our  money  market,  I  am  speaking  here  now,  on  the  16th 
day  of  January,  1874,  after  the  time  when,  by  the  bill  reported  at  the 
last  session.  United  States  notes  would  have  been  converted  into  coin 
or  bonds  at  the  oj^tion  of  the  United  States.  This  would  not  to-day 
have  produced  absolute  payment  of  the  notes  in  coin,  but  their  value 
would  have  advanced  to  the  value  of  the  5  per  cent.  bond.  Things 
equal  to  the  same  are  equal  to  each  other.  Five  per  cent,  gold  bonds 
this  day,  in  the  midst  of  the  panic,  are  worth  ninety-nine  and  a  half 
cents ;  so  that  the  United  States  notes  would  be  this  day  practically  at 
par  in  gold,  having  just  al)out  the  same  depreciation  as  now  exists  in 
France,  where  the  law  of  convertibility  has  always  been  maintained. 
In  France,  with  a  large  circulation,  the  currency  may  be  used  the  same 
as  gold  to  pay  for  any  form  of  debt  of  or  to  the  Government,  even  when 
in  the  form  of  duties. 

I  have  no  doubt  that  it  would  greatly  advance  our  greenbacks  if 
they  were  allowed  to  be  received  at  the  custom-house  for  duties.  But 
by  the  act  of  the  25th  of  February,  1862,  which  authorized  the  issue 
of  both  bonds  and  greenbacks,  it  was  expressly  stipulated  that  the 
greenbacks  should  not  be  receivable  for  customs  duties,  but  that  the 
customs  duties  should  be  paid  in  coin,  and  that  the  coin  should  be  spe- 
cially j^ledged  and  set  apart  as  a  fund  fii*st  to  pay  the  interest,  and  then 
the  principal,  of  the  debt.  There  is  the  difficulty.  If  we  were  now 
to  legislate  without  any  law  upon  the  statute-book,  I  certainly  should 
not  pass  an  act  that  would  require  us  to  refuse  the  notes  of  the  United 
States  for  the  taxes  payable  to  the  United  States  ;  but  we  are  crippled 
by  the  operation  of  a  law  which  we  cannot  repeal  without  violating  the 
public  faith, 

IS'ow,  sir,  taking  the  case  again  of  the  existence  of  some  convert- 
ible provisions  such  as  that  I  referred  to  in  the  bill  of  last  year,  at 
this  day  the  notes,  instead  of  being  hoarded,  would  to  some  extent 
have  floated  into  the  Ti-easury  for  five  per  cent,  bonds ;  they  would  be 
paid  out  for  current  expenses,  and  in  the  purchase  or  redemption  of 
five-twenties  at  a  discount  of  one  half  of  one  per  cent.  It  is  some- 
times said  that  these  notes  would  flow  in  unmeasured  amounts  for  five 


THE   CURRENCY  AND  SPECIE  PAYMENTS.  423 

per  cent,  bonds.  Why,  sir,  how  many  would  be  withdrawn  from  the 
vohime  of  the  currency  before  they  would  be  equal  to  the  five  per 
cent,  bonds  now  at  or  near  par  in  gold  ?  But  suppose  they  should 
fiow  in  to  the  extent  of  fifty  or  one  hundred  millions,  can  not  the  Gov- 
ernment of  the  United  States  use  them  ?  First,  we  have  to  j^ay  our 
current  expenses,  which  are  now  more  than  our  income.  Instead  of 
consuming  the  forty-four  million  reserve,  we  could  use  to  pay  the 
cuiTent  expenses  some  of  the  notes  which  would  come  into  the  Treas- 
ury for  bonds ;  and  we  could  use  all  of  them  in  the  purchase  and  re- 
demption of  the  six  per  cent,  bonds  of  the  United  States.  There 
would  be  no  practical  difiiculty  in  using  all  the  currency  that  might 
flow  into  the  Treasury  in  the  payment  and  liquidation  at  a  slight  sac- 
rifice of  a  debt  now  bearing  six  per  cent,  interest.  That  operation 
might  go  on  until  $1,200,000,000  were  paid,  because  every  dollar  of 
the  five-twenty  bonds  is  now  due  and  j^ayable  at  our  pleasure  in  coin. 

Sir,  the  Secretary  of  the  Treasury  has  for  years  pursued  the  policy 
of  buying  bonds  in  greenbacks.  He  has  paid  ten  j)er  cent,  premium, 
because  he  could  not  get  them  for  less.  And  suppose  our  notes  were 
advanced  near  the  par  of  gold  by  being  made  convertible  into  a  five 
per  cent,  bond,  the  value  of  which  is  fixed  in  foreign  countries,  he 
might  then  use  the  greenbacks  that  would  fiow  into  the  Treasury  to 
jDay  the  six  per  cent,  bonds,  by  paying  the  difference  between  notes 
and  gold.  What  premium  would  he  have  to  pay  ?  One  half  of  one 
per  cent.  This  operation  of  funding  the  six  per  cent,  bonds  into  the 
new  five  per  cents  is  going  on  now  at  an  expense  of  nearly  two  per 
cent,  to  the  Government.  First  the  law  allows  one  half  per  cent, 
for  expenses,  and  then  a  certain  credit  or  delay  in  payment  is  given 
to  the  syndicate  of  bankers  who  negotiate  the  exchange.  This  is 
equivalent  to  one  and  one  half  per  cent.,  so  that  we  are  now  carrying  on 
this  funding  system  at  an  expense  of  at  least  two  per  cent.  Sir,  the 
practical  operation  of  a  law  permitting  the  conversion  of  notes  into 
bonds  would  not  only  advance  our  notes  to  near  par  in  gold,  but  would 
enable  us  to  reduce  the  interest  on  the  whole  mass  of  six  per  cent, 
bonds  of  the  United  States  to  five  per  cent.,  thus  saving  $12,000,000 
per  annum,  or  several  times  the  amount  of  interest  we  would  pay  on 
the  bonds  given  for  notes  permanently  retired. 

iJ^ow,  sir,  I  will  not  go  into  the  details  of  the  other  provisions  of 
that  bill,  which  was  intended  to  supply  any  want  of  cm-rency  felt  at 
the  time.  That  bill  provided  for  free  banking,  and  for  a  relief  from 
the  reserve  required  to  be  maintained  by  the  banks  as  a  security  for 
their  notes.  Sir,  if  you  take  the  actual  facts  as  they  have  now  devel- 
oped themselves  and  apj^ly  the  principles  contained  in  the  bill  of  the 
last  session,  it  would  have  answered  by  its  actual  workings  all  the  ob- 
jections that  were  made  to  it,  and  I  defy  Senators  to  criticise  it.  But, 
sir,  the  time  will  come  when  whatever  plan  may  be  brought  before  the 
Senate  will  be  subjected  to  amendment  and  criticism.  We  are  not  now 
considering  any  plan,  but  only  whether  we  recognize  our  ol^ligation 
now  at  this  session  to  do  some  definite  act  to  redeem  our  broken  prom- 
ises.    If  you  will  you  can  find  a  way. 

Mr.  President,  there  are  some  objections  of  a  popular  character 


424  SPEECHES   AND  REPOKTS   OF  JOHN  SHERMAN. 

made  to  specie  payments  wliicli  I  tliiuk  I  ouglit  to  answer.  In  a  popu- 
lar government  like  ours  even  an  unfounded  fear  ouglit  not  to  go  un- 
heeded. Warnings  are  uttered ;  a  great  alarm  is  raised  about  every 
measure  tliat  tends  toward  specie  payments.  Let  us  examine  some  of 
tliese  popular  objections. 

The  first  objection  (and  it  is  the  only  one  well  taken)  is  that  specie 
resumption  will  be  burdensome  to  debtors.  Undoubtedly,  if  you  en- 
large the  standard  in  which  a  man's  debt  is  to  be  paid,  you  add  to  the 
burden  of  that  debt.  We  are  now  dealing  on  a  standard  about  eleven 
per  cent,  below  the  specie  standard ;  and  if,  by  some  sudden  act  of 
Congress,  a  debtor  should  be  required  to  pay  in  a  standard  w^orth  eleven 
per  cent,  more  than  the  present,  it  would  be  burdensome  to  him. 
Therefore,  and  for  this  reason  only,  it  is  necessary  to  make  the  advance 
slowly ;  and  I  for  one  would  not  desire  to  see  any  sudden  resumption, 
because  it  would  be  injurious  to  a  class  of  business  men  who  are  now 
more  or  less  in  debt.  This  injury  is  greatly  exaggerated,  for  almost 
every  debtor  is  a  creditor,  and  therefore  while  he  loses  on  the  one  hand 
he  gains  on  the  other.  Debts  are  now  less  than  they  were  a  short  time 
ago.  The  recent  panic  swept  away  a  great  many  of  them.  Most  of 
those  which  remain  are  being  settled  on  the  present  basis,  so  that  never 
was  there  a  time  when  an  act  looking  to  a  change  of  the  standard  of 
values  could  be  made  better  than  now.  There  are  fewer  contracts  to 
be  settled  upon  the  old  standard.  If  the  time  for  making  this  change 
of  standard  is  j)Ostponed  for  a  short  time,  say  a  year,  all  the  debts  con- 
tracted on  the  present  basis  will  be  settled. 

This  is  not  the  first  time  we  have  changed  the  standard.  We  did 
it  in  1834 ;  and  we  have  changed  the  value  of  our  gold  coin  twice 
within  my  recollection.  We  have  changed  the  value  of  silver  two  or 
three  times.  The  monthly  fluctuations  that  sometimes  occur  in  the 
city  of  New  York  are  greater  than  the  entire  difference  between  our 
paper  money  and  gold  now.  The  people  are  used  to  these.  Sir,  you 
live  in  a  State  whose  chief  production  is  now,  or  was,  wheat.  You 
have  seen  the  price  of  wheat  jump  up  from  fifty  cents  to  a  dollar  a 
bushel,  and  go  down  from  a  dollar  to  fifty  cents  again — a  fluctuation  of 
100  per  cent.  These  fluctuations  are  unavoidable ;  but  any  change 
which  afiiects  the  standard  of  all  values  ought  to  be  made  carefully 
and  slowly.  Here,  Senators,  is  the  only  difficulty  in  this  whole  prob- 
lem. When  we  made  our  notes  a  legal  tender,  when  we  repealed  the 
convertibility  clause,  when  we  took  away  their  value  and  let  them  de- 
preciate to  thirty-five  per  cent.,  we  did  great  injustice  to  creditors. 
We  did  it  because  we  were  compelled  to  do  it.  All  the  Senators 
around  me  admit  that  at  some  time  we  must  come  to  a  specie  standai'd. 
When  can  we  do  it  more  easily,  when  can  we  do  it  better  ?  Will  you 
flood  the  country  with  more  iri'edeemable  paper  money,  sink  again  the 
standard  of  value,  make  the  depreciation  greater  than  it  was  when 
General  Grant  was  elected,  thirty  or  forty  per  cent.,  and  then  resume  ? 
How  foolish !  how  idle !  The  moment  when  we  approach  the  specie 
standard  nearest  by  natural  causes,  that  is  the  happy  moment  to  com- 
plete the  cycle,  to  restore  us  to  the  old  and  true  foundation. 

The  next  objection  is  that  the  United  States  will  have  to  pay  inter- 


THE  CURRENCY  AND  SPECIE  PAYMENTS.  425 

est  on  a  portion  of  its  debt  wliicli  now  bears  no  interest.  I  have  heard 
that  argument  made,  I  think  by  my  friend  from  Indiana.  He  has 
said,  "  You  would  make  us  pay  interest  on  our  greenbacks  ;  they  will 
be  converted  into  interest-bearing  bonds."  Why  should  we  not  jDay 
interest  on  our  debt  that  is  due  ?  Why  should  the  people  of  the  United 
States  have  a  forced  loan  which  they  require  everybody  to  take,  debtor 
and  creditor,  without  interest  ?  Why  should  they  not  pay  interest  on 
it  ?  If  these  notes  are  idle  in  the  hands  of  the  people  and  there  is 
no  0]3portunity  for  investment,  why  should  we  not  pay  interest  while 
the  people  do  not  want  to  use  them  ?  It  is  perfectly  obvious  that  the 
strongest  considerations  of  equity  demand  that  when  anybody  has  our 
note  not  bearing  interest,  and  has  no  immediate  use  for  it,  but  prefers 
to  put  it  on  interest,  we  are  bound  either  to  pay  him,  as  we  agreed  to 
pay  hinij  in  coin,  or  to  give  him  something  that  will  bear  interest,  and 
wiU  be  as  near  as  j^racticable  to  a  specie  standard.  Therefore,  this 
fear  of  increasing  our  interest-paying  debt  does  not  disturb  me.  We 
have  in  the  last  five  years  paid  off  four  hundred  millions  of  bonds, 
and  have  saved  interest  to  the  amount  of  $30,000,000.  'No  one  has 
claimed  that  the  interest  on  the  debt  of  the  United  States  would  be 
increased  by  this  system  more  than  two  or  three  millions.  Why 
should  we  not  do  it  i  Why  should  not  the  people  who  hold  the  green- 
backs have  the  privilege  that  is  extended  to  other  creditors  ? 

A  third  objection  made,  I  think,  by  my  colleague,  who  is  not  now 
in  his  seat  [Mr.  Thurman],  was  that  the  United  States  notes  would  be 
retired  from  circulation  and  give  place  to  bank  notes,  and  he  has  a 
great  prejudice  against  bank  notes.  I  am  not  much  of  a  bank  man 
myself.  I  would  not  care  if  there  were  only  one  form  of  circulation 
in  this  country,  and  that  a  United  States  note  convertible  at  the  plea- 
sure of  the  holder  into  a  proper  bond,  or  into  coin.  But  the  national 
banks  sprang  out  of  the  necessities  of  the  war.  We  could  not  absorb 
the  State  banks  and  get  rid  of  the  horde  of  irresponsible  banks  issuing 
inconvertible  and  irredeemable  paper  all  over  this  country,  except  by 
allowing  them  to  be  organized  into  national  banks.  We  can  not  get  rid 
of  them  now.  That  was  the  only  way  in  which  they  could  be  dealt 
with.  They  disturbed  during  the  war  our  whole  system ;  but  now 
that  the  present  banking  system  is  so  much  better  than  the  old,  the 
currency  so  good,  so  well  secured,  of  such  universal  circulation,  and 
everywhere  at  j^ar  with  greenbacks,  nobody  would  propose  to  go  back 
to  the  old  system. 

Mr.  President,  as  these  banks  are  compelled  to  redeem  their  notes 
in  greenbacks,  as  they  are  bound  to  maintain  in  their  vaults  a  reserve 
of  greenbacks,  and  as  every  prudent  banker  will  maintain  this  reserve 
in  greenbacks,  there  is  no  danger  that  the  United  States  notes  will  be 
driven  from  circulation  to  give  place  to  bank  notes  to  any  considerable 
amount.  The  provision  for  the  redemption  of  United  States  notes  is 
applicable  also  to  national-bank  notes.  If  the  United  States  redeem 
its  notes  in  coin,  the  banks  must  redeem  theirs  in  coin.  If  the  United 
States  notes  are  redeemed  in  United  States  bonds,  the  banks  are  com- 
pelled to  redeem  their  notes  in  the  same  way.  The  very  moment  that 
a  bank  note  fell  below  the  value,  the  purchasing  power,  the  convertible 


426        •      SPEECHES   AND  EEPORTS  OF  JOHN  SHERMAN. 

power  of  the  United  States  note,  it  would  be  returned  first  to  the  bank, 
and  in  case  of  its  faihire  to  pay  then  to  the  Treasury  of  the  United 
States,  and  there,  with  the  bonds  in  the  Treasury  or  with  the  proceeds 
of  them,  the  Treasurer  would  pay  them  dollar  for  dollar.  So  that  the 
same  plan  of  redemption  that  we  now  propose  to  apply  to  United 
States  notes  is  applicable  by  existing  law  to  the  bank  notes  ;  and  hence 
the  theory  that  this  plan  will  drive  out  the  United  States  notes  and 
give  way  to  bank  notes  is  utterly  false.  The  same  obligation  to  redeem 
its  notes  which  now  rests  on  the  United  States  will  then  rest  on  the 
banks ;  and,  as  I  said  a  moment  ago,  you  are  now  dealing  with  insti- 
tutions that  are  amply  able  to  redeem  their  notes.  AVhether  any  of 
them  have  in  the  speculations  of  the  past  impaired  their  capital  or  not, 
is  a  matter  of  perfect  indifference  to  the  people  of  the  United  States 
so  long  as  the  notes  are  secure.  You  can  present  no  plan  of  redemp- 
tion which  the  banks  are  not  able  at  this  moment  promptly  to  comply 
with.  If  your  law  requiring  the  banks  to  redeem  either  in  coin  or  in 
bonds  of  the  United  States  should  take  effect,  every  bank  has  these 
bonds  and  10  per  cent.  over.  Therefore  this  plan  of  redemption  ap- 
plies not  only  to  the  United  States  notes,  but  to  the  banks  under  exist- 
ing law ;  and  it  is  not  necessary  even  to  change  the  law  to  make  it 
more  rigorous  or  direct. 

Sir,  the  last  objection  to  this  plan  is  that  it  will  contract  the  cur- 
rency. That  is  the  image  of  alarm  that  came  to  us  from  the  experi- 
ment— as  I  thought,  the  bad  experiment — of  1866.  My  honorable 
friend  from  Indiana  seemed  to  think  it  was  some  terrible  thing.  The 
people  are  afraid  of  contraction.  I  do  not  want  to  contract  the  cur- 
rency. But  what  is  contraction  ?  Is  it  to  fulfill  an  obligation  to  pay  a 
note  when  it  is  due ;  to  pay  in  coin  when  you  have  promised  to  pay  in 
coin  ?  I  do  not  think  that  is  contraction.  I  honestly  believe  that  if 
there  were  now  agreed  upon  a  23lan  of  redemption  by  which  notes 
could  be  converted  into  coin  or  bonds  at  the  23leasure  of  the  holder, 
and  all  restrictions  upon  the  volume  of  the  circulation  were  repealed, 
the  amount  of  currency  thus  raised  to  par  with  gold  would  be  greater 
than  it  is  at  present,  and  its  purchasing  jDOwer  would  be  11  per  cent, 
more.  The  people,  in  the  Western  States  especially,  have  been  very 
fearful  on  this  point,  although  they  are  now  getting  bravely  over  their 
fears.  Look  at  the  reports  of  their  chambers  of  commerce,  their  boards 
of  trade ;  see  the  intelligent  opinion  that  comes  up  from  the  Western 
States.  The  peoj^le  of  the  West  were  terribly  alarmed  about  contrac- 
tion of  the  currency,  but  they  begin  to  understand  it.  The  laboring 
man  who  is  paid  off  in  a  greenback  begins  to  desire  that  that  green- 
back may  buy  as  much  food  and  clothing  and  produce  as  the  best  dollar 
ever  coined  by  the  mint.  He  begins  to  understand  that  he  receives 
that  for  his  daily  labor  which  will  not  purchase  for  him  the  supplies 
that  gold  would.  The  farmer,  also,  who  sells  his  produce  mostly  to  a 
foreign  market,  finds  that,  under  this  system,  when  he  is  paid  in  green- 
backs, he  has  to  pay  greenback  prices  for  his  purchases,  while  his  com- 
modities are  settled  for  by  the  gold  standard. 

And,  sir,  I  can  here  show  by  the  actual  returns  compiled  by  Mr. 
Young,  of  the  Statistical  Bureau  of  the  Treasury  Department,  that 


THE  CUEEENCY  AND  SPECIE  PAYMENTS.  427 

althougli  tlie  price  of  greenbacks  fluctuates,  as  compared  with  the 
gold  standard,  yet  the  articles  which  the  farmer  sells  depend  almost 
entirely  on  the  gold  price  and  their  price  is  fixed  by  the  gold  standard. 
Wherever  he  sells  his  surplus  products,  the  ruling  price  in  the  foreign 
market  fixes  the  prices  of  his  commodities  here.  The  price  of  the  far- 
mer's produce  is  fixed  by  the  gold  standard,  and  was  during  all  the  war, 
and  is  to-day,  and  will  be  to-morrow.  His  price  is  controlled  by  the 
gold  standard,  while  the  price  of  all  he  buys  is  fixed  by  the  currency 
standard. 

The  people  are  beginning  to  understand  that ;  and  when  they  find 
out  that  ''  contraction,"  with  all  its  terrors,  means  good  money,  convert- 
ible money,  greenbacks  convertible  into  gold,  they  will  sound  hallelu- 
jahs in  favor  of  that  kind  of  money.  They  now  feel  that  the  green- 
back money  is  a  good  money — as  my  friend  from  Indiana  says,  the  best 
money  that  was  ever  devised  by  man.  In  many  of  its  properties  it  is 
good  money ;  it  is  of  universal  circulation,  universal  credit ;  it  has  a 
recognized  value,  determined  daily  by  the  quotations  in  New  York ;  it 
passes  readily  from  hand  to  hand.  It  is  much  better  than  the  money 
of  the  old  system.  There  is  only  one  thing  necessary  to  crown  the 
perfect  work  of  this  money  and  make  it  the  best  in  the  world,  and  that 
is  to  make  it  equal  to  what  it  promises  to  pay.  Then  you  will  have 
good  money,  based  upon  the  public  credit,  a  note  of  the  United  States 
not  dishonored,  whose  purchasing  power  is  as  great  as  the  best  gold  that 
was  ever  coined  by  any  mint,  or  ever  mined  in  Peru,  or  Australia,  or 
America ;  a  money  which  will  enter  the  markets  of  the  world  and  buy- 
its  face  value  in  the  products  of  the  world  ;  a  money  which,  if  convert- 
ible into  coin,  wiU.  travel,  like  the  Bank  of  England  note,  all  around 
the  world,  buying  in  every  mart  and  every  community  the  productions 
of  every  clime.  Sir,  this  is  what  we  aim  at,  this  is  what  we  desire ; 
and  when  the  people  begin  to  understand  this  question,  and  see  that 
this  cry  about  contracting  the  currency  means  nothing  but  an  effort  to 
stave  off  that  which  will  inevitably  come,  which  we  have  promised 
shall  come,  namely,  a  specie  standard,  they  will  then  silence  the  dema- 
gogical clamor  of  the  hour. 

If  a  year  or  two  ago,  before  this  panic,  you  had  convened  your  cham- 
bers of  commerce  and  boards  of  trade  and  representative  business  men 
of  the  country,  and  submitted  to  them  any  proposition  which  looked 
to  the  advancement  of  the  greenback  to  the  standard  of  gold,  they 
would  have  passed  resolutions  without  number  against  it.  But  now 
they  are  all  passing  resolutions  for  it.  Almost  every  one  of  them  is 
opposing  any  increase  of  the  paper  money  of  the  country.  These  doc- 
uments in  favor  of  specie  payments  from  representative  men  could  not 
have  come  here  a  year  ago,  led  off  by  the  great  petition  from  the 
Chamber  of  Commerce  of  Kew  York,  presented  a  month  ago.  Sir, 
the  people  will  soon  reply  to  these  popular  objections. 

We  have  had  a  great  deal  of  talk  here  about  the  amount  of  cur- 
rency we  ought  to  have,  and  Senators  have  computed  how  much  cur- 
rency is  required  for  each  inhabitant,  how  much  for  every  man,  woman, 
and  colored  baby,  how  much  for  every  child,  how  much  for  every 
bushel  of  wheat.    They  figure  it  out  in  some  way  that  France  and  Eng- 


428  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

land  have  more  em'rency  tlian  we,  and  tliat,  as  no  nation  ouglit  to  have 
more  of  a  good  thing  than  the  United  States,  we  shonld  have  all  that 
any  other  country  has !  That  is  the  argument.  They  say,  "  We  want 
more  money."  Well,  in  the  sense  in  which  money  means  capital,  I 
think  we  all  want  more  money.  In  the  sense  in  which  money  is  used 
as  a  mere  medium  of  exchange  to  measure  value,  to  pass  from  hand  to 
hand,  to  facilitate  commercial  transactions,  the  only  test  and  measure 
of  the  amount  necessary  is  the  amount  which  can  be  maintained  at  the 
specie  standard ;  no  other.  You  might  as  well  say  that  a  yard  is  not 
thirty-six  inches  long,  and  economize  by  using  one  thirty  inches  long ; 
what  would  be  the  effect  of  it  ?  It  would  take  more  yards  of  cloth  to 
make  a  coat ;  but  the  coat  would  not  cost  any  less.  The  amount  of 
currency  in  Great  Britain,  in  Bank  of  England  notes,  is  £25,162,000 ; 
in  notes  of  other  banks  of  England,  Ireland,  and  Scotland,  £18,226,000 ; 
making  a  total  of  £43,388,000,  or,  in  dollars,  $216,940,000  of  paper 
money,  as  good  as  gold.  That  is  enough  to  carry  on  all  the  business 
transactions  of  Great  Britain. 

But  my  friend  from  Indiana  says  Great  Britaiu  is  a  small  country 
compared  with  the  United  States  ;  it  does  not  cover  as  many  arid  plains 
and  deserts  as  the  United  States ;  it  has  not  the  area  or  the  population 
of  the  United  States.  Sir,  area  and  population  are  not  the  things  that 
demand  currency ;  it  is  business,  wealth,  production ;  and,  although  I 
wish  it  were  otherwise,  we  can  not,  as  yet,  compare  with  the  wealth  or 
commerce  of  Great  Britain. 

The  Senator  from  Indiana  says  that  $216,940,000  is  only  one  form 
of  money  in  Great  Britain.  So  it  is  ;  but  it  is  the  amount  of  paper 
money  that  it  undertakes  to  maintain  at  par  in  gold.  A  wise  nation 
like  Great  Britain,  with  ample  experience  in  all  iinancial  questions, 
which  have  been  managed  with  great  skill,  and  where  more  time  is 
devoted  to  them  in  Parliament  than  in  Congress  here,  has  decided 
that  it  is  not  wise  ever  to  attempt  to  circulate  more  paper  money  than 
can  at  all  times  be  maintained  at  par  in  gold.  It  prohibits  by  law  the 
issue  of  any  more  paper  money.  ]^o  new  stock  banks  are  organized, 
and  the  Bank  of  England  ■  can  not  issue  one  pound  of  paper  money 
more  tlian  £15,000,000,  the  amount  fixed  by  law  thirty  years  ago,  and 
such  .additional  amount  as  is  covered  by  actual  gold  on  hand.  Every 
dollar  is  secured  by  government  securities  or  gold  on  hand. 

Senators  say  that  the  Bank  of  England  can  issue  in  times  of  panic 
more  than  the  amount  allowed.  It  has  done  so  at  three  exceptional 
periods  of  distress.  But  this  did  not  cause  a  suspension  of  specie  pay- 
ments. When  the  Bank  of  England  note  is  issued  in  excess  of  the 
legal  limit  it  is  done  by  order  of  the  ministry,  at  their  hazard,  just  as 
they  would  do  any  other  unlawful  act  for  the  public  safety.  So  care- 
ful are  they  that  the  amount  is  limited,  say  to  £2,000,000,  or  $10,000,- 
000  ;  securities  are  required,  and  the  profit  of  the  issue  goes  to  the  Gov- 
ernment. The  amount  of  notes  issued  by  the  Bank  of  England  in  excess 
of  the  legal  limit  was  never  more  than  £2,000,000  sterling,  and  in  one 
case  no  notes  were  issued.  The  authority  to  issue  arrested  the  panic. 
The  issue  when  made  was  withdrawn  and  the  old  limit  restored  within 
sixty  days.     We  in  this  country  have  increased  our  paper  money  in 


THE  CURRENCY  AND  SPECIE  PAYMENTS.  429 

five  years  more  than  $80,000,000,  and  tlie  Secretary  of  the  Treasury 
during  and  since  tlie  panic  has  issued  new  paper  money  in  vohime 
fourfold  the  aggregate  of  temj^orary  issues  by  the  Bank  of  England 
since  Peel's  act  of  1844. 

But  the  Senator  from  Indiana  says  Great  Britain  has  coin.  So  it 
has,  and  the  reason  why  it  has  coin  is  that  it  has  a  use  for  it.  So,  if 
we  were  at  the  specie  standard,  coin  made  in  our  own  country  of  the 
gold  mined  here  would  be  kept  here.  It  would  have  some  useful 
emplojanent.  But,  sir,  one  of  the  evil  effects  of  a  depreciated  cur- 
rency is  to  demonetize  coin,  to  drive  it  out,  because  the  poorer  cur- 
rency always  fills  the  channels  of  circulation.  Therefore  it  is  that 
in  the  present  condition  of  our  affairs  we  can  not  keep  in  this  country 
any  considerable  amount  of  gold,  unless  we  hoard  it  in  the  Treasury 
of  the  United  States.  A  private  citizen  has  no  use  for  it.  He  sends 
it  abroad  where  they  recognize  its  value,  and  use  it  in  ordinary  affairs. 
The  gold  of  our  country  is  hoarded  by  the  Treasury  ;  and  so  long  as 
you  have  a  depreciated  currency  one  of  the  inevitable  effects  is  to  ban- 
ish gold  from  the  country,  although  it  is  our  own  production.  We 
banish  the  product  of  our  mines,  the  work  of  our  hands,  because  we 
will  deny  the  fundamental  truth  that  gold  mined  from  the  earth  is 
the  standard  of  value.  We  have  rejected  the  true  god  and  set  up  an 
idol  of  our  own  ;  and  thus  what  we  ourselves  produce  is  driven  from 
our  country.  So  it  is  with  France.  I  have  already  given  the  amount 
of  paper  circulation  there.  The  issues  of  the  Bank  of  France  were 
2,606,377,000  francs,  or  $521,275,000  ;  and  this  is  practically  main- 
tained at  par  in  gold,  as  the  Senator  from  Michigan  [Mr.  Ferry]  very 
properly  said. 

Now,  sir,  when  this  cry  is  made  for  more  money,  I  answer,  yes ; 
let  us  have  more  money,  but  let  it  be  more  good  money,  that  will  pur- 
chase what  money  in  any  other  country  will  purchase.  I  want  the 
best ;  and  if  my  friends  here  really  believe  that  France  and  Great 
Britain  have,  counting  their  gold,  a  little  more  currency  per  capita 
than  we  have,  let  me  console  them  by  telling  them  that  if  we  come 
back  to  specie  payments  we  shall  have  more  good  money,  paper  and 
coin  together,  than  any  country  in  the  world.  jS^ow,  at  this  moment, 
if  you  take  our  paper  money  and  add  it  to  the  gold  in  this  country, 
you  will  see  that  we  have  more  j^^^  capita  than  any  nation  in  the 
world.  How  much  paper  money  have  we  ?  About  $772,000,000, 
every  dollar  of  which  is  practically  a  legal  tender.  Although  the  bank 
notes  are  not  a  legal  tender  by  law,  yet  we  know  they  are  in  fact.  We 
have  to  receive  them  nolens  volens.  What  other  country  has  this 
amount  ?  France  has  $521,000,000  paper  money.  Great  Britain  has 
$216,900,000  paper  money.  But  they  have  more  gold  than  we.  Why? 
Because  we  banish  it  from  our  country.  Who  would  keep  gold  now  ? 
Would  a  bank  keep  it  \  It  is  more  dangerous  to  keep  than  paper 
money,  because  it  is  heavier  and  more  difficult  to  guard.  Would  a 
merchant  keep  it  ?  Yes,  to  the  extent  that  he  has  to  pay  it  to  the 
Government  for  duties.  The  Government  keeps  it,  and  the  amount 
that  is  owned  by  merchants  is  held  by  the  Government  in  N'ew  York 
on  gold  certificates.     So  the  Government  is  the  custodian  of  all  the 


430  SPEECHES  AND  KEPORTS   OF  JOHN  SHERMAN. 

gold  in  the  country  banished  from  circulation.  Take  the  aggregate  of 
our  currency,  and  we  have  more  paper  money  ]per  capita  than  any 
country  in  Europe  has  of  paper  and  gold.  Let  me  caution  Senators  in 
regard  to  their  estimates  of  gold  in  foreign  countries.  In  France  it 
was  estimated  that  there  was  $700,000,000  of  gold,  and  France  was 
compelled  to  pay  more  than  $400,000,000  of  this  gold  to  Germany  in 
the  settlement  of  their  difficulties. 

The  sum  paid  was  $1,000,000,000 ;  but  this  was  partly  by  credits 
and  partly  in  gold.  The  effect  of  the  German  war  has  been  that  the 
gold  of  France  has  enormously  decreased ;  no  one  can  tell  exactly  how 
much  is  left. 

I  can  show  by  English  writers,  and  even  by  the  declaration  of  the 
Chancellor  of  the  Exchecpier,  that  it  is  utterly  impossible  to  tell  how 
much  gold  there  is  in  England.  There  are  no  returns  that  enable  them 
to  tell.  It  is  kept  by  joint-stock  comjjanies,  by  the  Bank  of  England, 
and  by  private  persons.  A  great  portion  of  the  commerce  of  England 
being  foreign  commerce,  great  masses  of  gold  in  the  coin  of  different 
countries  are  held  by  merchants.  As  to  the  precise  amount,  no  one 
can  tell  what  it  is. 

Add  the  estimated  amount  of  $350,000,000  of  gold  currency  to  the 
amount  of  their  paper  money.  Take  it  as  you  claim  it,  and  what  does 
it  make  ?  Five  hundred  and  sixty-six  million  dollars  to  do  the  business 
of  that  nation  of  thirty-two  millions ;  while  we  have  of  inconvertible 
paper  money  $770,000,000.  Why  therefore  say  that  we  have  less 
money  than  England  ?     Sir,  we  have  vQ.ore  per  capita. 

There  is  also  a  large  part  of  this  country,  the  Pacific  coast,  where 
the  currency  is  gold ;  so  that  that  which  is  merchandise  simply  in  the 
Atlantic  States  is  currency  on  the  Pacific  coast ;  and  in  the  city  of  New 
York  and  other  j)orts  of  the  Atlantic  States  a  large  amount  of  the  busi- 
ness of  merchants  is  transacted  upon  a  gold  basis,  and  in  gold  alone. 

I  have  no  doubt  that  the  money  now  in  circulation  in  this  country 
is  greater  ^96/'  capita  than  in  any  nation  in  Europe. 

It  is  true,  there  is  a  considerable  amount  held  by  the  banks  as 
reserve.  Much  of  that  is,  however,  in  the  form  of  credits  by  deposit 
banks.  But  in  England  the  Bank  of  England  holds,  and  is  compelled 
to  hold,  a  large  portion  of  the  gold  in  England  as  a  reserve.  Every 
bank  has  to  have  a  reserve.  So  with  the  Bank  of  France.  There  is  a 
much  larger  percentage  of  reserve  held  in  the  Bank  of  France  now 
than  is  held  by  the  banks  of  the  United  States.  Their  reserve,  if  I 
remember  aright,  is  about  30  per  cent.,  whereas  our  banks  average  less 
tlian  20  per  cent.,  and  much  of  this  is  in  credits.  The  Bank  of  Eng- 
land reserve  is  greater  than  ours,  and  Bastiat  has  written  a  book  to 
show  that  it  is  too  small. 

As  a  matter  of  course,  if  you  go  into  all  the  details  about  reserve 
you  could  never  get  the  precise  results.  The  truth  is,  there  is  no  mode 
of  testing  how  much  money  is  needed  to  do  the  business  of  a  country 
except  that  amount  which  can  be  maintained  at  par  in  gold.  The 
very  fact  that  our  money  is  depreciated  11  per  cent,  is  as  conclusive 
as  any  sum  in  arithmetic  can  be  that  you  have  more  money  than  can 
be  maintained  at  the  proper  legal  standard.     You  can  not  get  around 


THE   CURRENCY  AND  SPECIE  PAYMENTS.  431 

that.  There  is  but  one  standard,  and  every  addition  to  the  volume  that 
can  not  be  maintained  at  that  standard  furnishes  conchisive  evidence 
that  there  is  too  much  money  of  that  kind  afloat. 

My  own  impression  is  that  a  reduction  in  the  volume  of  greenbacks 
of  10  per  cent.,  the  amount  of  their  depreciation,  would  give  addi- 
tional value  to  the  greenback,  so  that  people  can  use  it  as  gold,  so  that 
it  Avill  be  equivalent  to  gold,  and  then  the  gold  itself  will  become  a 
part  of  the  currency.  It  is  probable  the  full  amount  of  the  present 
issue  of  legal  tenders  can  be  maintained  if  you  will  only  give  it  an 
equal  value  with  gold.  When  you  make  your  paper  money  equal  to 
gold  it  floats  wdth  gold  and  tills  the  channels  of  trade.  In  my  deliber- 
ate judgment,  in  this  country  of  broad  extent,  as  my  friend  says,  of 
varied  population  and  varied  productions,  a  larger  amount  of  currency 
could  be  maintained  at  par  in  gold  than  the  actual  currency  now  in  use. 
I  have  some  statistics  here,  but  I  am  too  weary  to  go  into  them,  which 
show  what  amount  of  currency  we  maintained  at  par  in  gold  before  the 
war,  and  by  a  comparison  of  our  condition  then  and  now  I  could  esti- 
mate what  amount  can  be  maintained.  But,  sir,  the  only  standard,  the 
only  rule,  by  which  we  can  judge  of  the  amount  of  paper  money  is  that 
quantity  which  can  be  maintained  at  par  in  gold.  If  you  declare  ille- 
gal and  invalid  this  standard,  no  man  can  tell  how  much  circulation  is 
needed.  The  only  way  is  to  test  it  by  the  barometer  of  iS^ew  York. 
This  is  as  sure  a  test  as  the  instruments  here  around  the  Senate  Cham- 
ber are  tests  of  the  heat  of  this  room. 

There  is  another  class  of  measures  now  pending  on  which  I  wish  to 
make  a  few  remarks,  and  they  are  the  propositions  to  inflate  the  cur- 
rency still  more.  The  process  of  inflation  is  now  going  on  daily  while 
we  are  debating.  This  surely  ought  to  be  stopped.  This  issue  of  the 
forty-four  millions  ought  to  be  suspended  at  once.  The  payment  of 
this  money  ought  to  be  arrested  and  some  other  provision  made  to  pay 
the  ordinary  expenses  of  the  Government.  The  plan  that  I  suggested 
a  moment  ago  w^ould  do  it,  by  authorizing  the  funding  of  notes  into 
bonds.  But  there  are  other  propositions.  The  Senator  from  Michigan 
proposes  to  issue  $100,000,000  additional  currency,  to  require  the  sys- 
tem of  banks  now  organized  throughout  the  country  to  retire  their  cir- 
culation, and  to  issue  an  amount  of  greenbacks  equal  to  the  whole,  ag- 
gregating $800,000,000,  and  this,  I  suppose,  in  addition  to  the  fractional 
currency  ;  in  other  words,  an  increase  of  currency,  including  the  foi'ty- 
four  million  reserve,  of  about  $100,000,000.  AVill  not  the  immediate 
eficct  of  that  increase  be  to  depreciate  that  which  is  outstanding  ? 

There  is  no  doubt  about  it.  Every  addition  to  the  currency  does  it. 
If  I  wanted  to  teach  my  friend  this  plain  lesson  in  political  economy  I 
should  have  to  read  to  him  from  the  school-books  used  in  every  col- 
lege, down  to  the  last  work  on  political  economy.  It  is  an  axiom  of 
political  economy,  which  lies  at  its  very  groundwork  and  foundation, 
and  is  repeated  by  every  author  that  ever  wrote  upon  the  subject.  It 
is  as  necessary  a  consequence  as  that  water  will  seek  its  own  level. 
Any  increase  of  paper  currency  tends  to  impair  its  value  when  it  is 
once  depreciated. 

After  the  passage  of  the  act  authorizing  this  increase,  the  price  of 


432  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

gold  steadily  advanced  and  again  commenced  to  decline.  As  a  matter 
of  course,  if  we  could  once  fix  the  amount,  we  could  no  doubt  come  to 
it  in  time  ;  but  what  assurance  have  we  that,  after  you  have  issued 
your  $100,000,000,  and  gold  goes  up  to  133,  as  it  will,  and  then  after 
the  power  of  inflation  has  exhausted  itself  gold  commences  to  go  down, 
my  honorable  friend  from  Michigan,  or  some  successor  of  his,  will  not 
come  here  and  demand  another  inflation,  and  then  say  that  the  inflation 
will  not,  at  the  end  of  four  years,  increase  the  price  of  gold  ? 

There  is  no  mode  of  accounting  for  the  fact  that  the  value  of  our 
greenback  has  not  advanced  one  single  step  for  four  years,  except  that 
you  have  increased  the  volume  of  paper  and  have  taken  no  steps  what- 
ever to  advance  its  value.  As  a  matter  of  course,  if  you  would  main- 
tain the  amount  of  paper  money  at  a  certain  rate  for  one  hundred 
years  till  our  country  should  contain  three  hundred  millions  of  people, 
it  would  all  be  as  good  as  gold  ;  but  if  the  Senate  should  follow  the 
lead  of  my  honorable  friend  and  dilute  the  currency  by  putting  water 
into  the  elements  that  now  compose  it,  it  would  undoubtedly  dej^reciate. 

Senators,  we  have  now  arrived  at  a  stage  of  our  history  where,  if 
we  will  obey  the  law  and  keep  the  public  faith,  we  shall  surely  come 
to  that  safety  and  prosperity  which  rest  upon  the  universal  standard  of 
value — when  industry  will  be  rewarded,  and  not  cheated  by  the  depre- 
ciation of  paper  money.  If,  on  the  other  hand,  you  will  enter  again 
into  a  de]3reciation  of  your  paper  money,  adopting  the  cry  of  expansion, 
"  more  money,"  you  will  surely  travel  a  road  that  many  nations  have 
traveled  before,  and  which  leads  to  bankruptcy  and  repudiation. 

The  Senator  from  Indiana  says  that  the  issue  of  j^aper  money  under 
the  law  of  1870,  which  conferred  the  authority  to  charter  new  banks, 
was  not  expansion,  because  by  the  same  law  the  three  per  cents  were 
retired.  He  construes,  therefore,  the  law  of  1870  as  not  inflating  the 
currency  at  all.  My  friend  from  Michigan,  I  understand,  regards  it  as 
expansion  to  the  full  amount  of  notes  issued.  I  hope  they  will  settle 
it  between  them. 

There  is  another  view  I  wish  to  take  of  this  plan  of  expansion.  If 
you  issue  the  proposed  three  sixty-five  convertible  bonds,  what  will 
they  be  worth  ?  I  see  here  some  'New  York  bankers.  They  have 
computed  the  value  of  these  bonds  before  they  are  issued.  A  five  per 
cent,  bond  is  now  practically  at  par  in  gold.  If  a  five  per  cent,  bond  is 
at  par  in  gold,  what  will  a  three  sixty-five  gold  bond  be  worth  ?  Sen- 
ators can  answer  that  very  quickly,  because  there  is  a  reduction  in  value 
of  one  third  to  start  with.  If  a  five  per  cent,  gold  bond  is  only  worth 
par,  a  three  sixty-five  gold  bond  would  be  worth  only  two  thirds  of 
par.  Then,  if  a  three  sixty-five  gold  bond  is  worth  sixty-six  cents  on 
the  dollar,  what  will  a  three  sixty-five  convertible  paper  bond  be  worth  ? 
That  query  will  be  put  to  every  broker  and  banker  in  New  York  the 
very  moment  you  authorize  such  a  bond  to  be  issued.  They  will 
measure  your  device  by  the  gold  standard  before  you  issue  it.  They 
will  quote  a  bond  convertible  and  reconvertible  into  irredeemable  j)aper 
money  at  its  value  in  gold. 

But  there  is  one  other  reason  Avhy  all  these  schemes  for  more  paper 
money  ought  not  even  to  be  debated  here.     An  increase  of  i^aper 


THE  CURKENCY  AND  SPECIE  PATMEN-TS.  433 

money  beyond  four  Inmdred  millions  would  be  a  clear  and  palpable 
violation  of  the  public  faith.  In  the  darkest  hours  of  the  war,  when 
every  patriot  trembled,  when  our  fate  hung  in  the  balance,  when  our 
armies  were  before  Kichmond  and  on  the  march  through  Georgia  to 
the  sea,  when  everybody  felt  that  the  danger  of  inconvertible  paper 
money  was  likely  to  strike  us  from  the  hst  of  nations,  when  our  paper 
money  then  outstanding  had  fallen  so  that  it  took  82.80  to  buy  one 
dollar  in  gold,  then  it  was  that  we  entered  into  a  stipulation  with  the 
pubhc  creditor,  which  is  a  part  of  the  act  of  1864,  under  which  we 
borrowed  money  and  pledged  the  public  faith.  It  was  a  solemn 
promise  that  under  no  circumstances  would  we  issue  more  than  four 
hundred  millions  of  paper  money,  and  an  additional  reserve  of  hf ty 
million  dollars,  pledged  to  pay  a  debt  then  existing,  and  which  has 
since  been  paid. 

It  is  suggested  that  this  pledge  was  made  under  duress.  No,  Mr. 
President  f  the  United  States  was  never  under  duress  except  from  the 
rebellion  in  the  Southern  States.  Then  we  gave  our  sacred  pledge  tothe 
men  who  helped  us,  to  the  men  who  loaned  us  money,  to  the  capitalists, 
to  the  laborers,  to  the  servants,  to  the  women,  to  the  children ;  yea. 
Senators,  in  every  part  of  this  broad  land,  in  every  county  and  every 
town,  in  every  village  and  every  hamlet,  men,  women,  and  children 
poured  their  little  earnings  into  the  stream  that  flowed  into  the  National 
Treasury  in  the  summer  of  1864;  and  every  dollar  of  the  loan  then 
made  was  made  upon  the  faith  of  the  sacred  obligation  of  the  United 
States  that  our  paper  money  should  never  exceed  $400,000,000. 

Sir,  I  tnist  in  God  the  day  never  will  come  when  we  shall  violate 
that  pledge,  until  we  make  those  promises  equal  to  par  in  gold.  I  will 
not  acknowledge,  with  my  friend  from  Ehode  Island,  tliat  we  were 
under  duress.  Certainly  we  were  not  under  duress  from  the  men, 
women,  and  children  who  lent  us  money.  They  gave  us  the  means  by 
which  we  put  down  the  people  who  were  in  arms  against  our  Govern- 
ment, and,  so  help  me  God,  I  never  will  violate  the  faith  pledged  to 
them.  The  act  of  1864  is  known  to  every  Senator.  I  will  not  read  it. 
It  is  as  plain  and  strong  and  clear  as  language  could  make  it. 

But,  sir,  we  are  told  that  to  issue  these  three  sixty-five  bonds  con- 
vertible into  paper  money  will  lower  the  rate  of  interest ;  and  my 
friend  from  Indiana,  with  that  happy  faculty  which  he  has  of  avoiding 
difficulties,  asks  when  you  have  a  great  deal  of  money,  and  issue  more, 
does  not  that  cheapen  it  ?  Is  not  the  right  way  to  cheapen  money  to 
issue  more  of  it  ?  If  you  had  a  great  abundance  of  any  commodity  to 
sell,  would  it  not  be  cheaper?  That  is  the  argument.  Well,  sir,  it  will 
cheapen  money  to  issue  more.  It  wiU  cheapen  money  as  tested  by  the 
gold  standard,  and  brokers  will  tell  you  every  day  how  much  it  cheap- 
ens it.  But  whom  will  it  benefit  to  cheapen  money  ?  It  will  aid  a  man 
to  pay  more  cheaply  a  debt  contracted  upon  a  different  basis,  and  to 
that  extent  will  cheat  the  creditor ;  but  it  will  not  cheapen  supplies, 
provisions,  clothing,  food.  It  may  cheat  the  laboring  man ;  for  the 
laboring  man  may  fhink  it  is  the  same  money.  He  may  take  his  two 
doUars  a  day  just  as  he  did  before ;  but  when  he  goes  to  spend  those 
two  dollars  for  the  food  that  supplies  his  life,  or  for  the  clotliing  that 
28 


434  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

comforts  his  children,  he  will  find  that  somebody  else  than  the  capital- 
ist is  cheated,  and  he  is  the  one.  Every  device  to  relieve  needy  men  in 
distress  or  in  debt,  that  will  depreciate  the  currency,  adds  to  the  daily 
toil  of  the  laboring  men,  and  to  the  cost  of  food  and  clothing.  Why, 
sir,  Mr.  Webster  never  uttered  a  grander  truth  in  his  life  than  that 
famous  passage,  which  I  have  almost  forgotten,  but  the  substance  of 
which  is  that  the  best  way  to  enrich  the  rich  man's  field  by  the  sweat 
of  the  poor  man's  brow  is  by  the  use  of  inconvertible  paper  money. 
No  truth  was  ever  more  forcibly  uttered. 

But  they  tell  us  that  it  will  lessen  the  rate  of  interest.  Let  us  see. 
This  is  a  matter  of  experience.  We  have  had  a  slight  experience  in 
this  country,  and  we  have  had  the  experience  of  other  countries,  and 
the  fact  is  just  the  reverse — the  more  money  is  depreciated  the  higher 
is  the  rate  of  interest.  I  have  some  knowledge' of  this  by  my  own  ex- 
jjerience.  I  remember  the  panics  that  have  occurred  in  this  country 
since  1837.  I  recall  to  the  recollection  of  my  friend  from  Iowa  what 
took  place  in  his  own  State  in  1857.  I  was  in  that  beautiful  State  in 
the  spring  of  that  year.  The  people  were  rich,  abounding  in  riches, 
fanciful  riches ;  money  was  plenty.  One  man  had  made  a  profit  of 
100  per  cent,  on  a  piece  of  land  that  he  had  never  seen  and  had  owned 
but  three  months.  Another  had  laid  out  a  town  and  was  selling  lots  at 
fabulous  prices.  Everybody  was  rich ;  pajjer  money  was  abundant — 
wild-cat  paper  money ;  all  kinds  of  money.  Good  money  was  there, 
too,  gold  as  well  as  paper.  Interest  was  40  per  cent.,  and  many  told 
me  that  they  could  make  money  by  borrowing  at  40  per  cent.  They 
offered  to  give  me  40  per  cent,  for  money  to  buy  land  with  within  five 
miles  of  a  settlement.  Everybody  was  rich ;  interest  was  high ;  times 
were  glorious.  In  August  the  failure  of  the  Ohio  Life  Insurance  and 
Trust  Company  burst  the  bubble.  The  money  that  was  loaned  at  that 
rate  of  interest  was  not  paid,  and  the  men  who  were  engaged  in  these 
visionary  speculations  "  went  up  the  spout,"  to  use  a  common  phrase. 
So  it  was  in  the  panic  of  1837.  Upon  this  point  I  could  read  you  what 
is  said  by  Mr.  Mill  ;  but  that  is  mere  "  platitude  "  ;  it  is  only  the  expe- 
rience of  the  past,  of  men  of  a  different  day  and  generation.  I  could 
read  you  from  many  books.  I  could  read  you  the  story  of  the  South 
Sea  bubble,  when  securities  went  up  and  interest  was  100  per  cent.  So 
in  all  times  which  j)recede  a  financial-  panic,  when  people  think  they  are 
prosperous,  and  that  they  are  making  money  by  marking  up  their  goods, 
interest  is  enormously  high.  Sir,  the  experience  of  mankind  proves 
that  interest  is  higher  under  a  depreciated  paper  money  than  it  is  under 
a  gold  standard.  Is  it  worth  while  to  waste  more  time  to  show  the 
utter  fallacy  of  the  allegation  that  more  money  would  chea^^en  interest  ? 

But  it  is  said  that  the  recent  panic  was  caused  by  the  want  of 
money,  by  the  want  of  more  paper  money.  PajDcr  money  for  what  ? 
To  build  remote  railroads,  to  carry  out  schemes  for  the  future,  to  en- 
gage in  speculative  enterprises.  The  money  of  the  country  and  the 
capital  of  the  country  were  absorbed  in  unproductive  industry.  There- 
fore it  was  that  the  blow  fell  and  destroyed  a  great  many  good  men. 
But  how  is  it  now  ?  Why,  sir,  at  this  moment  money  is  easier  to  be 
had  in  the  city  of  New  York  than  it  has  been  for  years,  by  persons  who 


THE  CUREEXCY  AND  SPECIE  PAYMENTS.  435 

are  engaged  in  ordinary  commercial  business,  where  the  circumstances 
that  surround  them  inspire  confidence  and  credit.  The  same  money 
that  was  in  circulation  before  the  panic  is  in  circulation  now,  and  more. 
Sir,  this  is  not-  a  currency  panic.  It  has  no  connection  with  our  cur- 
rency. Such  panics  have  occurred  in  Great  Britain  and  the  United 
States  in  specie-paying  times.  It  was  simply  caused  by  unproductive 
investments.  The  currency  is  good,  only  lacking  one  quahty  to  make 
it  better.  If  it  were  as  good  as  gold,  it  would  then  be  the  best.  It  is 
well  secured.  ISTor  was  it  a  bank  panic,  I  will  say,  for  the  relief  of  my 
friend  from  Indiana  ;  for  I  am  glad  to  agree  with  him  in  one  or  two 
things.  The  banks  have  stood  the  panic  very  well.  With  the  excep- 
tion of  four  or  five,  the  national  banks  have  not  failed  ;  and  not  one 
has  failed  unless  by  a  clear  violation  of  the  law  of  its  organization. 
N'ot  one  that  has  been  brought  to  my  attention  has  failed  except  by  the 
use  of  the  bank  by  the  owners  in  loans  and  investments  prohibited  by 
the  national-cuiTency  act. 

The  suspension  of  payment  of  deposits  was  tlie  result,  not  the 
cause  of  the  panic.  It  was  justified  by  the  same  circumstances  that 
would  authorize  the  increase  of  the  amount  of  notes  of  the  Bank  of 
England  in  violation  of  law.  The  banks  did  suspend  payments ;  and 
that  only  proved  the  tmth  of  what  I  said  a  while  ago,  that  no  plan  of 
redemption  would  be  wise  and  good  unless  it  has  some  provision  for 
such  panics.  There  must  be  times  when  banks  are  compelled  to  use 
their  reserves  and  all  their  resources,  and  themselves  borrow  instead  of 
lending,  and  provision  sliould  be  made  for  such  times.  The  banks  did 
commit  an  act  of  justifiable  bankruptcy  when  they  refused  to  pay 
their  depositors  ;  but  that  was  temporary — a  bending  before  the  storm. 
They  rapidly  gathered  in  their  resources,  as  the  Bank  of  England 
would  under  like  circumstances,  calling  in  their  loans  and  denying 
loans  to  their  customers,  and  are  now  in  a  stronger  condition  than  ever. 
They  now  have  a  greater  reserve  than  they  had  before  the  panic.  Mr. 
President,  the  condition  of  our  currency  has  no  relation  whatever  to 
the  panic  that  passed  over  the  country. 

At  this  time,  when  nearly  all  debts  have  been  settled ;  when  the 
panic  has  swept  away  many  fortunes ;  when  we  now  have  all  the  money 
that  was  ever  afloat ;  when  confidence  is  restored ;  when  the  price  of 
every  commodity  is  advanced  to  the  price  it  bore  before  the  panic — 
now  is  the  golden  moment  when  we  should  take  a  step  in  the  right  di- 
rection to  make  our  money  equal  to  gold.  I  never  have  charged  the 
panic  upon  the  currency.  Indeed  I  was  the  first  in  the  midst  of  the 
panic  to  declare  that  the  currency  had  no  connection  with  the  panic. 
The  money  was  well  secured  ;  it  was  good,  only  that  it  was  not  so  good 
as  gold.  That  was  the  only  fault  to  be  found  with  it.  Men  hoarded 
it.  That  added  fuel  to  the  fire  and  fed  the  panic.  Its  origin,  like  that 
of  the  panic  of  1866  in  Great  Britain,  was  in  the  absorption  of  capital 
in  unproductive  enterj^rises.  The  want  of  confidence  created  by  the 
failure  of  great  houses  gave  the  first  alarm ;  then  came  tlie  withdrawal 
of  deposits,  the  depletion  and  the  suspension  of  the  banks.  Then  la- 
borers began  to  be  discharged  and  productive  industry  stopj)ed ;  but  in 
a  short  time  the  ordinary  business  of  the  country  was  resumed,  and 


436  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

people  found  that  tliej  were  not  all  ruined.  It  was  the  old,  old  story- 
repeated  periodically,  arising  from  different  causes,  but  having  the  same 
history  and  results.  These  panics  are  but  the  ebb  and  flow  of  great 
enterprises.  They  start  with  reviving  prosperity  ;  they  grow  with  ex- 
panding hope  and  energy ;  they  culminate  with  enterprises  too  great 
for  the  time,  and  the  blind,  unreasoning  fear  that  springs  from  the 
failure  of  these  enterprises  during  the  panic  does  more  harm  and 
causes  more  destruction  of  values  than  the  injury  done  by  failures 
themselves.  'No  action  of  ours  caii  prevent  these  panics.  All  we  can 
do  is  to  improve  the  opportunity  offered  us  to  place  the  public  faith  of 
our  country  on  an  enduring  foundation. 

I  again  appeal  to  the  Senate  to  now  firmly  take  its  stand  against 
any  inflation  of  paper  money  under  any  circumstances,  under  any 
provocation,  or  on  any  plea.  This  alone  will  do  a  great  good  to  the 
country.  But  if  it  will  go  further — if  the  Senate  will  lead  the  way  to 
some  wise  and  practical  measm'e,  looking  to  a  redemption  of  the 
pledged  faith  of  the  United  States,  the  people  we  represent  will  have 
cause  to  be  proud  of  the  political  body  which  they  have  so  long  hon- 
ored. I  believe,  sir,  that  no  act  of  the  Senate  would  so  much  inspire 
confidence,  strengthen  our  business  men  and  revive  our  industry,  as  by 
a  decided  vote  on  these  propositions  to  show  that  our  firm  purpose  is  to 
take  the  road  that  leads  to  specie  payments  and  a  restored  currency. 

Sir,  I  have  been  many  years  here  and  in  the  other  House,  through 
long  and  troublesome  controversies,  during  peace  and  war,  and  I  for 
onedesire  to  see  the  work  of  our  generation  crowned  by  the  greatest 
of  civic  triumphs,  the  fulfillment  of  every  promise,  and  to  behold  the 
nation  free  from  all  dishonor,  its  promises  good,  its  credit  untarnished, 
its  wealth  and  power  increasing  and  expanding. 


FKEE  BANKING— THE  CUKEENCY. 

m  TEE  SENATE,  MA  Y  13,  1874. 

The  bill  to  amend  the  several  acts  providing  a  national  currency  and  to  establish 
free  banking,  and  for  other  purposes,  being  before  the  Senate,  Mr.  Sherman  said  : 

It  is  not  my  purpose,  Mr,  President,  to  open  any  general  financial 
debate  on  this  bill.  Every  topic  embraced  in  the  bill  was  veiy  fully 
discussed  during  the  early  part  of  the  session,  and  I  should  deem  it  a 
violation  of  my  public  duty  to  detain  the  Senate  long  on  this  bill.  I 
shall  confine  myself  to  a  simple,  brief  statement  of  its  terms,  without 
any  attempt  to  discuss  the  various  propositions  contained  in  it. 

The  central  idea  of  this  bill,  or  rather  of  the  substitute  reported 
l)y  the  Committee  on  Finance,  is  to  make  the  business  of  banking 
free  to  all  on  the  terms  and  conditions  and  with  tlie  limitations  and 
restrictions  embraced  in  the  general  popular  phrase  "  free  banking." 
If  tlie  business  of  banking  were  confined  simply  to  contracts  of  loan 
and  exchange,  there  could  be  no  objection  to  free  banking.     The  busi- 


FKEE  BAN^KING— THE  CURRENCY.  437 

ness  would  involve  simply  the  relation  of  debtor  and  creditor,  resting 
entirely  njjon  contract  ancl  confidence,  and  needing  no  franchise,  part- 
nership, or  corporation  except  such  as  is  authorized  by  law  or  would  be 
freely  granted  by  any  State  to  promote  any  business  or  any  enterprise. 
But  the  term  "  banking  "  in  common  parlance  includes  the  power  to 
issue  circulating  notes  to  be  used  as  money.  This  power  is  in  no 
proper  sense  essential  to  the  business  of  banking.  If  I  had  my  way  I 
would  grant  it  to. no  State  corporation  and  to  no  individual, but  confine 
it  solely  to  the  United  States  and  use  it  merely  to  facilitate  domestic 
exchanges,  and  only  to  an  amount  that  at  any  time  could  be  converted 
into  gold  coin  at  the  will  of  the  holder.  Such,  I  believe,  was  the  design 
of  the  framers  of  the  Constitution,  who,  fresh  from  the  disasters  caused 
by  paper  money,  desired  to  cut  up  and  supposed  they  had  cut  up  this 
evil  by  the  roots.  The  prohibition  upon  the  issue  of  bills  of  credit  by 
the  States,  fairly  construed,  prohibits  the  issue  of  paper  money  by  a 
State  or  by  any  corporation  authorized  by  a  State,  while  the  power  of 
the  United  States  to  borrow  money  implies  that  this  power  must  be 
executed  by  a  contract  freely  entered  into  by  two  consenting  parties, 
and  payable  alone  in  gold  and  silver  coin. 

If  we  were  now  in  a  condition  to  deal  with  this  cjuestion  solely 
upon  piinciple,  I  would  gladly  join  in  prohibiting  all  paper  money 
except  such  as  might  be  issued  by  the  United  States  for  coin  values 
and  redeemable  in  coin  only.  But,  sir,  we  must  deal  with  this  ques- 
tion as  practical  men.  We  know  that  during  our  whole  history  paper 
money  has  been  issued  by  corporations,  that  the  business  of  our  people 
has  been  founded  on  it,  that  it  has  proved  a  convenient  agency  in 
developing  om*  resources ;  and  that,  whatever  theory  may  prevail,  in 
practice  some  form  of  paper  money  has  been  and  will  be  used  in  the 
United  States  under  the  authority  either  of  the  United  States  or  of  the 
States.  We  now  have  nearly  two  thousand  banks  authorized  to  issue 
$354,000,000  of  paper  money.  Shall  the  restriction  upon  the  amount 
be  now  repealed  and  banking  be  made  free  to  all  ?  Section  4  of  the 
substitute  contains  a  repeal  by  name  and  description  of  every  clause  in 
the  banking  law  which  limits  the  amount  of  circulating  notes.  The 
fii-st  act  of  1863  and  that  of  1864  limited  the  amount  to  $300,000,000. 
In  18T0  the  limit  was  extended  to  $354,000,000.  This  bill  proposes 
to  repeal  the  restriction  upon  the  amount  of  bank  circulation  that  may 
be  issued,  provided  the  banks  will  comply  with  the  terms  of  the  bank- 
ing law. 

The  first  objection  to  free  banking  without  coin  redemption  is  that 
it  is  a  novelty,  an  experiment,  which,  though  plausible,  will  endanger 
the  whole  system.  Other  systems  of  free  banking  are  based  entirely 
upon  coin  redemption.  There  is  no  system  of  free  banking  in  the 
world  that  I  loiow  of  under  which  the  currency  is  not  redeemable  in 
gold  and  silver  coin.  Consequently,  we  meet  the  objection  at  the  out- 
set, that,  if  we  now  authorize  free  banking  upon  a  currency  basis  with- 
out coin  redemption,  we  shall  be  the  only  nation  in  the  world  that  has 
done  so  to  this  time.  Other  systems  of  free  banking  are  based  upon 
coin  redemption.  For  instance,  in  Kew  York,  which  furnished  the 
first  example  of  free  banking,  every  note  was  redeemable  at  the  counter 


438  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

of  the  bank  and  also  in  the  city  of  Xew  York  in  gold  and  silver  coin. 
The  State  of  Ohio  followed  the  example  of  IS'ew  York  and  established 
a  very  excellent  system  of  what  was  called  free  banking.  The  notes 
were  redeemable  in  coin.  I  am  not  familiar  with  the  principle  that 
prevailed  in  New  England  under  the  Suffolk  Bank  system,  nor  do  I 
know  whether  the  banks  possessed  charters  granted  by  the  States  or 
whether  there  was  any  limit  upon  the  amount  of  their  circulation.  At 
all  events,  if  they  had  a  free-banking  system  it  was  always  on  a  coin 
basis.  So  in  England,  the  Bank  of  England  has  practically  the  f>ower 
to  issue  an  unlimited  amount  of  paper  money  ;  but  after  it  has  issued 
a  certain  amount  authorized  by  its  charter,  every  dollar  of  notes  is 
based  uj)on  coin  or  bullion  in  the  vaults  of  the  bank,  so  that  after  all  a 
Bank  of  England  note  is  nothing  but  a  certificate  of  coin  or  bullion  on 
hand.  I  repeat  that,  while  we  now  propose  free  banking,  it  is  an 
experiment  that  has  not  been  tried  in  other  countries,  but  which  we  are 
willing  to  try  upon  the  terms  and  conditions  proposed  by  this  bill. 

Banks  without  coin  redemption  have  always  been  carefully  limited 
in  the  amount  of  their  issues.  For  instance,  in  France  the  Bank  of 
France  now  has  authority  to  issue  paper  money  without  the  burden  of 
coin  redemption ;  but  the  amount  is  carefully  limited  to  3,200,000,000 
francs.  They  have  never  exceeded  twenty-nine  hundred  and  odd  mil- 
lions, and  are  now  reducing  the  amount ;  and  the  subject  of  reducing 
still  further  the  limit  of  bank  paper  occupies  the  attention  of  the 
Legislative  Assembly  of  France.  So  in  the  United  States,  we  have  au- 
thorized banking  without  coin  redemption ;  but  hitherto  we  have  always 
done  it  upon  a  carefully  hmited  basis.  These  are  the  only  examples  I 
know  of,  in  great  commercial  nations  at  least,  of  banking  without  coin 
redemption,  and  in  these  cases  the  banks  have  been  carefully  limited  in 
the  amount  of  circulation. 

It  has  been  urged  very  often  that  if  we  make  the  redemption  of 
these  notes  certain  by  requiring  absolute  security  to  be  placed  in  the 
hands  of  the  Treasurer  of  the  United  States,  we  can  dispense  with  coin 
redemption.  That  such  a  provision  can  not  be  a  substitute  for  redemp- 
tion is  shown  by  the  simple  fact  that  to-day  every  national  bank  in  the 
United  States  has  securities  in  the  hands  of  the  Treasurer  of  the  United 
States  worth  one  hundred  and  fifteen  dollars  in  gold  for  every  ninety 
dollars  of  notes ;  and  yet  the  very  notes  thus  secured  are  worth  only 
eighty-nine  cents  in  gold.  The  security  of  the  bank  paper  does  not  at 
all  affect  this  question.  The  question  is  whether  it  is  payable  or 
not,  or  whether  a  person  who  holds  it  can  convert  it  into  that  which  is 
superior  in  value,  either  coin  or  its  equivalent.  As  a  matter  of  course, 
if  the  bank  paper  could  be  converted  at  the  will  of  the  holder  into  the 
securities  which  are  now  held  by  the  Government  for  its  payment, 
the  notes  would  at  once  be  worth  par  in  gold.  I  say,  therefore,  that  the 
objection  to  free  banking  which  I  have  thus  named  is  fatal,  unless  there 
is  some  provision  for  coin  redemption  either  now  or  in  the  future  at 
such  time  as  the  people  will  have  reasonable  confidence  that  that  pro- 
vision will  be  observed. 

The  secojid  objection  to  free  banking  is  that  the  business  of  issuing 
paper  money  is  a  Government  franchise ;  that  the  Govermnent  should 


FREE  BANKING-THE   CURRENCY.  439 

have  the  profit  of  it.  In  theory  that  is  true,  but  in  practice  it  is  found 
extremely  inconvenient.  The  power  is  to  stamp  paper  money  and  jjrac- 
tically  to  compel  everybody  in  the  United  States  to  use  it,  because  the 
right  to  refuse  bank  paper  money,  aUhough  it  is  not  a  legal  tender,  is 
practically  of  no  avail.  Every  individual  must  take  it.  It  -would  seem 
that  that  ought  to  be  a  Government  franchise,  and  that  the  Govern- 
ment alone  should  have  the  benefit  of  any  profits  that  are  made  out  of 
it ;  but  in  practice  it  is  found  that  Government  pajDcr  money  can  not 
in  all  respects  supply  the  place  of  bank  paper  money,  and  I  may  very 
briefly  point  out  the  reasons  and  the  difiiculties  in  the  way  before  1  get 
tlirough. 

In  the  first  place  we  have  the  fact  that  these  national  banks  are  in 
existence  throughout  the  United  States  ;  that  any  endeavor  to  withdraw 
their  notes  and  substitute  gi-eenbacks  would  disturb  a  business  so  enor- 
mous that  the  mere  statement  of  the  amount  that  would  be  affected  by 
it  would  deter  any  prudent  man  from  making  the  attempt.  The  nine- 
teen hundred  and  seventy -six  banks  now  in  operation  have  lent  to  the 
]^)eople  of  the  United  States  $9M,220,O00  in  money.  They  have  on 
hand,  to  secure  tlieir  circulation  and  their  deposits,  $388,330,000  of 
bonds.  If,  therefore,  the  Government  of  the  United  States  assumes, 
as  it  has  the  right  to  assume,  the  power  to  issue  all  the  paper  money  in 
this  countiy,  one  of  two  things  must  occur :  either  all  the  bonds  now 
held  as  security  for  the  circulation  will  be  sold  for  money,  thus  depre- 
ciating their  value  and  deranging  our  financial  affairs  ;  or,  what  is  still 
worse,  the  banks  will  be  compelled  to  draw  in  from  the  people  of  the 
United  States  enough  greenbacks  to  replace  the  notes  they  have  out- 
standing and  to  collect  all  their  bills  receivable,  so  that  all  of  the  banks 
under  their  present  organization  would  be  compelled  to  retire  from 
business.  So  that  the  practical  effect  of  any  attempt  to  change  from 
the  national  bank  cuiTency  to  a  paper  money  issued  by  the  Govern- 
ment of  the  United  States  alone  would  be  the  withdrawal  of  loans  to 
the  amount  of  $944,000,000  and  a  sale  of  bonds  to  the  amount  of 
$388,000,000. 

It  is  also  sometimes  comj)lained  that  the  Government  of  the  United 
States  loses  money  by  the  privilege  granted  to  the  banks.  Let  us  look 
at  that  for  a  moment  in  the  light  of  a  few  simple  figures.  The  gains 
to  the  Government  I  will  compute  at  the  largest  sum  at  which  they 
have  ever  been  estimated  by  any  one.  The  circulation  is  now  $354,- 
000,000.  There  is  now  an  actual  currency  reserve  held  under  the  law, 
and  which  is  not  very  materially  diminished — not  merely  a  dejjosit  re- 
serve in  the  banks,  but  a  currency  reserve  for  this  circulation — of  S92,- 
500,000,  making  the  amount  of  bank  paper  in  excess  of  the  greenbacks, 
which  by  law  the  banks  are  compelled  to  hold  and  do  now  actually 
hold  in  theh  vaults,  $261,500,000.  Now,  if  United  States  notes  were 
at  once  to  take  the  place  of  all  the  bank  notes  in  the  country  to  the 
amount  of  $261,500,000,  the  interest  saved  to  the  Government  upon  a 
coin  basis  at  the  rate  of  five  per  cent,  would  be  $13,075,000.  That  is  the 
highest  amount  that  could  be  saved  to  the  Government,  without  count- 
ing the  fact  that  there  is  now  a  depreciation  of  the  paper  money,  and 
consequently  the  interest  now  reahzed  would  not  be  so  high.     But,  on 


440  SPEECHES   AND  REPORTS  OF  JOHN"  SHERMAN. 

the  other  hand,  look  at  the  loss  which  the  Government  would  at  once 
sustain.  The  taxes  now  imposed  on  the  national  banks  by  the  United 
States  and  by  the  State  governments,  all  inuring  to  the  benefit  of  the 
people  of  the  United  States,  produce  $18,000,000,  and  are  increasing 
gradually  with  the  increase  of  taxation  in  this  country.  If  it  may  be 
supposed  that  one  half  of  this  taxation  is  on  the  deposits  of  the  banks 
and  on  the  business  which  they  would  transact  under  any  circumstances, 
the  amount  would  be  reduced  to  $9,000,000.  This  the  Government  of 
the  United  States  and  the  people  of  the  United  States  would  lose  at 
once,  because  the  bonds  held  by  the  banks  are  not  taxable,  and  if  the 
bank  notes  should  be  withdrawn,  of  course  their  bonds  would  not  be 
taxed  and  there  would  be  no  circulation  to  be  taxed.  Under  the  pres- 
ent system  we  tax  the  cu-culation  of  national  banks,  and  we  tax  their 
capital  in  the  form  of  bonds  ;  and  the  amount  of  taxes  thus  levied  upon 
property  which,  if  the  banking  system  were  wiped  out,  would  not  be 
taxable  jper  se  is  probably  about  equal  to  five  per  cent,  on  all  the  circula- 
tion issued  by  the  banks.  The  Comptroller  of  the  Currency,  who  has 
gone  into  the  calculation  very  carefully,  thinks  it  is  more,  but  I  have 
taken  the  lowest  figure  any  one  has  suggested. 

Besides  that,  if  the  Government  should  assume  this  business  of  issu- 
ing notes,  there  would  be  the  cost  of  maintaining  resumption,  because 
I  take  it  that  no  man  would  propose  that  the  Government  should  step 
in  and  issue  United  States  notes  unless  it  should  also  assume  the  burden 
of  redeeming  those  notes  in  some  form  or  other,  either  that  of  bonds  or 
of  coin.  The  time  for  such  a  proposition  has  gone  by,  and  I  have  not 
heard  in  all  this  long  debate  any  Senator  say  that  he  would  be  in  favor 
of  issuing  greenbacks,  actual  promises  to  pay,  and  compelling  the 
people  to  take  them,  without  supplementing  and  supporting  them  by 
some  plan  of  redemption,  either  in  some  form  of  bond — and  a  three 
sixty-five  bond  is  the  lowest  any  one  has  named — or  in  actual 
coin. 

There  is  another  difficulty  in  the  way  of  the  substitution  of  United 
States  notes  for  bank  notes.  United  States  notes  can  be  paid  out  only 
for  Government  dues.  If  a  person  has  a  claim  against  the  United 
States  and  presents  it  to  the  Government,  the  Government  may  pay  it 
in  United  States  notes ;  but  Government  notes  have  not  that  quality  of 
flexibility  which  is  indispensable  to  a  circulating  medium,  because  Gov- 
ernment can  pay  them  out  only  in  payment  of  dues  against  itself.  The 
Government  cannot  lend  money  ;  it  cannot  promote  private  business  ; 
it  cannot  move  the  crops,  nor  do  anything  of  that  kind.  No  man  in 
this  country  is  so  wild  as  to  propose  that  the  Government  of  the  United 
States  should  become  a  banker  and  deal  in  negotiable  bills,  and  make 
loans  and  discounts.  It  is  contrary  to  the  theory  of  our  Government, 
and  would  embark  the  Government  of  the  United  States  in  a  business 
for  which  it  is  ill  adapted.  Indeed,  even  the  thought  of  such  a  thing 
is  totally  inadmissible.  Therefore,  on  a  system  of  United  States  notes 
alone  without  bank  currency,  you  cannot  have  that  quality  of  flexibil- 
ity, that  ebb  and  flow  of  loans  and  discounts,  which  is  necessary  to 
transact  business,  the  payments  sometimes  requiring  more,  sometimes 
less.     That  function  of  a  currency  cannot  be  supplied  by  Government 


FKEE  BANKING— THE  CUKRENCY.  441 

notes.  It  must  be  supplied  by  bank  paper  or  by  private  credit,  or  pri- 
vate capital  employed  either  by  corporations  or  by  individuals. 

Then  there  is  another  thing.  Under  a  system  which  furnishes  only 
one  kind  of  cun-eucy,  and  that  a  currency  of  United  States  notes,  there 
is  no  possibility  of  a  distribution  of  banking  capital.  We  know  the 
great  value  of  the  banking  system  lies  in  the  fact  that  a  bank  is  situated 
in  every  considerable  town  of  the  United  States,  and  that  that  bank 
furnishes  a  center  of  capital  where  money  can  be  borrowed,  lent,  or 
deposited,  where  drafts  can  be  purchased,  and  exchanges  conducted. 
Under  a  system  of  United  States  notes  alone  it  M^ould  be  impossible  to 
distribute  the  benefit  of  those  notes  so  as  to  promote  loans  and  dis- 
counts and  exchanges. 

These  are  objections  which  have  been  stated  over  and  over  again, 
and  I  snm  them  up  here  to  show  that  a  system  of  currency  depending 
upon  United  States  notes  alone,  even  if  it  had  not  other  objections  to 
it,  would  not  be  23racticable  in  this  country ;  and  the  experience  of  the 
country  from  the  first  organization  of  the  Govermnent  to  this  time 
bears  out  the  statement.  So,  while  in  theory  it  would  seem  to  be  best 
that  all  notes  intended  to  circulate  as  money  should  have  the  stamp  of 
the  Government  upon  them  and  that  the  Government  should  derive 
the  profit  from  their  circulation,  yet  I  believe,  after  all,  that  the  mixed 
system  which  we  adopted  under  the  pressure  of  war — a  system  of  notes 
issued  by  the  United  States  practically  redeemable  in  coin  as  the  basis 
of  our  paper  money,  and  then  other  notes  equally  secure,  equally  valu- 
able, provided  by  the  United  States  but  issued  by  banks — furnishes  the 
best  system  of  paper  money  that  has  been  devised  in  the  history  of 
man ;  and  I  think  that  is  the  judgment  of  most  of  the  statesmen  and 
financiers  of  Europe  who  have  given  attention  to  this  matter.  While 
the  Government  may  properly  issue  its  notes  in  the  ordinary  course  of 
its  business  in  payment  of  demands  upon  it,  to  meet  the  exigencies  of 
war,  and  now  since  the  war  is  over  to  meet  the  ordinary  arrangements 
of  peace,  provided  they  are  maintained  at  par  in  coin,  banks  also,  in 
some  form  or  other,  may  issue  paper  money,  and  those  banks  may  be 
wisely  distributed  over  the  whole  country  and  their  notes  may  be  in- 
creased or  diminished  as  the  wants  of  the  community  may  require  ;  and 
that  combination  furnishes  us  as  good  a  system  of  paj)er  money  as  can 
be  devised. 

It  is  frequently  said  that  at  aU  events  banks  would  be  organized  as 
banks  of  exchange  or  deposit,  even  if  the  Government  issued  all  the 
notes.  The  right  to  issue  circulating  notes  is  a  great  inducement  to 
the  organization  of  banks  of  exchange  and  deposit.  There  is  no  agency 
or  convenience  of  our  day  more  useful  for  business  of  every  kind  than 
those  convenient  mediums  of  exchange  and  deposit  called  banks.  They 
are  indispensable  in  manufacturing  communities ;  they  are  convenient 
in  agricultural  communities.  Without  them  commerce  can  not  be  con- 
ducted on  any  large  scale.  Banks  are  necessary,  whether  they  are  con- 
ducted by  private  individuals  or  by  coi-porations.  How  they  shall  be 
governed  is  another  thing.  The  right  of  a  bank  to  issue  bank  notes,  so 
as  to  be  able  under  the  pressure  of  a  demand  for  money  to  increase  its 
power  to  loan,  and  so  to  meet  the  changing  requirements  of  business,  is 


442  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

eminently  beneficial  to  every  community ;  and  therefore  it  is  that  there 
is  a  complaint  in  certain  sections  that  they  have  not  their  share  of  bank- 
ing facilities.  They  want  banks  for  their  convenience,  not  for  the 
money  made  ont  of  them,  because  it  is  shown  clearly  that  very  little 
money  is  made  by  the  circulation  of  bank  notes,  but  because  it  is  con- 
venient and  important  in  the  transaction  of  all  business — farming, 
planting,  manufacturing,  mining — to  have  convenient  mediums  of  ex- 
change "in  the  form  of  banks ;  and  it  is  a  great  aid  and  inducement  to 
the  organization  of  banks  throughout  the  country  that  the  banks  can 
add  to  their  means  the  power  to  issue  their  notes  to  circulate  as  money. 

I  have  compared  these  two  systems,  and  there  are  one  or  two  quali- 
ties in  which  the  two  are  alike.  There  is  no  difference  between  a  bank 
note  and  a  Government  note  in  these  respects :  they  are  alike  j)rinted 
by  the  Government  and  guarded  against  counterfeiting ;  and  that  is  an 
invaluable  advantage.  In  1863,  when  the  national  bank-note  system 
was  first  proposed,  I  presented  to  the  Senate  statistics  showing  the 
amount  of  counterfeiting  and  counterfeit  notes  and  the  number  of 
bank  bills  that  then  existed.  I  showed  that  more  than  one  fifth  of  the 
currency  was  counterfeited  or  suspected  of  being  counterfeited.  I  pro- 
duced, I  remember,  a  large  book  called  a  counterfeit  detector,  and  the 
number  of  counterfeit  notes  that  were  described  in  that  book  was  almost 
as  multitudinous  as  the  sands  of  the  sea.  The  present  system  is  un- 
doubtedly a  great  improvement  on  the  old.  There  is  no  more  danger 
of  counterfeiting  the  bank  note  than  the  United  States  note.  They 
both  rest  upon  the  public  faith.  The  United  States  promises  to  pay 
its  notes  at  the  earliest  day  practicable  in  coin.  The  bank  note  contains 
a  similar  promise  to  pay  in  United  States  notes ;  and  in  addition  to  that, 
being  a  private  corporation,  the  bank  secures  that  promise  by  Govern- 
ment bonds.  So  that  both  rest  u]3on  the  public  faith,  and  neither  can 
be  violated  without  public  dishonor.  The  United  States  notes  and 
bank  notes  are  of  uniform  value  throughout  the  United  States.  United 
States  notes  and  bank  notes  circulate  wherever  our  flag  floats  or  oui' 
jurisdiction  extends,  without  any  doubt  or  question  as  to  their  solvency. 

In  these  three  respects  it  makes  no  difference  to  the  people  whether 
the  currency  is  in  the  form  of  bank  paper  or  of  United  States  notes. 
Whether  it  is  best  to  issue  United  'States  notes  or  bank  notes  depends 
upon  the  convenience  of  the  people,  and  the  argument  in  favor  of  the 
bank  notes  is  that  the  banks  may  be  distributed  throughout  the  coun- 
try so  as  to  do  the  daily  business  of  the  country ;  that  they  furnish  a 
basis  of  taxation  to  support  not  only  the  national,  but  the  State  and 
local  governments  ;  and  that  they  are  convenient  agencies  for  the  trans- 
action of  the  ordinary  business  of  the  people,  while  United  States  notes 
can  not  be  made  in  any  way  as  convenient  agencies  for  that  purpose. 
And  yet,  notwithstanding  ail  this,  I  say  that  in  theory  there  is  no  rea- 
son why  the  Government  of  the  United  States  sliould  not  issue  its 
notes,  provided  only  that  it  maintains  them  at  par  in  coin,  and  makes 
subsidiary  to  this  power  the  power  of  banks  freely  to  issue  their  notos 
upon  terms  and  conditions  exactly  equal  to  all. 

Now,  Mr.  President,  this  is  the  purpose  of  this  bill,  to  make  free 
banking  subject  to  these  conditions.     If  the  United  States  notes  are  to 


FKEE  BANKING— THE  CURRENCY.  US 

continue  irredeemable,  as  a  matter  of  course  there  is  no  reason  why  all 
of  the  notes  should  not  be  issued  by  the  United  States  rather  than  by 
the  United  States  arid  banks  together.  It  is  perfectly  idle,  perfectly 
farcical,  to  require  the  banks  to  dej^osit  bonds  to  secure  the  redem2> 
tion  of  their  notes  to  the  amount  of  one  hundred  and  fifteen  dollars 
in  bonds  for  ninety  dollars  in  notes,  and  yet  at  the  same  time  talk 
about  redemption.  So  long  as  the  United  States  notes  are  irredeem- 
able the  whole  currency  ought  to  be  in  that  form. 

But  I  wish  to  call  the  attention  of  the  Senate  to  the  important  fact 
that  when  the  national-bank  system  was  started,  it  was  declared  by 
every  person  who  voted  for  it  and  by  every  member  who  spoke  in  that 
debate,  which  continued  for  some  three  or  four  weeks,  that  the  na- 
tional-bank notes  were  intended  to  replace  the  greenbacks  at  the  close 
of  the  war.  Under  the  provisions  of  the  law  as  it  stood  in  18G3,  on 
the  day  the  first  banking  act  passed,  the  notes  and  the  bonds  were  con- 
vertible one  into  the  other  and  would  stand  always  uj^on  the  same  level ; 
and  as  the  bonds  should  rise  to  par  in  gold  the  notes  would  necessarily 
rise  to  the  same  level.  The  very  right  that  is  conferred  by  this  bill, 
not  to  take  effect,  however,  until  the  1st  of  January,  1877,  was  con- 
ferred ujDon  the  note-holder.  But  it  was  then  supposed  that  at  the 
close  of  the  war,  as  soon  as  our  bonds  would  sell  at  par  in  gold,  the 
United  States  notes  would  be  at  par  in  gold,  and  that  the  burden  of 
redemption  would  then  fall  upon  the  banks.  I^o  argument  can  be 
made  in  favor  of  the  national  banking  system  unless  the  banks  assume 
the  burden  of  redemption.  If  they  do  not  redeem  their  notes  the 
national  banks  should  fall,  and  I  never  have  stood  up  and  never  will 
stand  up  before  the  people  of  the  United  States  to  insist  upon  giving 
to  the  banks  the  right  to  issue  irredeemable  paj^er  when  the  whole  the- 
ory and  purpose  and  object  of  the  national  banking  system  was  to 
relieve  the  United  States  at  the  close  of  the  war  from  the  necessity  of 
maintaining  actual  coin  redemption.  The  notes,  it  was  supposed, 
would  then  be  converted  into  bonds,  and  the  national  banks  would 
step  in  and  maintain  their  notes  at  par  in  gold,  subject  to  the  most 
rigorous  coin  redemption.  The  acts  of  1863  and  1861:  contained  the 
most  positive  provisions  requiring  redemption  in  coin. 

There  is  another  objection  to  free  banking,  which  I  will  mention 
very  briefly,  that  without  redemption  every  additional  issue  of  notes 
inevitably  depreciates  the  whole  mass.  This,  I  take  it,  is  so  clear  an 
axiom  that  it  is  scarcely  worth  while  to  discuss  it.  In  the  absence  of 
redemption  every  additional  note  added  to  the  volume  of  paper  cur- 
rency will  decrease  its  purchasing  power.  Why  is  a  bank  note  depre- 
ciated ?  Kot  because  it  is  not  well  secured,  not  because  the  ultimate 
payment  is  not  provided  for.  Why  is  a  United  States  note  depreci- 
ated ?  Kot  because  anybody  believes  that  the  United  States  will  not 
pay  it  eventually  in  coin.  They  are  depreciated  simply  because  there 
is  too  much  paper  to  be  maintained  at  par  in  gold.  By  the  judgment 
of  the  world  its  market  value  has  sunk  below  par  in  gold  ;  and  that  is 
the  best  evidence  in  the  world  that  there  is  too  much  of  it  to  be  main- 
tained at  par  in  gold.  Every  addition  to  the  volume  of  it  would 
necessarily  sink  it  lower  and  lower. 


444  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

This,  therefore,  involves  the  question  of  public  faith.  If  we  pro- 
vide for  the  issuing  of  more  paper  money  to  any  extent  without  coun- 
teracting provisions  looking  to  its  redemption,  we  violate  the  pledge  of 
the  public  faith  made  by  the  act  of  March,  1869.  That  act  provides 
that  we  will  redeem  the  United  States  notes  in  coin  "  at  the  earliest 
practicable  period."  Any  one  who  undertakes  to  prove  tliat  you  fulfill 
that  pledge  by  depreciating  the  purchasing  power  of  these  notes  by 
your  o^vn  action,  by  act  of  Congress,  will,  it  seems  to  me,  have  a  very 
difficult  task.  It  is  not  sufficient  to  say  in  reply  to  this  that  we  intend 
always  to  keep  that  promise  in  view,  and  at  some  time  to  make  it  good. 
The  promise  itself  implies  that  we  will  steadily  pursue  a  policy  that 
will  gradually  but  surely  advance  us  to  the  coin  standard.  The  issuing 
of  more  paper  money  without  some  provision  for  redemption  inevi- 
tably depreciates  it,  and  that  just  as  inevitably  violates,  ^ro  tanto,  the 
public  faith  pledged  by  the  United  States. 

I  have  stated  the  objections  to  free  banking,  not  only  as  they  are 
made  by  the  popular  voice,  but  as  they  have  been  made  here  and  prob- 
ably will  be  made  again.  I  know  that  many  Senators  who  now  hear 
me,  and  who  will  probably  vote  with  some  hesitation  for  free  banking, 
feel  afraid  of  it.  They  are  afraid  that  free  banking  may  operate  in- 
juriously and  disastrously ;  that  the  amount  of  paper  money  may  be 
issued  so  rapidly  as  to  affect  the  public  credit  and  endanger  it.  I  admit 
that  there  is  that  danger,  and  we  have  endeavored  in  this  bill  to  guard 
against  it. 

But  there  are  some  advantages  in  free  banking  that  I  must  not 
pass  by,  and  one  is  that  it  repeals  the  monopoly  of  banking.  If  there 
is  anything  in  the  world  that  the  people  of  the  United  States  hate  it  is 
a  monopoly ;  a  right  conferred  upon  one  man  or  corporation  and  not 
upon  another ;  a  right  enjoyed  by  one  community  and  denied  to  an- 
other. It  is  the  Anglo-Saxon  feeling  of  hatred  to  monopoly.  The 
word  "  monopoly  "  is  one  of  the  most  odious  words  in  the  language. 
The  idea  of  free  banking  is  not  only  popular,  but  just.  The  only  rea- 
son why  the  monopoly  was  provided  in  the  beginning  was  because  we 
were  afraid  to  authorize  these  paper  issues  without  some  restriction  as 
to  the  amount,  and  we  could  not  abolish  that  restriction  until  we  had 
changed  the  character  of  these  notes  so  as  to  make  a  uniform  rule  en- 
tirely safe  to  the  people  of  the  United  States.  It  is  a  great  advantage 
to  our  system  of  currency  to  abolish  all  monopolies  and  to  put  all  peo- 
ple upon  the  same  footing. 

By  proper  measures  of  redemption  we  may  avoid  the  danger  of 
depreciation,  and  reacli  specie  payment  at  the  earliest  practicable  pe- 
riod. 

I  know  that  here  I  am  met  with  an  objection  to  free  banking — and 
I  am  speaking  now  of  those  who  voted  with  me,  and  perhaps  I  might 
say  I  have  seen  it  also  in  a  document  from  another  branch  of  the  Gov- 
ernment— that  we  might  safely  postpone  free  banking  until  we  had 
actually  reached  coin  resumption.  In  my  judgment  that  would  not  be 
wise  ;  nor  is  it  necessary.  It  is  only  necessary  to  show  to  the  people 
of  the  United  States,  to  convince  every  man  who  is  engaged  in  the 
business  of  banking,  that  it  is  our  determination  to  redeem  these  notes 


FREE  BANKING— THE  CURRENCY.  445 

in  coin,  and  that  we  have  the  ability  to  redeem  them,  and  then  we 
can  make  banking  free.  When  we  declare,  on  the  one  hand,  that  all 
restrictions  on  banking  are  abolished,  and  on  the  other  that  all  banks 
are  subject  to  certain  conditions  which  will  inevitably  redeem  the 
promise  of  the  United  States  to  pay  its  own  notes,  and  also  enforce 
the  obligation  that  rests  upon  the  banks  to  redeem  their  notes  in  coin 
or  its  equivalent,  I  think  free  banking  is  perfectly  safe  ;  and  when  we 
show  that  we  have  the  ability  and  the  means  on  hand  to  maintain  it, 
that  every  provision  of  our  bill  can  certainly  be  carried  out  without 
doubt  or  danger,  and  that  it  is  within  the  power  of  the  United  States 
to  redeem  in  the  bonds  proposed  by  this  bill,  we  have  met  every  ob- 
jection that  could  be  reasonably  made  to  free  banking  now  in  advance 
of  actual  coin  redemption.  But,  sir,  free  banking  in  advance  of  a 
disposition  or  an  ability  to  redeem  is  simj^ly  a  delusive  promise  and  a 
delusive  hope  ;  and  therefore  it  should  be  accompanied  by  measures 
which  will  certainly  bring  us  up  to  the  gold  standard  according  to  the 
terms  and  stipulations  contained  in  the  bill. 

Xow,  I  wish  very  briefly  to  call  attention  to  the  provisions  for  re- 
demption contained  in  this  bill ;  and  without  some  such  provisions  I  am 
free  to  say  that  I  will  not  vote  for  free  banking,  or  for  any  increase  of 
paper  money.  It  is  of  no  use  for  us  to  discuss  our  fixed  convictions 
on  this  point.  The  purpose  of  the  Committee  on  Finance,  in  the 
preparation  of  this  bill,  has  been  to  go  just  as  far  as  they  dare  go  ac- 
cording to  their  conscientious  conviction  of  public  duty,  to  make  this 
operation  as  easy  as  possible,  and  yet  to  secure  redemption,  and  to  j)ro- 
vide  for  free  banking  and  redemption,  always  keeping  in  view  the 
pledges  of  the  public  faith.  For  one,  in  framing  these  provisions,  I 
have  gone  only  so  far  as  was  absolutely  necessary  in  my  opinion  to 
show  our  ability  and  willingness  to  redeem. 

The  first  feature  which  looks  to  redemption  is  contained  in  section 
5,  which  provides  that  every  banking  association  organized  or  to  be  or- 
ganized shall  deposit  in  the  Treasury  of  the  United  States  a  sum  equal 
to  five  per  cent,  of  the  amount  of  its  circulation,  and  shall  redeem  all 
its  notes  presented  there  for  redemption.  This  is  a  currency  redemp- 
tion, a  redemption  in  greenbacks.  I  have  no  idea  that  this  section  will 
operate  veiy  much  for  a  while,  except  to  bring  in  the  mutilated,  torn, 
defaced,  and  otherwise  injured  notes  to  be  replaced  by  others.  I  can 
not  see  that  in  the  present  condition  of  affairs  there  will  be  any  motive 
for  presenting  these  notes  for  redemption  except  that  of  securing  clean, 
new  paper  money  instead  of  ragged,  mutilated  money,  and  that  is  a 
veiy  proper  one.  Our  bank  paper  money  has  now  become  so  defaced 
and  in  some  sections  so  soiled  and  injured  that  it  is  unfit  to  remain  in 
circulation,  and  this  measure  will  have  a  most  beneficial  effect  in  reno- 
vating it  without  too  great  a  burden  to  the  banks. 

As  a  corresponding  benefit  to  the  banks,  so  as  not  to  make  the  bill 
too  oppressive,  we  have  relieved  them  from  the  necessity  of  maintain- 
ing a  reserve  on  their  circulation.  There  is  no  argument  in  favor  of 
such  a  reserve.  The  circulation  is  amply  secured  by  bonds,  and  there  is 
no  necessity  for  maintaining  a  reserve  of  fifteen  per  cent,  upon  it  when 
in  fact  no  notes  are,  have  been,  or  will  be,  presented  for  redemption.    I 


4:46  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

doubt  very  mucli  whether  one  per  cent,  of  the  notes  of  any  bank  has  been 
presented  to  it  for  redemption  since  its  organization.  In  lieu  of  the  fif- 
teen per  cent,  reserve  on  circulation,  we  require  the  banks  to  maintain 
this  five  per  cent,  in  the  Treasury  of  tlie  United  States  to  provide  for 
actual  and  practical  redemption  and  to  secure  the  ebb  and  flow  of  this 
paper  money. 

In  oi\ler  to  avoid  aU  practical  difficulties  in  the  way,  the  Committee 
on  Finance  took  the  pains  not  only  to  inquire  of  bankers  and  business 
men  throughout  the  country  as  to  the  effect  of  this  section,  but  to  ask 
General  Spinner,  Treasurer  of  the  United  States,  and  Comptroller 
Knox  for  their  opinion,  whether  it  would  be  diflicult,  expensive,  or 
impracticable,  and  we  have  the  hearty  assurance  of  every  one,  bankers, 
citizens,  and  officers  of  the  Government,  that  the  section  could  not  be 
oppressive  to  anybody.  Indeed  General  Spinner  estimated  the  cost  of 
this  process  I  think  at  only  $60,000  ;  but  the  very  highest  estimate  that 
was  put  upon  it  by  any  one  was  one  fifth  of  one  per  cent,  upon  the  amount 
of  notes  that  should  be  redeemed.  If  $100,000,000  should  be  presented 
for  redemption  within  a  year,  and  I  should  hope  that  much  would  be, 
because  there  is  8100,000,000  of  it  that  is  unfit  for  circulation,  it  would 
at  once  be  exchanged  for  the  new  notes,  and  they  would  be  forwarded 
to  the  banks  and  sent  out  among  the  people.  The  whole  cost,  accord- 
ing to  the  highest  estimate,  which  was  one  fifth  of  one  per  cent.,  would 
be  8200,000  a  year,  and  it  is  not  probable  that  more  than  $100,000,000 
could  be  presented  in  any  one  year.  But  whatever  the  cost  may  be, 
the  bill  provides  that  it  shall  be  paid  by  the  banks,  and  be  assessed  in 
proportion  to  the  amount  redeemed.  This  would  be  practical  redemp- 
tion in  greenbacks,  which  we  have  never  had  heretofore. 

The  next  clause  which  looks  to  some  provision  for  redemption  is 
contained  in  section  2,  which  has  been  somewhat  modified  by  the  Com- 
mittee since  the  bill  was  reported.  The  Senator  from  Pennsylvania 
[Mr.  Scott],  who  has  it  in  charge,  will  offer  an  amendment  requiring 
one  fourth  of  the  amount  of  the  gold  paid  to  the  banks  to  be  retained 
by  them  as  a  reserve  in  lieu  of  so  much  currency.  That  has  been  al- 
ready debated,  and  has  received  the  sanction  of  the  Senate,  and  it  is 
also  contained  in  substance  in  the  House  bill.  Indeed  nearly  all  the 
provisions  I  now  refer  to  are  provisions  contained  in  the  House  bill. 
The  Senator  from  Pennsylvania  intends  to  offer  an  amendment,  which 
he  will  explain,  which  meets  my  approval,  and  perhaps  will  meet  that 
of  the  Senate,  providing  a  way  in  which  this  gold  may  be  utilized  tem- 
porarily until  final  resumption  is  attained. 

The  third  provision  which  looks  to  redemption  is  the  eighth  section, 
which  I  regard  as  the  vital  section  of  the  bill  jjroviding  for  the  redemp- 
tion of  these  notes.  It  requires  that  whenever  $1,000,000  of  circulating 
notes  shall  have  been  issued  for  thirty  days  among  the  people,  half  a 
million  dollars  of  United  States  notes  shall  be  retired  and  canceled. 
So  vital  do  I  regard  this  provision  of  the  bill  that  I  certainly  can  not 
vote  for  any  increase  of  paper  money  without  it.  In  order  to  make  a 
fair  and  just  compromise — if  that  word  is  not  out  of  date  and  out  of 
fashion — and  to  show  that  while  we  were  willing  to  extend  to  the  peo- 
ple of  the  United  States  every  facility  in  the  amount  of  paper  money 


FEEE  BAJiTKING— THE   CUERENCY.  447 

without  restriction,  we  adopted  one  half  of  the  bank  notes  to  be  issued 
as  the  measure  of  the  greenbacks  to  be  retired ;  and  here,  Senators,  is 
the  point  which  is  probably  to  determine  the  fate  of  this  bill.  Why 
retire  the  greenbacks  ?  The  people  are  in  love  with  the  greenbacks, 
we  are  told.  The  reason  is  that  they  are  depreciated  below  par  in  coin ; 
and  if  you  pass  this  bill  without  making  any  provision  Avhatever  to  in- 
crease their  value  and  purchasing  power,  you  actually  depreciate  them 
by  adding  to  the  volume  of  paper  money  the  amount  that  would  be 
issued  under  a  system  of  free  banking,  and  you  violate  the  public  faith 
and  the  public  honor,  and  you  turn  your  back  upon  the  pledges  of 
parties  and  of  Congress.  This  is  a  fatal  objection  to  begin  with,  but  it 
is  not  all. 

Every  dollar  of  these  notes  retired  necessarily  adds  value  to  the 
whole  mass.  It  is  the  greenback  that  is  not  redeemed.  It  is  not  the 
bank  paper  that  is  in  the  way.  The  bank  paper  never  was  in  the  way. 
If  it  were  not  for  the  greenbacks  the  banks  could  be  compelled  to  pay 
their  notes  in  coin  to-day ;  and  the  material  to  pay  them  is  on  hand  in 
their  bonds  in  the  Treasury.  By  retiring  the  greenbacks  you  necessa- 
rily add  to  the  value  of  the  whole  mass  of  j^aper,  because  you  retire 
that  which  is  the  cause  of  the  depreciation.  This  is  the  principal  pro- 
vision of  the  bill  that  looks  to  the  maintenance  of  these  notes  at  or  near 
par  in  gold.  This  operation  is  to  go  on  until  the  amount  of  United 
States  notes  is  reduced  to  $300,000,000.  So  far  as  I  am  concerned  I 
would  very  much  like  to  see  that  restriction  of  8300,000,000  repealed, 
and  let  the  process  go  on  to  the  extent  that  bank  notes  may  be  issued. 
But  it  is  a  matter  of  practical  belief,  based  upon  the  opinion  of  many 
experienced  men,  that  if  the  amount  of  greenbacks  were  reduced  to 
three  hundred  millions,  that  amount  could  be  maintained  at  par  in 
gold. 

At  all  events,  the  other  provisions  of  the  bill  will  undoubtedly  in 
the  course  of  two  or  three  years  advance  them  to  par  at  coin.  This 
provision  has  already  been  discussed  so  often  in  the  Senate  that  I  oko 
not  propose  to  comment  further  on  it  now. 

The  fourth  provision  in  this  bill,  looking  toward  redemption,  is  that 
in  the  ninth  section,  which  has  been  debated  here  so  often  that  I  need 
not  enlarge  upon  it.  However,  in  order  to  avoid  any  sudden  or  violent 
change  in  value,  and  to  give  time  for  the  operation  of  this  bill,  the 
Committee  on  Finance  have  postponed  its  operation  until  the  1st  of 
January,  1877.  On  that  day  we  now  promise  to  do  precisely  what  we 
promised  to  do  when  the  greenback  was  issued.  AVe  promise  the  hold- 
ers of  the  greenbacks  that,  if  they  desire  it,  they  may  then  present 
them  to  the  Treasury  of  the  United  States  and  receive  a  five  per  cent, 
bond.  This  section  has  been  somewhat  changed  in  its  phraseology  since 
it  was  reported  before,  but  it  is  in  eiiect  the  same.  It  provides  for  an 
alternative  redemption  either  in  bonds  or  coin,  the  choice  resting  with 
the  Treasury  of  the  United  States  ;  and  there  is  nothing  new  in  it.  All 
that  it  does  is  to  restore  that  feature  and  privilege  given  to  the  green- 
back when  it  was  first  issued,  and  always  maintained  until  the  close  of 
the  war,  when  we  chose  by  our  legislation  to  advance  the  bond  at  the 
expense  of  the  greenback  and  dissolve  the  tie  that  had  always  existed 


44S  SPEECHES  AND   REPORTS   OF  JOHN   SHERMAN. 

between  them.  But  this  is  a  section  familiar  to  the  Senate,  aiul  it  Li 
not  necessary  for  me  ti)  discuss  it. 

TIriv  is  <»ue  provision,  however,  wliich  I  will  take  this  oj)i>ortnnity 
to  explain.  It  i-i  asked,  "  Why  reissue  these  notes  for  current  ex|>ense8; 
will  not  this  nece>sarily  increase  the  puhlic  deht  ? "  Not  at  all.  The 
necessity  of  maintainini^  that  j)rovision  ^rows  out  of  the  fact  that  wo 
now  have  a  deticiency  of  currency  revenue.  Our  currency  revenue  is 
only  about  $l(H»,00i^0()t» ;  our  goKi  revenue  is  nearly  *-J(>o,0<h>,(MM>. 
The  result  is,  that  now  we  are  compelled  to  sell  our  ;;old  in  order  to 
get  currency  to  pay  the  current  exi>enses  of  the  (ioveniment.  If  wo 
were  not  com|K'llcd  to  sell  the  gold  received  from  customs,  we  could 
use  in  redeemiu';  bonds  all  the  surplus  gold,  amounting  to  ;*«'•< »,(M.)0,(.H)<), 
or  more  than  that  ])eriiaps,  as  the  interest  on  the  public  <lebt  is  $1()0,- 
000,0(10,  and  the  sinkiuir  fund  re<|uircs  i?3iS(MM»,<XM).  We  might  nse 
our  excess  of  gold  directly  for  the  payment  of  the  six  per  cent.  l>ond8 
of  the  Tniteil  States  at  par,  without  discount,  with<»ut  commi.ssion,  and 
without  tlie  intervention  of  agent  <»r  syndicate.  All  the  surplus  gold 
that  comes  into  the  Tivasury  might  be  used  directly  and  surely,  each 
month,  in  the  ]>aynjent  of  the  six  ]>er  cent.  bon<Is  of  the  I'nited  States, 
and  to  the  extent  that  currency  flows  into  the  Treasury  for  the  five  per 
cent,  bonds  that  currency  might  Ihj  used  for  the  payment  of  the  current 
expenses,  instead  of  their  being  met  by  the  sale  (tf  gold.  To  the  ex- 
tent that  those  n(.>tes  are  ]>resenti'd  for  redemj)tion,  to  the  full  extent 
that  anybody  claims  thev  will  l)e  presented  for  redemption,  we  can  con- 
vert our  six  ])er  cent,  bonds  into  five  per  cent.  Ixjnds  without  coets, 
commissions,  »)r  exchange. 

r>ut  this  is  only  an  incident  to  thegencr.d  provision  ;  an<l  the  reason 
why  bonds  instead  of  coin  ought  to  be  stipulated  for  is  because  wo 
can  not  now  say  that  we  can  actually  promi.se  beyond  all  doubt  to  pav 
coin  at  the  time  named.  If  Congress  were  willin*^  to  impose  the  requi- 
site taxes  we  might  maintain  a  system  <^f  actual  coin  redemption,  al- 
though I  think  it  wouhl  not  be  desirable  to  do  it.  I  certainly  would 
not  vote  for  actual  coin  redemption  at  any  fixed  j>eriod.  l»ut  instead 
of  promising  coin,  we  can  promise  to  give  what  we  have  the  power  to 
give,  our  bond. 

It  is  said  that  we  lose  interest ;  that  if  a  man  gives  up  a  note  not 
bearing  interest  and  takes  our  note  or  bond  lu-aring  interest,  we  there- 
by lose  interest.  Ought  we  not  to  do  so  i  Why  should  the  Tnited 
States — or  any  bank  or  individual — have  the  power  to  force  its  note 
into  circulation  as  money  when  it  refuses  to  ]>ay  interest  on  it  to  tho.se 
who  desire  interest  on  their  money  i  There  is' no  reason  for  it.  This 
also  fixes  a  time  after  the  next  presidential  election,  so  that  I  hope  that 
will  not  mingle  in  this  contest — the  1st  of  January-,  1ST7,  when  we 
shall  have  reached  practical  coin  redemption. 

Mr.  President,  these  are  the  general  features  of  the  bill,  and  in  my 
judgment,  with  due  deference  to  the  opinions  of  the  Senate,  it  ought 
to  be  taken  as  a  whole.  It  is  manifest  that  here  are  two  provisions,  one 
providing  for  an  increase  of  paper  money,  the  other  providing  for  in- 
creasing its  value ;  one  providinor  for  more  money,  the  other  providing 
for  better  money.    You  can  not^ave  more  money  without  making  pro- 


FREE   BAXKING— THE   CURRENCY.  449 

vision  to  make  that  money  better,  except  by  violating;  tlie  ])iiblic  faith. 
Therefore  I  submit  to  the  Senate  in  all  candor  and  sincerity  tiiat  thev 
outjht  to  take  this  bill  as  a  M'hule,  and  not  tear  it  to  j>ieces  iind  comjK'l 
those  who  are  friendly  to  the  system  of  free  bankin«j^  to  vote  a<,'ainst  it, 
because  there  is  not  coupled  with  tlie  provision  for  free  bankiutr  such  a 
system  of  redemption  as  will  prevent  the  depreciation  of  the  notes.  I 
am  a^iked  whether  the  immediate  effect  of  this  bill  on  the  countrv  will 
be  contraction  or  expansion. 

1  always  avoid  as  far  a.s  I  can  the  use  of  j)hra.ses  which  deceive  and 
mislead.  The  use  of  "contraction,"  and  "expansion,"  and  "inflation," 
and  all  those  words,  does  not  convey  distinctly  anv  meanin*;  which 
oui;ht  to  piide  us  in  the  consideration  of  a  j)ractical  measure  of  Icfjisla- 
tion.  Ihit,  to  come  nearer  to  the  noint.  I  will  say  that  each  section  of 
this  bill  may  have  a  different  tendency.  The  first  section  of  the  bill 
at  once  places  in  circulation  all  the  reserves  now  held  by  the  banks  an 
a  security  for  circulation.  Tliere  is  another  section  of  the  bill  which, 
on  the  other  hand,  by  withdrawiu^T  the  reserves  for  deposits  from  the 
banks  in  New  York  and  re<piirin^'  tliem  t(»  be  maintaiue<l  in  the  vaults 
of  the  respective  bunks,  would  tend,  in  the  first  instance,  to  contract 
the  currency;  that  is,  it  would  transfer  currency  from  a  place  where  it 
is  admitteil  to  be  su|)erabun<!ant  to  re^nons  of  the  country  where  it  is 
(•laimed  to  be  in-ufricieut.  S(»  1  should  have  to  p»  over,  section  by 
Ke<-tioM,  the  whole  bill.  As  a  whole,  jind»»ubtedly  the  elTcct  will  i)e  to 
increase  the  volume  of  paj>er  money,  and  it  can  not  l>e  otherwi.se,  be- 
cause it  hafi  no  effect  to  cancel  a  single  dollar  of  the  paper  now  out- 
stan«lin<^  except  as  twice  as  much  m(»re  is  issued.  Therefore  the  im- 
mediate effect  and  the  effect  of  the  whole  must  necessiirily  be  to  expand 
the  currency,  but  with  such  <jualitications  and  j)rovisions  and  with  such 
pledi^es  for  the  future  as  will  pn-vent  its  depreciation. 

It  is  s;iid  that  the  effect  of  the  clau.se  of  this  bill  which  provides 
for  removing  the  reserve  on  dei>osits  from  New  York  to  the  \N  est  and 
South  would  l>e  to  produce  contraction.  Now,  if  there  is  any  objection 
to  this  proposition  that  has  twice  received  the  vote  of  the  Senate  and 
once  received  the  vote  of  the  House  r>f  Keprcsentatives,  if  there  is 
really  objection  to  the  tninsfer  of  this  reserve  from  the  citv  of  New 
York,  where  it  is  u.sed  simply  for  htock-^mblin;r,  to  the  NVest  and 
South,  I  h<j]>e  some  Senator  will  move  to  strike  out  that  clause. 

The  section  which  rcj)eals  the  reserve  on  circulati(»n  j>assed  the 
Hou.se  of  Hej)re.sentatives.  It  wa,s  intended  for  the  benefit  of  the  banks, 
and  to  relieve  them  from  all  reserves  on  circulation,  and  as  a  substitute 
f<tr  that  fifteen  or  twenty-five  per  cent,  we  rerpdre  them  to  maintain  five 
]H'r  cent,  reserve  in  the  Treasury  of  the  United  States;  so  that  to  this 
extent  both  the  House  bill  and  the  Senate  bill  are  an  expansion  or  un- 
lock iufj  of  the  currency.  But  the  Senator  from  Illinois  Siiys  that  the 
bill  also  contains  another  section  which  tran-fers  the  reserve  on  dejK>sitH 
from  New  Y<»rk  to  the  West  and  South.  If  the  Senator  is  op])osed  to 
that  transfer  he  can  move  to  strike  it  out.  If  he  thinks  that  works 
contraction,  and  he  strikes  at  the  bill  in  that  direction,  he  can  move 
to  strike  it  out,  and  then  I  could  give  the  reasons  why  we  adopted  that 
section. 

20 


450  SPEECHES  AND   REPORTS  OF  JOHN  SHERMAN. 

Under  the  juvsoiit  law  three  fourtli8  of  tliree  fifths  of  the  reserve 
on  d(*i)()sit.s  iiKiv  be  loaned  by  bankers  in  New  Yorlv  to  whoever  will 
borrow  it  on  eall ;  and  that  is  just  what  is  dune.  1  liave  not  ^one  into 
a  close  eoin{)utation,  l)ut  I  will  takt-  the  Senator's  own  e.-tiniate.     Sup- 

fose  the  ciirreney  reserve  on  depc^its  is  ^50,0O(>,O(M»,  as  lie  states,  and 
think  it  is  about  $;5(>,0(»0,<>(H),  or  !?r)r>,000,000.  Three  tifths  of  that 
amount  may  be  put  in  New  York,  and  three  fourths  of  that  three  tifths 
may  be  lent  in  New  V«)rk.  How  {  It  is  lent  out  by  the  banks  of  New 
York  only  to  brokei's.  It  is  not  made  the  basis  of  coiiimeirial  loans  at 
all.  Not  a  siuijle  dollar  of  the  reserves  of  the  country  banks  held  there 
is  lent  for  commercial  purj)oses,  or  f<tr  investment  in  the  West  or 
South  or  anywhere  else.  It  is  lent  for  speculative  stock  operations; 
and  business  men  of  the  highest  character  in  New  York  who  them- 
selves are  presitlents  of  banks  have  ad\  ised  lurainst  it.  They  s;iy  that 
wbile  this  reserve  is  piled  up  in  New  York,  banks  there  will  bid  for  it 
according  to  the  rate  of  interest  to  induce  its  dej)o>it  with  them.  Bein*^ 
a  deposit  on  call,  liable  to  be  called  for  at  any  moment,  the  New  York 
banks  lend  it  on  call  themselves.  I  think  this  provision  of  the  bill  can 
be  defended  without  regard  to  whether  it  intlates  or  contract.s.  liut  if 
there  is  objection  to  havin«;  the  reserve  transferre<l  from  New  York,  let 
ns  relieve  the  i>anks  entirely  from  the  reserve.  If  Senators  really  think 
that  from  Hfteen  to  twenty-Hve  percent,  on  tlej^osits  is  too  much  <»f  a  re- 
serve to  be  maintained  by  national  banks  to  protect  themselves  against 
sudden  demands,  lower  the  reserve,  and  so  make  an  exj)ansion.  I  am 
perfectly  willing  to  leave  the  banks,  with  or  without  reserve,  to  take  their 
chances.  They  will  surely  fail  if  thev  do  not  maintain,  in  an  ordinary 
state  of  affairs,  from  ten  to  twenty-tive  per  cent,  in  re^erve,  whether 
the  law  provides  for  it  or  not.  If  the  reserve  recpiired  is  too  lar^, 
reduce  it,  and  thus  raise  the  question  of  intiation.  liut  this  provision, 
which  the  Senator  from  Illinois  himself  proposed  to  the  Senate,  is  now 
inijeniously  seized  npon  as  an  objection  to  this  bill,  be&mse,  forsooth, 
it  will  cause  tlie  transfer  f»f  the  reserves  fr(»m  New  Y«»rk  to  the  West 
and  South.  What  benefit  is  it  to  the  We^t  and  South  to  have  their 
money,  belonging  to  their  own  banks,  sent  to  New  York  and  lent  to 
stock-brokers  in  that  city  i  It  may  be  of  some  service  in  the  West 
after  the  banks  are  established  to  strengthen  them  at  home,  and  if  they 
ought  not  to  have  that  amount  of  reserve  now  required  by  law,  why 
not  decrease  it  ^  Now  to  take  two  provisions  together  for  the  pur]>ose 
of  making  an  argument  against  this  bill,  esjK'cially  when  this  particular 
clause  has  been  i)assed  by  both  Houses  of  Congress  and  was  otfered  by 
the  Senator  from  Illinois  himself  and  assented  to  by  mcmbei-s  on  both 
sides,  seems  to  me  to  be  late.  If  Senators  desire  to  correct  their  opin- 
ion on  that  question,  as  they  have  the  right  to  do ;  if  they  think  the 
transfer  ought  not  to  be  made,  it  is  very  easy  for  them  to  propose  suit- 
able amendments  to  the  l)ill  in  that  respect ;  but  they  do  not  propose 
them. 

Now  a  word  in  regard  to  another  point,  and  this  is  the  cliief  point. 
The  Senator  from  Indiana  refei-s  to  the  8-W:,000,000  reserve.  There  is 
nothing  in  this  bill  about  a  reserve  at  all.  Yesterday  the  reserve  was 
perhaps  $3,000,000;  to-day  it  may  be  810,000,000.    "According  to  the 


FREE   BANKING— THE   CURRENCY.  451 

last  statement  the  currenev  reserve  is  swollen  t<j  ten  millions.  Some- 
times it  must  be  ten  millions.  Whenever  quarter-clay  comes  for  the 
]>avment  of  p'ensions,  the  Treasury  must  have  on  hand  seven  and  a  half 
millions  to  pay  pensions.  Sometimes  this  reserve  must  run  up  to  ten 
or  tifteen  millii»ns.  The  Secretary  of  the  Treasury  carefully  studies 
when  he  must  pay  out  money.  There  are  times  when  he  must  have  a 
larf,'e  currency  reserve.  There  are  other  periods  of  the  year  when  he 
can  nin  it  down  to  three  millions.  I  have  known  the  currency  reserve 
at  one  time  to  run  down  to  two  millions.  In  my  judgment  it  is  hardly 
ever  safe  to  have  a  currency  reserve  in  the  Treasury  of  less  than  fifteen 
milli<ms.  It  is  better  to  have  it.  The  Secretary  of  the  Treasury  would 
naturally  have  it,  and  on  an  avera<re  the  reserve  has  ])cen  more  than 
fifteen  millions.  On  the  12th  of  September,  just  before  the  panic,  the 
reserve  was  about  twelve  or  fifteen  millions;  the  precise  amount  I  do 
now  know,  but  it  was  over  twelve  millions  certainly — fourteen  millions 
my  friend  from  New  York  sup^ests.  To-<lay  it  is  ten  millions,  and 
sometimes  it  ^oes  down  t(j  three  millions. 

The  very  lauirua^e  of  this  section  is  the  lanfjuafje  oi  the  House  bill, 
tlie  lantfua«;e  proj>osed  by  the  Senator  from  Iowa  the  other  day,  and 
there  is  not  a  word  about  the  Sfe44,(Mio,0<»o  reserve  in  it.  This  bill 
practically  abolishes  the  idea  of  such  a  reserve ;  it  fixes  tlie  maximum 
<.f  I'nited  States  notes  at  *38i>.(KK>,0(Kt,  and  the  Secretary  (.f  the  Trea- 
sury will  necessarily  keep  enoujL^h  of  that  s;>S2,0<Mi,U(i()  t<»  meet  his  cur- 
rent j)aymerits. 

Now,  in  retrard  to  the  vital  im])ortance  of  the  clause  which  the 
pendin<;  amendment  touches,  I  sav  that  without  the  reduction  of  the 
greenbacks  as  bank  notes  are  issued,  in  some  proportion,  this  l)ill  is  no- 
thini^  at  all  but  an  inflation  measure  j)rovi(ling  for  a  large  increase  of 
paper  money,  with  no  restraint  except  a  provision  that  in  .laiiuarv,  1877, 
thirty-two  months  hence,  we  shall  re<leem  these  notes,  then  largely  in- 
creased, in  bonds  of  the  Tnited  States.  Sir,  I  knew  the  division  of 
sentiment  here  among  Senatoi^s.  I  knew  we  were  all  grown-uj)  men 
and  disliked  to  change  our  opinions.  I  have  gone  to  the  extreme  limit 
in  this  bill  to  meet  the  ideas  of  those  who  desire  more  paper  money  if 
only  we  could  have  better  pa|>er  money.  I  am  not  sure  but  that  I  have 
gone  too  far;  perhaps  I  have;  but  I  am  willing  to  go  so  far  and  other 
Senators  are  willing  to  join  me.  But  now  when  we  introduce  a  ])ropo- 
sition  here  which  provides  for  the  continual  daily  increase  of  paper 
money  without  a  sirjgle  dollar  of  reduction — for  not  one  dollar  of  notes 
can  be  canceled  or  redeemed  until  twice  their  amount  is  put  in  circula- 
tion— when  we  ]>ropose  that  as  a  compromise,  with  all  the  ()ther  provi- 
sions of  the  bill  ])ractically  agreed  to  except  one  that  does  not  take 
effect  for  two  years  (for  all  the  other  ])rovisions  of  this  bill  have  come 
to  us  from  the  House  of  Kepresentatives,  where  they  have  been  dis- 
cussed and  carried),  we  are  met  on  this  decisive  vote  which  settles  the 
fate  of  this  bill,  so  far  as  I  am  concerned  at  least,  with  an  intimation 
that  uidess  you  can  issue  !i(4,000,n(  lO  of  paper  money  for  the  cancella- 
tion of  ^l.Ouo^OOO  certain  Senatoi-s  will  not  vote  for"  the  bill.  If  that 
is  so,  the  sooner  it  is  ended  the  better,  in  my  judgment.  I  will  not 
prolong  debate.     I  hope  the  Senate  will  act  upon  this  amendment  as 


452  SPEECHES  AND   REPORTS   OF  JOHN   SHERMAN. 

the  vital  issue  involved  in  this  hill.  If  u  majority  decido  for  it,  then, 
as  a  matter  of  course,  I  will  relievo  myself  of  any  further  custody  or 
care  of  the  measure. 


THE   ISSUES   OF   THE    UOllR. 
DELIVERED  AT  COLUMBUS,  SEPTEMBER  2,  187 Jf. 

Fellow  Citizkns  :  The  two  great  parties  liave  now,  by  their  State 
Conventions  in  Oliio,  nominated  tlieir  candidates  and  annoujuuMl  tlieir 
principles.  The  j)eople  of  Ohio  have  rejected  the  new  (Constitution, 
and  have  tlius  postponed  for  the  time  all  questions  of  State  |)olicy.  No 
(jovernor  is  to  he  elected.  Tiie  officers  to  be  chosen  are  ])iirely  minis- 
terial or  judicial,  and  no  local  question  is  to  be  decided.  T\\g.  ])eople 
of  Ohio  are  now  called  upon  to  choose  })etween  the  only  two  existing 
national  jjolitical  parties,  and  at  an  election  wlien  their  immediate 
Jiepresentatives  in  Congress  are  to  be  chosen.  It  is,  thend'ore,  a  na- 
tional election.  The  issues  and  r(!sults,  whatever  they  arc;  and  inay  be, 
affect  not  only  the  peoph;  of  Ohio,  but  the  whole  p(!(>[)le  of  the  United 
States. 

And,  fellow  citizens,  I  am  bound  to  say  that  at  no  period  of  our 
political  history  have  the  peo])le  of  the  whole  country  been  more  free 
froin  embarrassment  in  the  selection  of  parties  than  at  this  moment. 
All  the  great,  overriding,  fundamental  (juestions  that  have  given  rise 
to  political  parties  are  practically  settled  by  the  progress  of  events — l)y 
pojxdar  accpiiescence  and  judicial  decisions.  I'lie  ledcral  and  Rej)ub- 
b'caii  parties  of  Adams  and  . Jefferson  grew  ])artly  out  of  the  tendency 
of  the  Federalists  to  ai'istocratic  forms  and  usages,  and  partly  from 
difference  of  views  as  to  the  powers  of  the  Oeneral  (rovernm(!nt.  The 
strength  of  the  Republi(;an  ])iirty  of  .Jefferson  lay  in  its  adoption  of 
sinq)le  republican  foi-nis.  The  ideas  and  hahits  which  came  to  our 
ancestoi's  from  England  tendcid  to  keep  alive  class  distinctions  betw(;en 
citizens.  These  distinctions  were  encouraged  by  the  Federalists,  but 
were  Bwej)t  away  by  the  success  of  the  K(!publican  party.  On  the 
other  hand,  the  powers  of  the  General  Government,  as  maintained  by 
the  Federalists,  were  estiiblished  by  successive  decisions  (/f  the  Su|)r(!me 
(Jourt,  and,  though  disputed  froiri  time  to  time,  are  now  r(!Cogniz(!d  by 
all  parties  and  all  classes.  The  supreme  authority  of  the  National 
Government  over  national  questions,  and  the  exclusive!  a,utliority  of 
State  (iovernments  over  local  questions,  are  now  admitted  by  all,  and 
the  boundary  between  the  two  has  been  carefully  defined. 

The  questions  that  gave  rise  to  the  formation  of  the  Whig  and 
Democratic  parties  of  Clay  and  Jackson  were;  (;(;oiiondc  fjuestions — 
()U(;stions  about  a  national  bank,  the  j)id)IIc  lands,  and  tariffs.  Th(!se 
again  have  been  settled.  No  one  nowthiid<s  of  a,  na,tir»ria,l  bank.  TIhj 
public  lands  are  no  longer  regarded  as  a  source  of  r(;v(!nu(;,  but,  by 
common  consent,  are  held  for  settlement  under  the  honu^stead  and 
eiription  laws;  while  the  tariff  question  is  purely  a  matter  of  det 


aiHi  j)re- 
letail,  in 


THE  ISSUES   OF   THE   HOUR.  453 

wliicli  revenue  is  regarded  as  tlie  primary  object,  and  the  encourage- 
ment of  domestic  industry  the  necessary  and  proper  incident. 

The  great,  and  I  may  say  the  only,  question  that  gave  rise  to  the 
Republican  and  Democratic  parties  of  our  day  was  that  of  slavery. 
Under  Democratic  management,  the  political  power  of  slavery  had 
acquired  sujjreme  control  over  all  departments  of  the  Government. 
This  power  was  violent,  arrogant,  and  insulting,  and  at  length  repealed 
the  Missouri  Compromise,  and  undertook,  by  force  and  fraud,  to  extend 
slavery  over  the  Territories,  threatening,  if  resistance  were  made,  to 
dissolve  the  Union.  On  this  question  the  Republican  party  had  its 
birth,  and  took  its  stand.  The  successive  stages  of  tliat  controversy 
were  but  the  natural  and  unavoidable  development  of  an  irrepressible 
conflict.  We  declared  against  the  extension  of  slavery.  This  led,  suc- 
cessively, to  a  local  conflict  in  Kansas,  the  election  of  Lincoln,  the 
civil  war,  the  abolition  of  slavery,  and  the  citizenship  of  an  emanci- 
pated race.  In  this  conflict  the  Republicans  won  a  clear  victory.  They 
gained  possession  of  all  the  powers  of  the  Government — legislative, 
executive,  and  judicial.  Every  promise  they  have  made  has  been 
faithfully  performed.  Their  political  creed  is  ingrafted  upon  the  Con- 
stitution of  the  United  States.  The  general  summary  of  results  is  so 
well  stated  in  a  recent  address  by  the  National  Republican  Committee, 
that  I  will  venture  to  read  it  to  you : 

At  home  and  abroad  the  Union  was  proclaimed  to  be  dissolved  in  1861.  The 
Union  is  restored  now. 

Nine  States  tiien  claimed  to  have  left  the  protection  of  the  Constitution  forever. 
They  have  all  returned  to  that  protection  now.  '*  Those  that  tlion  gavest  me  I  have 
kept,  and  none  is  lost,"  said  the  Saviour  of  men.  The  Republican  party  has  more 
than  preserved  the  States  you  committed  to  its  keeping.  It  has  found  those  which 
were  lost. 

In  1861  the  "  Confederate  States  of  America,"  so  called,  were  clamoring  for  ad- 
mission into  the  family  of  nations.  There  is  no  longer  any  such  pretense.  Each 
one  of  those  great  but  misguided  communities  now  has  honorable  recognition  as  an 
integral  part  of  the  United  States. 

A  race  numbering  millions  has  been  raised  from  the  condition  of  chattels  to  the 
state  of  man.  Human  rights  have  gained  the  sanction  of  three  new  chapters  added 
to  the  National  Constitution.  Murder,  organized  in  several  States,  bearing  the 
name  of  Ku-Klux,  wearing  the  garb  and  plying  the  trade  of  fiends,  has  been  ex- 
posed, convicted,  punished. 

Fellow  citizens,  when  you  committed  the  Union  to  the  keeping  of  the  Republi- 
can party,  it  seemed  on  the  verge  of  dissolution.  Many  hoped  and  some  feared  it 
had  received  an  incurable  wound.  We  present  the  Union  to  you  to-day,  every  whit 
whole.  The  Republic  is  at  peace  throughout  all  her  borders ;  she  is  at  peace  with 
all  the  world.  Her  rightful  authority  is  disputed  nowhere ;  her  ojiinions  are  re- 
spected everywhei-e.  She  stands  in  the  very  vanguard  of  sovereign  States.  "We 
challenge  history  to  produce  another  instance  of  a  country  raised  from  such  humilia- 
tion to  such  grandeur  in  so  short  a  time.  And  this  transformation  has  been  wrought, 
not  merely  without  the  aid  of  the  Democratic  party,  but  in  spite  of  its  utmost 
hostility. 

Such,  fellow  citizens,  are  the  admitted  results  of  the  last  great 
division  of  parties  in  this  country.  Our  policy  has  been  approved,  om* 
principles  have  triumphed.  And  now  the  question  remains,  shall  we 
abandon  the  Republican  party  and  seek,  either  in  the  Democratic  party 
or  in  new  parties,  a  representative  of  our  views,  hopes  and  aspirations 


454  SPEECHES  AND  KEPOKTS   OF  JOHN  SHEEMAN. 

for  the  future  of  our  country  ?  It  is  to  this  inquiry  I  now  invite  your 
considerate  attention. 

I  have  said  that  all  the  fundamental  questions  which  gave  rise  to 
the  Republican  party  are  settled,  so  far  as  the  guarantees  of  the  Con- 
stitution can  settle  them.  But  there  are  guarantees  not  yet  enforced ; 
and,  unless  they  shall  be  enforced,  much  of  our  success  will  become 
but  wasted  energy.  One  is  the  guarantee  made  by  the  fourteenth 
amendment,  which  secures  to  all  citizens  equal  rights  and  privileges, 
and  the  equal  protection  of  the  laws.  The  same  amendment  gives  to 
Congress  the  power  to  enforce  it  by  appropriate  legislation.  This  has 
been  done  to  some  extent,  by  securing  to  all  citizens — white  and  black, 
native  and  naturalized — the  equal  enjoyment  of  the  right  to  sue  and 
be  sued,  to  testify,  and  to  acquire  and  hold  property ;  but,  in  some  of 
the  States,  the  right  to  travel  on  railways,  to  stop  at  inns,  and  fairly  to 
share  in  the  benefits  of  common  schools  has  been  denied.  These  rights 
are  common  incidents  of  citizenship,  which  all  may  enjoy  without  im- 
pairing their  enjoyment  by  others.  And,  especially,  the  right  to  enjoy 
equal  facilities  in  the  education  of  children  is  a  right  of  primary  im- 
portance, not  alone  to  the  individual,  but  to  the  whole  community. 
The  education  of  youth  is  by  far  the  most  costly  object  of  local  taxa- 
tion— freely  borne  because  it  is  essential  to  the  maintenance  of  a  re- 
pubHcan  form  of  government.  In  the  old  constitution  of  Ohio — as 
well  as  in  the  new,  which  has  been  rejected — it  is  provided  that  "  The 
General  Assembly  shall  make  such  provision  by  taxation,  or  otherwise, 
as,  with  the  income  arising  from  the  school  fund,  will  secure  a  thorough 
and  efficient  system  of  common  schools  throughout  the  State." 

The  benefits  of  our  system  of  common  schools  have,  in  Ohio,  been 
fairly  secured  to  all  alike,  unless  voluntarily  rejected  through  pride, 
creed,  or  prejudice.  It  is  a  monument  of  wisdom.  It  is  a  stream  of 
perennial  fertility.  In  populous  communities,  where  the  number  of 
colored  children  is  sufficiently  large  for  a  separate  school,  it  is  often 
preferable  to  form  such  school,  by  local  authority ;  but  where  there  are 
lew  such  children,  they  go  to  the  same  school  with  white  children,  and 
take  part  in  the  same  class.  I  am  assured  by  some  of  the  best  teachers 
in  the  State  that,  practically,  no  difficulty  is  experienced  when  white 
and  black  are  admitted  into  the  same  school  and  class ;  and  that  very 
often  the  colored  children  are,  from  their  general  good  humor,  favorites 
with  the  white  children.  The  difficulty  is  not  in  the  school  or  with 
the  scholars,  but  with  parents,  in  the  blind,  unreasoning  spirit  of  caste 
— the  debris  of  slavery — which  is  strongest  with  the  more  ignorant  and 
vicious. 

At  aU  events,  the  blacks  are  citizens  of  the  United  States,  armed 
with  the  ballot,  and  with  equal  rights  and  privileges,  and  entitled  to 
equal  immunities  and  advantages ;  and  it  is  not  for  us,  as  Eepublicans, 
to  deny  them  any  of  the  rights  essential  to  their  manhood,  from  a  feel- 
ing of  caste  or  prejudice,  arising  from  race,  or  color,  or  condition. 
They  have  borne  their  part  in  the  conflicts  through  which  we  have 
passed,  and  we  must  not  shrink  from  fairly  enforcing  the  guarantees 
which  we  have  given  them.  The  Republican  party  is  the  only  one 
possessing  the  courage  and  disposition  to  enforce  this  guarantee  ;  and 


THE   ISSUES   OF  THE   HOUR.  455 

we  owe  its  enforcement  to  our  honor,  as  well  as  to  the  logic  of  the  lofty 
principles  which  have  guided  us.  I  voted  for  the  civil  rights  bill  now 
pending  in  the  House  of  Kepresentatives,  not  only  because  I  thought 
it  was  right,  but  because  I  felt  bound,  in  honor,  to  stand  by  and  enforce 
the  great  amendments  to  the  Constitution — the  pride  and  boast  of  the 
Eepublican  party,  and  the  connecting  link  by  which  the  immortal 
Declaration  of  Independence  was  made  a  part  of  our  frame  of  Govern- 
ment. I  have  seen,  one  by  one,  the  narrow  prejudices  of  caste,  which 
denied  to  the  black  race  the  rights  of  human  nature,  melt  away  with- 
out evil  results ;  and  I  wish  to  see  this  work  completed  and  perfected 
by  local  or  State  authority,  by  securing  to  all  men  who  are  citizens  of 
the  United  States  precise  ecpiality  in  all  civil  and  political  rights, 
whether  those  rights  tend  to  protect  their  person  and  property,  or  to 
lift  them  above  degradation.  The  ima voidable  influences  of  wealth, 
birth,  caste,  and  education,  in  lifting  men  in  social  life  above  their  fel- 
lows, are  surely  enough  to  create  inequality  among  men,  without  ap- 
pealing to  local  la-^  or  prejudice,  whereby  to  force  a  man  to  occupy  a 
lower  plane  than  his  native  abilities  and  equal  opportunities  would  give 
liim.  The  Eepublican  party  of  Jefferson  demanded  equality  before 
the  law  of  all  white  men.  How  strange  it  is  that  we  have  to  contend 
with  a  party,  calling  itself  Democratic,  for  the  right  of  all  to  equal  op- 
portunities to  rise  and  become  men,  the  equal  of  other  men! 

Kot  only  are  these  rights  disputed,  but  in  some  parts  of  the  South- 
ern States  the  right  to  live  and  labor,  and  to  enjoy  the  fniits  of  labor, 
is  practically  denied.  The  spirit  of  Ku-Kluxism  is  only  smothered. 
We  hear  daily  of  murders,  outrages,  and  wrongs,  that  may  lead  at  any 
time  to  a  war  of  races.  If  the  Democratic  party  were  now  in  power, 
the  tendency  to  restore  a  condition  of  slavery  in  the  South  would  be 
overwhelming ;  and  then,  instead  of  a  civil  war  between  sections,  we 
should  have  a  war  between  races.  We  now  hear  of  fraud,  force,  and 
violence  in  the  South.  These  can  be  arrested  only  by  peace  and  time. 
But,  if  you  add  to  these  evils  an  open  war  between  distinct  races  of 
men  who  live  together,  waged,  as  such  wars  always  are,  by  assassina- 
tion and  the  torch,  you  will  have  San  Domingo  over  again,  with  all  its 
nameless  horrors.  The  easiest  way,  the  only  way,  to  avoid  them  all  is 
to  place  by  law  all  the  rights,  privileges,  and  immunities  created  by 
the  law,  upon  precisely  the  same  footing  as  to  aU  citizens.  Then,  with 
equal  opportunities,  let  each  rise  or  faU,  according  to  his  merits  and 
industry. 

Fellow-citizens,  there  is  another  guarantee  which  we,  as  Eepubli- 
cans,  are  bound  to  see  fulfilled.  It  is  section  four  of  the  fourteenth 
amendment  to  the  Constitution  of  the  United  States,  as  follows  : 

The  validity  of  the  public  debt  of  the  United  States,  authorized  by  law,  includ- 
ing debts  incurred  for  payment  of  pensions  and  bounties  for  services  in  suppressing 
insurrection  or  rebellion,  shall  not  be  questioned.  But  neither  the  Uuited  States 
nor  any  State  shall  assume  or  pay  any  debt  or  obligation  incurred  in  aid  of  insurrec- 
tion or  rebellion  against  the  United  States,  or  any  claim  for  the  loss  or  emancipa- 
tion of  any  slave  f  but  all  such  debts,  obligations,  and  claims  shall  be  held  illegal 
and  void. 

No  one  can  doubt  that  the  Eepublican  party  will  faithfully  and 


456  SPEECHES  AND   EEPORTS   OF   JOHN   SHERMAN. 

honestly  observe  this  guarantee  ;  and  it  is  equally  certain  that  a  large 
portion  of  the  Democratic  party  openly  seeks  to  impair  the  validity  of 
the  public  debt  of  the  United  States.  Direct  and  open  repudiation 
would  probably  be  sanctioned  by  a  majority  of  the  Democratic  party 
in  the  late  rebel  States.  But  this  form  of  attacking  the  validity  of  the 
public  debt  is  not  the  most  dangerous  one.  The  Indiana  State  Con- 
vention adopted  a  series  of  resolutions,  of  which  these  are  the  first 
three  : 

1.  That  we  are  in  favor  of  the  redemption  of  the  five-twenty  bonds  in  green- 
backs, according  to  tlie  law  under  which  they  were  issued. 

2.  We  are  in  favor  of  the  repeal  of  the  law  of  March,  1869,  which  assumed  to 
construe  the  law  so  as  to  make  such  bonds  payable  exclusively  in  gold. 

3.  We  are  in  favor  of  the  repeal  of  the  national  banking  law,  and  the  substitu- 
tion of  greenbacks  for  the  national  bank  currency. 

These  resolutions,  taken  together,  would  directly  invalidate  and  re- 
pudiate the  great  mass  of  the  debt  of  the  United  States.  They  declare 
that  the  five-twenty  bonds  shall  be  paid  in  greenbacks  ;  and  not  only 
with  greenbacks  issued  when  the  bonds  were  issued,  but  with  new 
greenbacks,  issued  now,  in  express  violation  of  the  loan  acts.  By  the 
act  of  March  18,  1869,  the  j)ublic  faith  was  pledged  that  the  bonds 
should  be  paid  in  coin.  This  act  not  only  was  in  accord  with  the  pub- 
lic judgment,  but  has  been  accpiiesced  in  for  five  years  ;  and  the  five- 
twenty  bonds  have  in  consequence  risen  in  market  value  to  par  in  gold. 
Five  hundred  millions  of  them  have  been  paid  in  coin  by  the  Govern- 
ment, and  new  bonds  have  been  issued.  An  attempt  now  to  disturb 
the  settlement  made  by  the  act  of  March,  1869,  is  a  wanton  and  foolish 
breach  of  public  faith,  pledged  by  that  act.  And  the  proposition,  now 
boldly  made — to  issue  new  greenbacks  in  exjjress  violation  of  an  act 
under  which  the  five-twenty  bonds  were  issued,  in  order  to  pay  off  these 
bonds  with  notes  not  bearing  interest — is  a  direct  repudiation  of  the 
public  debt.  If  it  were  possible  to  commit  a  crime  by  the  announcement 
of  an  atrocious  political  dogma,  this  would  be  a  crime.  It  will  create 
uneasiness  and  impair  American  credit  to  the  precise  extent  that  it  gains 
strength  and  behef.  And  I  believe  that  these  resolutions  23resent  the 
opinion  at  this  day  of  the  disloyal  elements  of  the  South,  and  of  those 
in  the  North  who  sympathized  with  them  during  the  war. 

The  platform  of  the  Indiana  Democracy  has  been  adopted  by  the 
Democratic  Convention  of  Tennessee.  The  current  is  widening  and 
deepening ;  and  now  in  Ohio — which  never  shrank  from  the  burden  of 
her  debt,  never  for  a  moment  violated  her  faith,  never  even  listened  to 
such  advice,  except  in  the  almost  forgotten  days  of  Byington  and 
Mcj^ulty,  and  then,  rejecting  their  counsel,  sold  her  bonds  at  fifty  cents 
on  the  dollar  to  pay  her  interest — even  in  Ohio,  which  we  proudly  claim 
as  a  model  State,  the  Democratic  party,  in  its  recent  Convention,  looks 
suspiciously  toward  repudiation,  but  does  not  boldly,  like  the  Indiana 
Democracy,  assert  its  purpose  to  commit  it.  The  Ohio  Democrats  re- 
solved as  follows : 

That  the  Democracy  of  Ohio  reiterate  their  declaration  that  the  five-twenty 
bonds,  by  the  letter  and  spirit  of  the  law,  and  the  general  understanding  of  the  com- 
munity, were  payable  in  legal-tender  notes ;  and  the  act  of  March,   1869,  which 


THE  ISSUES  OF  THE  HOUR.  457 

pledged  the  faith  of  the  nation  to  tlieir  payment  in  coin,  was  an  unnecessary  and 
wicked  sacrifice  of  the  interests  of  the  tax-paying  laborers  for  the  benefit  of  the 
non-tax-paying  bond-holders. 

The  Indiana  Democrats  assert  as  follows  : 

That  we  are  in  favor  of  the  redemption  of  the  five-twenty  bonds  in  greenbacks, 
according  to  the  law  under  which  they  were  issued. 

The  Ohio  Democrats  do  not  say  that  they  will  pay  the  bonds  in 
greenbacks.  They  stop  short  of  that,  and  denounce  the  act  of  March, 
1869.  They  say  that  the  bonds  were  payal^le  in  greenbacks,  but  do  not 
say  whether  they  may  now  be  so  paid.  It  is  a  most  lame,  pitiful,  and 
impotent  conclusion.  If  this  policy  of  reopening  the  questions  settled 
by  the  act  of  March,  1869,  is  not  sheer  demagogism,  it  is,  by  far,  the 
most  important  issue  of  this  canvass.  Prior  to  1869  there  were  some 
honest  differences  of  opinion  as  to  the  proj^er  construction  of  our  loan 
laws.  Mr.  Pendleton  contended  that  the  public  debt,  in  the  form  of 
bonds,  might  be  paid  off  by  an  unlimited  issue  of  greenbacks,  and  thus 
practically  repudiate  the  whole  of  them.  Governor  Morton  claimed 
that  the  bonds  might  be  paid  in  greenbacks,  kept  within  the  limit  of 
the  $400,000,000  authorized  by  the  loan  acts.  But  the  great  body  of 
both  the  Republican  and  Democratic  parties  held  that  the  bonds  could 
be  paid  in  gold  coin  only.  This  dangerous  controversy  greatly  affected 
the  public  credit,  and  entered  into  the  canvass  of  1868.  The  act  of 
March,  1869,  was  universally  regarded  as  forever  settling  this  question. 
It  declared  that  the  public  faith  was  pledged  to  the  payment  of  both 
bonds  and  notes  in  coin.  It  was  passed  by  a  Congress  fresh  from  the 
people,  by  a  vote  of  98  yeas  to  47  nays  in  the  House,  and  in  the  Senate 
by  42  yeas  to  13  nays.  It  was  the  first  act  approved  by  President 
Grant.  It  was  universally  acquiesced  in.  The  effect  of  the  act  was 
immediately  to  advance  the  public  credit.  It  led  to  confidence  and 
prosperity,  and  the  rapid  payment  of  the  public  debt.  Under  the 
policy  thus  inaugurated,  $382,000,000  of  the  debt  has  already  been 
paid,  the  rate  of  interest  has  been  reduced  on  $500,000,000  more  of  the 
debt  still  due,  and  an  annual  saving  of  over  $25,000,000  of  interest  has 
been  made.  A  period  of  unexampled  prosperity  also  set  in,  which  has 
been  checked  only  by  a  too  rapid  development  of  distant  and  unpro- 
ductive railroads. 

Gentlemen,  the  reopening  of  this  controversy  is  a  real  calamity. 
The  failure  of  confidence  in  railroad  investments  was  the  cause  of  the 
recent  panic.  This  swept  away  fortunes  as  by  a  hurricane.  Its  re- 
ceding waves  still  paralyze  business,  and  especially  in  the  production 
of  iron  and  its  manufactures.  What,  then,  will  be  the  effect  of  de- 
stroying confidence  in  public  securities  and  the  public  faith  ?  What 
will  be  the  effect  of  hastening  home  our  discredited  debt  ?  What  will 
be  the  result,  if  the  United  States  should  now,  in  violation  of  the  pub- 
lic faith, begin  to  j)ay  out  its  newly  printed  notes  in  pajanent  of  bonds? 
It  is  this  danger  to  the  public  credit  that  ought  now  to  be  grappled 
with  and  throttled  by  the  people  of  Ohio,  with  the  fierce  energy  with 
which  they  grappled  and  throttled  Yallandigham  in  1863.  Untarnished 
honor — honor  so  pure  that  it  is  not  only  free  from  open  fault,  but  from 


458  SPEECHES   AND  REPORTS   OF  JOHN   SHERMAN. 

even  the  shadow  of  it — this  is  the  pride  of  a  State.  Men,  as  in- 
dividuals, may  not  attain  it,  but  organized  States  can.  Fellow  citizens, 
this  movement,  whether  under  the  open  flag  of  repudiation  raised  by 
the  Indiana  Democrats,  or  under  the  covert,  evasive  threat  of  repu- 
diation in  the  Ohio  Democratic  platform,  is  dishonor — shameless,  pal- 
pable, and  flagrant — with  which  v;e  Repubhcans  have  this  day  made 
issue. 

Again  I  call  your  attention  to  the  second  clause  of  the  fourteenth 
amendment,  read  by  me.  It  provides  that  neither  the  United  States 
nor  any  State  shall  assume  to  pay  any  debt  or  obligation  in  aid  of  the 
rebellion — or  any  claim  for  the  loss  or  emancipation  of  any  slave.  This 
provision  also  is  in  constant  danger  of  violation.  Claims  which  grew 
out  of  aid  given  to  the  rebellion  have  been  assumed  by  States  under 
the  control  of  the  Democratic  party.  One  of  the  dangers  that  now 
threaten  our  future  is  the  assumption  by  the  General  Government, 
tln-ough  the  agency  of  the  Democratic  party,  of  an  overwhelming  mass 
of  Southern  claims  growing  out  of  the  M'ar.  Heretofore,  by  the  care- 
ful watchfulness  of  the  Republican  party  in  Congress,  the  payment  of 
war  claims  in  the  Confederate  States  has  been  confined  to  such  as  were 
for  supjjlies  furnished  to  our  army  and  such  claims  as,  by  the  well  de- 
fined laws  of  war,  a  belligerent  ought  to  j^ay  for  supplies  furnished  in 
an  enemy's  country.  Even  these  are  enoi-mous.  I  read  you  a  state- 
ment recently  made  by  Judge  Lawrence,  of  Ohio : 

Some  idea  of  the  magnitude  of  these  claims  may  be  had  by  the  fact  that  those 
presented  to  the  Commissioner  of  Claims  reach  $50,033,764.  Those  now  pending 
before  Congress  reach  about  $20,000,000,  many  of  which  are  test  claims,  which,  if 
successful,  will  be  followed  by  very  many  millions  more.  The  judgments  of  the 
Court  of  Claims  for  the  year  1873  amounted  to  $439,034.  The  claims  paid  under 
relief  acts  by  Congress  for  the  same  year  were  $797,748.  I  can  not  state  the 
amount  paid  on  allowance  of  the  Departments,  but  it  was  immense,  and  included 
$1,960,679  for  claims  for  captured  and  abandoned  property. 

Senator  Davis,  in  his  speech  of  May  13,  estimates  that  all  pending 
war  claims  before  the  Departments,  the  Commissioners  of  Claims  and 
Congress,  number  30,242,  aggregating  $88,547,121. 

This  vast  volume  of  claims  might  easily  be  enlarged,  by  the  adoption 
of  plausible  rules,  so  as  to  include  several  hundred  millions  of  dollars, 
and  thus  add  many  of  the  losses  suffered  by  the  rebels  to  the  burden 
of  our  public  debt.  This,  the  Democratic  party,  if  in  power,  will  be 
sure  to  do ;  for  there  has  yet  been  no  such  case  or  class  of  cases  pre- 
sented that  the  Democratic  members  have  not  voted  for.  A  Demo- 
cratic Congress  means  a  vast  enlargement  of  the  public  debt,  by  the 
assumption  of  rebel  claims.     This  is  not  a  fanciful  danger. 

^  Not  only  is  there  danger  .of  the  National  Government  being  over- 
burdened with  debts  caused  by  the  rebellion,  but  now,  daily,  the  actual 
services  rendered  and  sacrifices  suffered  by  leading  rebels  are  rewarded 
by  the  Democratic  party — not  for  acquiescence  in  tlie  results  of  the 
war,  as  in  the  case  of  Longstreet  and  others,  but  as  a  direct  reward  and 
compensation  for  services  rendered  to  the  Confederate  States,  and  as  a 
mark  of  honor  for  duty  done.  Persons  without  number  have  been 
appointed  and  elected  to  office  in  Democratic  States,  solely  because 


THE  ISSUES  OF  THE  HOUR.  459 

tliey  were  active,  zealous,  and  alDle  officers  and  agents  of  the  Confed- 
eracy. Such  service  is  ahnost  a  prerequisite  for  office  in  some  of  the 
Democratic  States.  It  may  be  said  that  the  right  to  vote  precludes  all 
question  of  the  reason  for  a  vote ;  but,  when  we  are  invited  to  join  the 
Democratic  party,  we  may  well  inquire  into  the  motives  that  inspire 
and  the  influence  that  controls  that  party  in  the  States  where  it  has 
full  power.  It  sometimes,  in  the  Northern  States,  adopts  a  resolution 
similar  to  that  adopted  by  the  Democratic  Convention  in  Indiana : 
"•  That  we  bear  in  grateful  remembrance  the  sacrifices  made  and  the 
services  rendered  by  the  gallant  soldiers  of  the  late  war  in  defense  of 
the  Union ; "  but,  in  a  great  majority  of  the  Democratic  States,  reso- 
lutions applauding  the  services  and  sacrifices  of  the  rebels  against  the 
Union  would  be  received  with  applause.  The  animating  and  control- 
ling motive  of  the  Democratic  party  is  now,  as  it  was  during  the  war, 
either  to  apologize  for  or  to  defend  the  rebels  who  sought  to  overthrow 
the  Union,  and  to  decry  and  undo  what  was  done  in  defense  of  the 
Union. 

Fellow  Eepublicans,  the  true  path  of  safety  and  of  duty  demands 
that  we,  who  have  written  these  guarantees  upon  the  Constitution  and 
the  laws,  shall  stand  together  in  hearty  and  warm  political  association, 
until  all  of  them  are  executed  and  enforced.  Until  then,  the  mission 
of  the  Republican  party  is  not  accomplished.  We  know  that  that 
party  will  maintain  and  enforce  the  rights  guaranteed  by  the  constitu- 
tional amendments.  It  will  protect  and  shield  the  public  faith  from 
dishonor  and  repudiation.  It  will  prevent  in  the  future,  as  in  the  past, 
the  payment  of  losses  incurred  by  rebels  during  the  war.  It  will  not 
permit  the  burdens  which  the  Confederate  States  incurred  in  the  rebel- 
lion to  be  shifted  to  the  shoulders  of  loyal  people.  The  results  of  the 
war,  its  achievements  and  its  honors,  are  the  pride  and  glory  of  the 
Republican  party,  and  that  party  may  be  trusted  with  every  question 
which  may  hereafter  grow  out  of  the  war ;  while  the  Democratic  party 
will  instinctively  waste  the  fruits  and  fritter  away  all  the  results  which 
that  war  effected. 

But,  fellow  citizens,  I  have  perhaps  occupied  too  much  time  with 
the  still  unsettled  issues  of  the  war.  Allow  me  to  say  that  we  can  not 
and  ought  not  to  rely  solely  upon  the  honorable  record  of  the  Rej^ub- 
lican  party  in  the  past.  A  party  which  assumes  to  administer  a  Gov- 
ernment like  ours  must  keep  pace  with  the  changing  events  of  the 
time.  Every  year  has  its  own  issues  ;  and  even  good  principles  and 
good  conduct  do  not  always  solve,  with  success,  new  issues.  In  a  very 
brief  period  the  whole  round  of  political  questions  changes.  This  is 
especially  true  now.  Twenty  years  ago,  in  the  warm  enthusiasm  of  a 
great  and  overshadowing  issue,  we  entered  the  lists  to  curb  the  pohtical 
power  of  slavery.  Later  on  we  conducted  war  on  a  gigantic  scale, 
to  preserve  the  Union.  Still  later  we  successfully  solved  all  the  diffi- 
cult questions  that  grew  out  of  reconstruction.  And  during  all  that 
interval  we  devised,  molded,  and  administered  with  success,  all  the 
financial  agencies  of  a  period  of  unexampled  energy.  It  is  only 
within  a  very  brief  period  that  we  have  approached  a  state  of  peace, 
with  no  overriding  issues  to  rally  us,  and  nothing  to  occupy  us  but  the 


460  SPEECHES   AND  REPORTS   OF  JOHN  SHERMAN. 

quiet  and  usual  pursuits  of  productive  industry.  Under  these  cir- 
cumstances it  is  our  duty,  while  guarding  well  the  results  of  the  past, 
to  thoughtfully  examine  and  master,  if  we  may,  the  questions  of  the 
future.  It  is  the  hope  of  that  future  that  animates  and  inspires  a  race 
like  ours.  I  believe  that  the  Republican  Jjarty  is  so  organized  and 
composed  that  it  can,  better  than  any  other  party,  old  or  new,  meet  the 
requirements  of  the  new  condition  of  affairs — a  state  of  rest  and  quiet, 
in  which  industry,  economy,  and  prudence  take  the  place  of  courage, 
vigor,  and  audacity.  We  are  now  dealing  with  quiet  citizens,  each 
endeavoring  to  earn  an  honest  living,  and  with  the  ho^De  of  saving  a 
little  for  a  rainy  day,  and  not  with  men  excited  by  the  passions  of  a 
great  conflict. 

I^ow,  if  I  were  called  upon  to  sj)ecify  the  first  great  requisite  of  a 
party  to  enable  it  to  successfully  administer  the  Government  in  these 
new  times,  I  should  say  it  is  economy,  economy,  economy.  This  is 
the  most  difficult  virtue  to  practice,  especially  after  a  period  of  great 
expenditures.  It  would  be  easy  to  show  you,  gentlemen,  that  the  Re- 
publican party  in  Congress  has  entered  upon  the  true  course,  by  reduc- 
ing by  twenty-seven  millions  the  expenses  of  the  ISTational  Government 
for  the  current  year.  But  there  is  ample  room  and  verge  for  a  greater 
reduction,  and  I  believe  there  is  an  honest  purpose  in  Congress  to  carry 
out  this  policy  of  economy.  What  we  most  need  is  a  very  large  reduc- 
tion of  local  taxes,  and,  still  more,  a  very  great  limitation  of  the  power 
of  local  taxation.  At  present,  innumerable  local  authorities — counties, 
towns,  cities,  districts,  boards,  etc. — have  authority  to  levy  taxes,  until 
they  amount  in  many  instances  almost  to  confiscation.  Although  this 
question  does  not  enter  into  our  canvass,  yet  it  answers  at  once  all  this 
cry  of  burdensome  taxes.  They  are  local,  not  national,  questions,  and 
here  the  people  of  Ohio,  whenever  they  have  an  opportunity,  ought  to 
put  in  the  plow  of  the  Granger.  Has  the  Accidental  Democratic 
General  Assembly  of  Ohio  shown  any  capacity  to  reduce  taxes  or  ex- 
penses ?  I  think  not.  It  was  too  eager,  in  the  chase  for  the  few  offices 
connected  with  our  penitentiary  and  asylums,  to  do  any  act  of  useful- 
ness. The  best  I  can  say  for  it  is,  that  it  was  so  shattered  into  fac- 
tions that  it  could  not  do  several  evil  things  which  it  attempted. 
Upon  this  question  of  local  taxation  we  ought  to  have  no  party,  or 
soon  all  incomes  will  be  absorbed  by  taxes. 

The  next  object  which  we  ought  to  have  in  view  is  to  return  to  a 
specie  standard  as  rapidly  as  practicable.  Now,  I  know  that  upon  this 
question  there  is  a  wide  difference  of  opinion,  and  we  ought  not  to  be 
intolerant  with  each  other  when  we  differ.  Still  I  believe  that  the  in- 
telligent voice  of  the  people  is  tliat  we  can  not  attain  real  prosperity, 
in  which  no  man  can  be  cheated  with  false  values,  until  our  labor  and 
productions  are  measured  by  tlie  gold  standard.  We  had  months  of 
weary  talk  in  Congress  on  this  subject,  and  although  we  took  no  posi- 
tive, direct  step  toward  a  specie  standard,  yet  we  did  prevent,  and  I 
trast  forever,  any  retrograde  movement  in  the  opposite  direction.  The 
general  result  is  that  no  measure  can  now  be  adopted  which  will  lead 
us  from  a  specie  standard,  while  we  will  in  due  time  agree  upon  some 
decided  though  moderate  measure,  which  shall  hasten  the  time  when 


THE   ISSUES   OF  THE  HOUR.  461 

the  dollar  of  our  paper  money  will  buy  as  much  as  a  dollar  of  real 
money,  l^ov  will  this  result,  when  attained,  deprive  us  of  the  useful 
agency  of  paper  money,  whether  in  the  form  of  bank  notes,  or  of 
United  States  notes,  or  of  both ;  but  it  will  make  this  paper  money 
what  it  promises  to  be — an  equivalent  of  coin — when  the  only  test  of 
its  proper  quantity  will  be  the  amount  of  it  that  can  be  maintained  at 
par  with  coin.  On  this  question,  I  am  sorry  to  say,  we,  as  Republi- 
cans, are  not  entirely  agreed,  although  we  are  far  better  off  in  this  re- 
sjDect  than  our  adversaries.  The  law  of  the  last  session  of  Congress, 
though  not  what  any  of  us  hoped  for,  has  resulted  and  will  result  bene- 
ficially, and  is  in  the  right  direction.  The  long-standing,  sectional  com- 
plaint about  the  distribution  of  national  bank  circulation  has  been 
amicably  settled.  Banks  may  now  be  organized  in  any  of  the  Southern 
and  Western  States,  and  this,  not  by  the  increase  of  depreciated  notes, 
but  by  the  transfer  of  circulation  from  the  East,  where  they  have  more 
than  their  share,  to  the  West,  where  they  have  less.  Our  grievance 
was  not  that  we  needed  the  circulation,  but  that  we  were  unjustly  de- 
prived of  our  right  to  it.  This  law  also  settled  the  dangerous  power 
claimed  by  the  Secretary  of  the  Treasury,  to  increase,  at  his  j^leasure, 
the  volume  of  paper  money  to  the  extent  of  forty-four  millions  of 
dollars.  It  also  provided  a  system  of  actual  redemption,  by  which  the 
people  will  get  clean,  new  bank  notes  for  the  mutilated,  dirty,  and  de- 
faced notes  we  have  had.  O,  for  one  step  further,  to  make  these  notes 
as  good  as  gold !  And  it  needs  only  courage  to  take  it.  I  hope  and 
trust  that  tlie  Republican  party  will  take  this  step.  It  will,  by  so  doing, 
complete  the  system  of  great  financial  measures  which  that  party  has 
had  the  honor  to  propose  and  adopt. 

The  next  most  important  and  difficult  question  which,  as  a  party, 
we  must  meet,  is  the  reduction  and  simplification  of  the  national  taxes ; 
and  upon  this  point  the  people  have  the  assurance  of  what  we  have 
done  in  the  past,  as  a  guarantee  and  guide  for  the  future.  We  have 
rapidly  and  wisely — perhaps  almost  too  hastily — reduced  and  simplified 
taxes.  From  taxes  on  all  incomes  and  productions,  we  have  come 
down,  with  but  few  exceptions,  to  taxes  on  spirits,  tobacco,  beer,  and 
imported  goods.  The  few  remaining  stamp-taxes  will  probably  be  re- 
pealed next  winter,  and,  no  doubt,  would  have  been  repealed  last  ses- 
sion, except  for  the  continued  influence  of  the  panic  in  reducing  our 
revenue.  The  present  excise  taxes  on  whisky,  tobacco,  and  beer,  have 
been  carefully  adjusted,  and  are,  I  believe,  as  honestly  levied  and  col- 
lected as  is  possible.  I  think  no  changes  ought  to  be  made  in  these, 
except  to  remedy  defects  in  the  machinery,  when  discovered.  As  to 
the  duties  on  imported  goods  I  may  safely  affirm  that  the  present  tariff 
is  far  more  certain,  specific  and  productive  than  any  ever  before  exist- 
ing in  this  country.  In  comparison  with  the  tariffs  of  1842,  1846  and 
1861,  it  is  better  in  every  particular.  It  is  better  than  the  former 
tariffs  in  the  very  direction  in  which  it  can  be  still  furtlier  improved. 
A  greater  number  of  the  duties  are  specific,  and  the  classifications  are 
more  simple.  Still,  in  these  particulars  our  present  tariff  laws  can  and 
ought  to  be  improved.  In  every  case  which  the  nature  of  the  article 
will  admit  of,  the  duty  should  be  specific,  and  all  similar  articles  should 


462  SPEECHES   AND  EEPOETS  OF  JOHN  SHEPvMAN. 

be  classified  into  schedules,  and  with  descriptive  words  impossible  to 
be  misunderstood.  These  laws  ought  to  be  codified,  as  many  additions 
and  changes  have  been  made,  without  specifically  repealing  the  old 
laws.  The  duties  and  powers  of  the  revenue  ofiicers  should  be  defined 
and  simplified,  though  this  was  largely  done  during  the  last  session. 
This  subject  of  the  tariff,  which  forty  years  ago  threatened  revolution, 
and  which,  for  years,  was  the  leading  cause  of  division  between  na- 
tional parties,  has  now  become  a  matter  of  detail,  sometimes  a  question 
of  locality,  and  frequently  the  subject  of  the  meanest  demagogism. 
It  should  be  now  treated  purely  as  a  business  question — as  a  method  of 
collecting  revenue  in  the  cheapest  and  easiest  way.  I  do  not  fear  that 
any  material  change  in  the  principles  upon  which  the  tariff^  is  framed 
will  soon  be  made,  though  new  details  of  rate  and  classification  may  be 
adopted.  As  a  means  of  revenue,  it  has  proved  its  success,  by  furnish- 
ing us,  steadily,  nearly  $200,000,000  of  gold  a  year :  and  as  a  measure 
of  poHtical  economy  it  has  largely  contributed  to  the  unexampled  in- 
crease of  all  forms  of  domestic  industry,  making  us,  already,  with  our 
brief  national  history,  the  second  nation  in  production  in  the  civilized 
world.  Surely  in  this  branch  of  our  national  jDolitics  the  Republican 
party  may  safely  enter  the  lists  with  our  old  adversaries. 

there  are  two  topics  that  are  likely  to  enter  into  our  political  con- 
troversies which  have  not  yet  been  so  developed  by  discussion  as  to 
justify  me  in  defining  the  position  of  the  Republican  party  upon  them, 
if,  indeed,  they  are  capable  of  being  made  political  issues.  I  mean  the 
transportation  and  labor  questions.  And  as  to  both  of  these',  I  know  of 
no  better  rule  of  action  than  to  leave  them  to  the  laws  of  supply  and 
demand,  without  invoking  the  power  of  the  Government  to  control 
either  wages  or  rates.  It  is  the  right  of  every  man  to  get  as  much  for 
his  labor  as  he  can  ;  and,  to  avoid  undue  competition,  he  is  at  perfect 
liberty  to  agree  or  combine  with  others  in  refusing  to  work  or  to  do 
any  lawful  act  which  may  make  his  work  more  valuable.  But  any  act 
done  by  him  with  a  view  to  prevent  others  from  working,  or  to  deter 
or  hinder  a  like  liberty  in  others,  is  an  unlawful  act,  to  be  prohibited 
and  punished  according  to  its  degree.  Lawyers,  doctors,  preachers, 
literary  men  or  laborers,  must  be  governed  by  the  same  law — and  that 
the  highest  law — and  be  permitted  to  work  when,  where,  and  as  much 
or  as  little  as  they  choose,  and  to  get  as  much  as  they  can  for  their  labor. 
Actual  freedom  to  all,  to  employ  or  to  be  employed  at  any  lawful  busi- 
ness, without  fear  or  favor,  without  threat  or  intimidation,  and  to  get 
all  that  they  can  for  their  labor,  is  the  primary  law  which  sprang  from 
the  curse  that  fell  upon  Adam.  This  principle  applies  to  corporations 
as  well  as  to  individuals,  but  with  this  essential  difiference :  That  cor- 
porations, being  creations  of  law,  have  no  rights  not  directly  conferred 
by  law.  They  have  no  natural  rights.  It  is  perfectly  within  the  power 
of  the  State  that  creates  them  to  reserve  the  right  to  amend  their  char- 
ters, and  to  exercise  that  right.  In  view  of  the  "  strikes  "  and  the  as- 
sociations of  "  Grangers  " — the  one  designed  to  promote  the  interests 
of  mining  and  mechanical  labor,  and  the  other  those  of  the  farmers — it 
is  obvious  that,  if  we  are  to  deal  with  the  vital  issues  of  the  hour,  we 
must  study  these  new  phases  of  political  strife,  and  be  prepared  to  meet 


THE  ISSUES  OF  THE  HOUR.  463 

them.  No  political  organization  is  better  able  to  deal  with  them  than 
is  the  Republican  party. 

There  is  another  ordeal  to  which  the  Republican  party  has  submit- 
ted itself,  to  a  degree  never  heretofore  adopted  by  any  party — namely, 
the  duty  of  seK-examination.  It  has  freely  and  proudly  courted,  invit- 
ed, and  conducted  investigations  into  the  conduct  of  its  most  trusted 
agents.  It  has  never  evaded  nor  refused  such  an  investigation.  No 
anchorite  ever  carried  his  self-examination  further  than  has  the  Repub- 
lican party.  And  what  has  been  the  result  ?  No  doubt  but  here  and 
there  misconduct,  neglect,  and  violations  of  law  or  of  otficial  deli- 
cacy and  propriety  have  been  discovered.  When  was  it  ever  other- 
wise ?  When  will  it  be  ever  otherwise  ?  So  long  as  governments  are 
conducted  by  human  agencies,  such  faults  will  continue  to  exist.  When 
were  they  ever  more  severely  punished  than  by  the  Republican  party — 
or,  perhaps  I  ought  to  say,  by  a  healthy  public  opinion,  which  will  now 
excuse  less,  and  demands  more,  of  public  agents,  than  ever  before  ?  I 
have  been  a  member  of  ten  Congresses,  and  I  can  truly  say  that  none 
of  them  has  been  so  exact  and  careful  in  performing  public  duties — so 
free  from  all  just  suspicion  or  taint  of  corruption — so  laborious  and 
painstaking — nor  so  able  in  the  general  average  of  ability,  as  the  pres- 
ent Congress.  And  I  can  also  say,  from  history,  and  from  my  observa- 
tion so  far  as  it  goes,  that  there  has  never  assembled  in  this  country  a 
Congress  more  free  from  the  vice  of  intemperance.  I  believe,  gentle- 
men, that  while  the  issues  we  are  to  present  and  discuss  are  changing, 
the  moral  tone,  the  educational  standard,  the  general  intelligence  of  our 
people,  is  higher,  better  and  more  advanced  than  ever  before  ;  and  that 
they  are  prepared  to  demand  from  their  political  leaders  and  organiza- 
tions more  considerate  measures  and  more  thoughtful  discussion  than 
ever,  without  pretense  on  the  one  hand  or  demagogism  on  the  other. 

And  now,  gentlemen,  in  conclusion,  allow  me  to  say  a  few  words 
upon  a  subject  that  has  never  been  a  political  one,  and  which  ought  not 
to  be  made  one  now,  but  which  will,  whether  we  wish  it  or  not,  greatly 
affect  political  results,  not  only  in  Ohio,  but  in  many  of  the  States  of 
the  Union.  I  mean  the  temperance  question.  That  intemperance  is 
the  monster  evil  of  society,  especially  in  English-speaking  communi- 
ties, is  a  fact  which  no  man  can  dispute.  It  is  presented  daily  by  the 
blear-eyed  whisky  seller,  dealing  out  his  slow  poison  to  a  depraved  ap- 
petite ;  by  the  drunkard,  bloated  and  reeling,  robbed  of  his  mind,  his 
manhood  and  his  honor,  by  what  he  has  drunk ;  and  by  the  poor  wife, 
growing  daily  more  faded  and  wan,  more  hopeless  and  homeless ;  by 
the  ragged  children,  neglected,  pinched  with  hunger,  and  shrinking 
with  shame  from  healthful  play,  through  the  thought  of  what  they  see 
at  home.  Multiply  this  by  millions  and  add  crime  in  every  form,  the 
trial  at  the  bar,  the  penitentiary,  the  scaffold,  and  the  poor-house,  and 
you  have  a  picture  of  the  evils  of  intemperance.  God  knows  they  are 
fearful  enough,  without  adding  to  them  the  exaggerations  of  rhetoric. 
No  wonder  that  good  men  and  women  demand,  with  fierce  energy,  that 
all  the  agencies  of  life — the  Church,  the  State,  political  parties,  prayer, 
speech,  song,  the  tears  of  women  and  the  courage  of  men — shall  be  ar- 
rayed against  this  monster.     They  demand  that  the  Republican  party 


464  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

shall  not  only  undertake  to  destroy  this  evil,  but  that  it  shall  do  it  in  a 
particular  way — by  prohibiting  the  sale  of  all  spirituous,  vinous  and 
malt  liquors.  Now,  while  admitting  the  fearful  evils  of  intemperance, 
while  willing,  as  a  citizen,  to  do  all  I  can,  by  moral  suasion  or  by  law, 
to  check  these  evils,  I  must  reply  that  a  political  party  is  not  the  best 
possible  agency  to  deal  with  this  question,  and  that  absolute  and  gen- 
eral prohibition  is  not  the  surest  means  to  effect  the  hoped-for  result. 
Let  us  consider  these  propositions  a  moment.  Political  parties  are 
formed  of  men  of  widely  differing  opinions  on  religion,  politics,  morals, 
and  the  like,  but  who  agree  in  some  common  principles  affecting  the 
frame-work  of  the  Government,  or  its  administration.  From  the  com- 
position of  the  Republican  party,  it  no  doubt  embraces  a  great  portion 
of  the  temperance  men  of  the  country ;  but  it  also  embraces  a  multi- 
tude of  other  men,  who  may  differ  as  to  the  principle  or  proper  mode 
of  dealing  with  the  evils  of  intemi)erance.  Must  we  abandon  our  po- 
litical principles,  and  drive  from  us  those  who  agree  with  us  on  politi- 
cal topics,  merely  to  do  as  a  party  what  we  can  now  do  as  citizens  ?  As 
citizens,  we  can  vote  for  temperance  men  ;  we  can  use  our  moral,  social 
and  political  influence  to  make  and  enforce  wise  temperance  laws.  We 
can  invoke  the  aid,  not  only  of  Republicans  but  of  Democrats,  for  that 
work.  We  can  organize  societies,  can  lecture,  speak,  pray,  exhort,  and 
get  others  to  do  likewise.  It  is  sheer  folly,  in  my  humble  judgment, 
for  those  who  would  destroy  intemperance  to  invoke  the  agency  of  a 
political  party  to  secure  the  passage  of  a  prohibitory  law.  It  is  far  bet- 
ter to  leave  such  a  question  to  the  constantly  improving  morals  and 
education  of  the  whole  people  of  Ohio,  as  represented  in  our  General 
Assembly.  It  is  purely  a  local  question,  to  be  decided  by  local  law, 
and  affecting  alone  the  people  of  Ohio.  Political  parties  represent  na- 
tional questions  and  national  interests.  We  are  able  to  deal  with  our 
local  questions  without  mingling  them  with  our  national  politics. 

As  to  tlie  measures  best  to  be  adopted,  there  is  a  wide  difference  of 
opinion.  We  know,  by  experience  in  many  States,  that  a  general  pro- 
hibitory law  can  not  and  will  not  be  enforced.  It  has  the  form  of  law, 
but  not  the  force  of  law.  In  communities  where  a  strong  sentiment 
exists  against  the  sale  of  liquor,  such  a  law  may  be  enforced,  and  this 
can  be  fully  accomplished  by  a  local  option  law.  From  my  observa- 
tions in  different  States  and  in  Europe,  I  am  satisfied  that  a  much 
wider  distinction  should  be  made  by  our  laws  between  the  sale  of  spir- 
ituous and  of  vinous  and  malt  liquors.  Distilled  spirits,  as  now  made 
and  used  as  a  beverage,  are  necessarily  poison ;  while  beer  and  wine 
may  be  harmless,  and  in  many  cases  are  beneficial.  We  know  that  in 
France,  Germany,  and  Italy,  where  wine  and  beer  enter  into  the  con- 
sumption of  every  household,  as  tea  and  coffee  do  with  us,  a  drunken 
man  is  rarely  seen,  and  is  promptly  arrested  as  a  criminal ;  while  in 
Scotland,  Ireland,  and  England,  and  in  many  of  the  States,  where 
whisky  is  a  beverage,  drunken  men  daily  stagger,  with  the  unques- 
tioned right  to  the  public  highway.  I  give  you,  as  my  opinion,  for 
which  no  one  else  is  responsible,  that  a  judiciously  imposed  tax  on 
liquor  sellers — yielding  annually  to  the  people  of  Ohio  not  less  than 
one  million  of  dollars  of  revenue — and  which  carefully  discriminates 


THE  EESUMPTION  ACT.  465 

against  the  whisky  seller,  together  with  a  local  option  law,  and  the 
enforcement  of  the  Adair  law,  would  be  a  far  better  system  of  temper- 
ance measures  than  any  prohibitory  liquor  law  that  can  be  framed  or 
enforced.  But,  above  all,  I  contend  that  every  Kepublican  of  what- 
ever creed  or  nationality,  shall  be  free  to  vote,  believe,  and  act  on  this 
question  as  he  thinks  right,  being  responsible  only  to  public  opinion 
and  the  law  for  his  conduct.  It  is  not  rightfully  a  political  question, 
and  ought  not  to  be  made  one. 

Let  the  Republican  party,  then,  with  its  honoraWe  record,  meeting 
fairly  every  question  of  the  hour,  evading  nothing,  following,  as  of  old, 
its  instinctive  love  of  liberty  and  equal  rights,  with  strong  sympathy 
for  those  that  labor  in  every  field  of  employment,  with  a  love  of  coun- 
try that  will  not  for  a  moment  listen  to  disunion  or  dishonor,  without 
prejudice  of  race  or  caste,  and  with  the  practical  common  sense  which 
has  guided  it  thus  far — let  this  i^arty  enter  the  lists  before  the  people 
in  the  usual  way,  and  the  despondency  caused  by  the  partial  defeat  of 
a  year  ago  will  disappear  like  the  mists  of  the  morning,  and  Ohio  will 
again  be,  as  it  has  been  for  years  before,  the  head  of  the  Eepubhcan 
colunm. 


THE  RESUMPTION  ACT. 

IN  THE  SENATE,  DECEMBER  22,  187 Jf. 

The  bill  to  provide  for  the  resumption  of  specie  payments  being  before  the 
Senate,  Mr.  Sherman  said : 

Mr.  Pkesldent  :  I  do  not  intend  to  reopen  the  debate  on  financial 
topics  of  the  last  session.  That  debate  was  carried  to  such  great  length 
that  it  was  not  only  exhaustive,  but  it  was  exhausting,  not  only  mental- 
ly but  physically.  The  Senate  is  composed  of  the  same  persons  who 
shared  in  that  debate,  and  it  is  utterly  idle  for  us  in  this  short  session 
to  reopen  it  and  to  in\ate  the  discussion  of  its  various  topics.  The 
Senate  is  now  within  less  than  three  months  of  its  adjournment,  and 
there  is  a  general  feeling  throughout  the  country,  shared  by  all  classes 
of  the  people,  that  this  Congress  ought  to  give  some  definite  notice  to 
the  people  of  this  country  as  to  their  purj)ose  in  the  important  topics 
embraced  in  this  bill ;  and  I  say  to  Senators  on  all  sides  of  the  house 
that  this  bill  contains  enough  to  accomplish  the  important  object  de- 
clared by  its  title,  and  this  without  reviving  all  the  troublesome  and 
difiicult  questions  which  were  discussed  at  the  last  session.  It  contains 
a  few  simple  propositions  which  may  be  separated  from  the  mass  of 
financial  topics  discussed  at  the  last  session.  Its  purpose  is  declared 
by  its  title,  "  An  act  to  provide  for  the  resumption  of  specie  payments." 
Every  word,  eveiy  line,  and  every  proWsion  of  the  bill  is  in  harmony 
with  the  title.  The  bill  will  tend  to  promote  the  resumption  of  specie 
payments.  It  may  fall  short  in  many  particulars  of  the  desire  of  some 
Senators ;  and  it  does  go  further  in  that  direction  than  some  Senators 
30 


466  SPEECHES  AND  REPOKTS  OF  JOHN  SHERMAN. 

were  willing  to  go  at  the  last  session.  It  is  a  bill  which  demands  rear 
sonable  concession  from  every  member  of  the  Senate.  If  we  under- 
take to  carry  out  the  individual  views  of  any  Senator  we  can  not  accom- 
plish the  passage  of  any  bill  to  promote  this  object,  and  therefore  this 
bill  has  demanded  of  every  one  who  has  consented  to  it  thus  far  a  sur- 
render of  some  portions  of  his  opinions  as  to  measures  and  means  to 
accomplish  the  great  purpose.  I  will  consider  my  duty  done  as  far  as 
this  bill  is  concerned  by  simply  stating  its  provisions  and  calling  atten- 
tion to  the  character  of  these  provisions,  without  entering  into  a  single 
topic  that  gave  rise  to  the  long  discussion  at  the  last  session. 

The  first  section  of  the  bill  provides  for  the  resumption  of  specie 
payments  to  the  extent  of  the  fractional  currency.  It  is  confined  to 
that  subject  alone.  It  so  happens  that  the  state  of  the  money  market, 
the  state  of  the  demand  for  silver  bullion,  and  more  especially  the  recent 
action  of  the  German  Empire,  which  has  demonetized  silver  and  thus 
cheapened  that  j^roduct,  enable  us  now,  without  loss  of  revenue,  with- 
out any  sacrifice,  to  enter  the  market  for  the  purchase  of  bullion  and 
resume  specie  payments  of  our  fractional  currency.  The  market  price 
of  bullion  to-day  will  enable  the  Government  of  the  United  States,  at 
a  price  about  equivalent  to  or  perhaps  a  trifle  above  its  fractional  cur- 
rency— scarcely  a  shadow  above  it — to  purchase  silver  bullion  in  the 
money  markets  of  the  world,  mostly,  perhaps  entirely,  of  its  own  pro- 
duction. This  section  simply  directs  that  the  Secretary  of  the  Treasury 
shall  purchase  this  bullion  and  shall  coin  silver  coin  and  substitute  it  in 
the  place  of  fractional  currency.  To  that  extent  it  is  a  resumption  of 
specie  ]3ayments  upon  the  silver  standard  for  the  fractional  currency. 
It  is  recommended  not  only  by  the  Secretary  of  the  Treasury  and  the 
President  of  the  United  States,  but  I  believe  it  will  meet  the  general 
concurrence  of  every  member  of  the  Senate,  and  we  fortunately  are 
enabled  to  embrace  the  present  time  to  commence  this  operation  with- 
out any  loss  to  the  Government,  except  perhaps  that  the  cost  of  the 
coinage  of  this  silver  may  have  to  be  paid  out  of  the  Treasury  of  the 
United  States.  That  coinage  may  be  done  in  the  ordinary  course  of 
business  without  any  increase  of  expenditures.  The  mints  of  the 
United  States  are  prepared,  immediately  upon  the  passage  of  this  bill, 
to  resume  the  coinage  of  silver  coins  of  all  the  legal  denominations. 
Therefore  the  committee  have  provided  that  the  Secretary  of  the 
Treasury  shall  proceed  to  coin  the  silver  coins  and  in  one  of  several 
ways  to  issue  them  in  the  place  of  fractional  currency. 

I  need  not  dwell  further  upon  this  section,  because  I  believe  it  will 
meet  with  the  general  assent  of  the  Senate.  It  provides  for  the  im- 
mediate resumption  of  specie  payments  to  the  extent  of  the  fractional 
currency,  or  at  least  as  immediate  as  possible ;  that  is,  as  soon  as  the 
Government  of  the  United  States  can  in  the  mints  of  the  United 
States  coin  the  silver  coin.  That  process  may  continue  one,  two,  or 
three  years,  how  long  we  can  not  teU,  depending  entirely  upon  the  force 
that  may  be  employed  for  the  purpose.  It  takes  a  much  longer  time 
to  coin  these  small  coins  than  a  like  amount  of  gold  coins. 

The  second  section  of  this  bill  simply  removes  an  inducement  that 
now  exists  to  export  our  gold  bullion  from  the  United  States  to  Great 


THE  RESUMPTION  ACT.  467 

Britain,  where  by  the  long-established  laws  of  that  country  they  coin 
money  free  of  charge.  This  section  involved  the  surrender  of  about 
$85,000  a  year  of  revenue ;  that  is,  the  Government  of  the  United 
States  received  last  year  for  coining  gold  coin  $85,000,  or  one  fifth  of 
one  per  cent,  on  forty-five  millions  of  gold  coined.  The  only  sacrifice 
of  revenue,  therefore,  by  the  second  section  of  the  bill  is  the  sacrifice 
or  surrender  of  $85,000,  which  heretofore  has  been  levied  upon  those 
who  produce  gold  bulhon  in  order  to  convert  it  into  coin.  In  the 
opinion  of  many  men,  among  them  the  Secretary  of  the  Treasury,  the 
Director  of  the  Mint,  and  perhaps  a  large  number  of  Senators  hereto- 
fore, this  will  tend,  in  a  shght  degree  at  any  rate,  to  prevent  the  expor- 
tation of  the  gold  of  our  own  country  into  foreign  parts,  because  when 
the  Government  of  the  United  States  undertakes  to  put  gold  bullion 
into  the  form  of  gold  coin  without  additional  charge  the  tendency  will 
inevitably  be  for  the  gold  bullion  to  flow  into  the  mints  for  coinage ; 
and  being  put  into  the  form  of  American  coin,  it  is  thought  by  a  great 
many  people  that  this  will  tend  to  prevent  its  exportation.  To  the  ex- 
tent it  does  so  it  prepares  us  for  specie  payments.  That  is  the  whole 
of  the  second  section. 

The  third  section  of  the  bill  contains  only  two  or  three  afiirmative 
propositions.  The  first  is  that  after  the  passage  of  this  act  banking 
shall  be  free.  Perhaps  there  is  no  idea  stronger  in  the  minds  of  the 
American  people  than  that  of  hostility  against  a  monopoly — a  privilege 
that  one  man  or  set  of  men  can  enjoy  which  is  denied  to  another  man 
or  set  of  men.  Under  the  law  as  it  now  stands  banking  is  substan- 
tially free  in  the  Southern  and  some  of  the  Western  States;  but  bank- 
ing is  not  free  in  the  great  commercial  States,  in  the  older  States, 
where  wealth  has  accumulated  for  many  years.  This  may  be  a  mere 
sentimental  point,  but  it  is  well  enough  to  meet  it ;  and  by  the  opera- 
tion of  this  bill  banking  is  made  free,  so  that  there  will  be  no  difficulty 
hereafter  for  any  corporation  organized  as  a  national  bank  either  to 
increase  its  circulation  or  for  banks  to  be  organized  under  the  provi- 
sions of  existing  law  to  issue  circulating  notes  to  any  extent  within  the 
limits  and  upon  the  terms  and  provisions  of  the  banking  law.  This 
section,  therefore,  by  making  banking  free,  provides  for  an  enlarge- 
ment of  the  currency  in  case  the  business  of  the  community  demands 
it,  and  in  case  any  bank  in  the  United  States  may  think  it  advisable  or 
profitable  to  issue  circulating  medium  in  the  form  of  bank  notes  under 
the  conditions  and  limitations  of  the  banking  law.  Conpled  with  that 
is  a  provision  that  as  circulating  notes  are  issued,  either  by  old  or  new 
banks,  the  Government  of  the  United  States  will  retire  eighty  per  cent, 
of  that  amount  of  United  States  notes.  In  other  words,  it  j)roposes  to 
redeem  the  United  States  notes  to  the  extent  of  eighty  per  cent,  of  the 
amount  of  bank  notes  that  may  be  issued  ;  and  here  is  the  first  contro- 
verted question  that  arises  on  this  bill  and  the  first  that  is  settled.  It 
may  be  asked,  if  we  provide  for  the  issue  of  circulating  notes  to  banks, 
why  not  provide  for  the  retirement  of  an  equal  amount  of  United 
States  notes  ?  The  answer  is  that  under  the  provisions  of  the  banking 
act,  by  the  law  as  it  now  stands,  a  bank  can  not  be  organized  and 
maintained  in  existence  unless  the  reserve  which  is  in  that  bank,  or 


468  SPEECHES   AND   EEPORTS   OF  JOHN   SHERMAN. 

required  for  that  bank  in  tlie  ordinary  course  of  business  eitlier  on  its 
deposits  or  circulation,  is  at  least  equal  to  twenty  per  cent,  of  the  amount 
of  its  circulating  notes,  so  that  it  was  believed,  according  to  the  judg- 
ment of  the  best  business  men  of  the  country,  and  I  may  say  of  the 
Comptroller  of  the  Currency,  that  the  retirement  of  eighty  per  cent,  of 
the  amount  of  bank  notes  is  fully  equivalent  to  keeping  the  amount  of 
circulating  medium  in  actual  circulation  on  the  same  footing,  so  that 
this  provision  of  the  bill  neither  provides  for  a  contraction  nor  expan- 
sion of  the  currency,  but  leaves  the  amount  to  be  regulated  by  the 
business  wants  of  the  community,  and  so  that  when  notes  are  issued  to 
a  bank  eighty  per  cent,  of  the  amount  in  United  States  notes  is  re- 
deemed, and  this  process  continues  until  United  States  notes  are  reduced 
to  three  hundred  millions. 

Kow,  Mr.  President,  that  is  all  there  is  in  regard  to  banking  in  this 
bill  and  also  in  regard  to  the  retirement  of  the  United  States  notes 
until  the  time  for  the  resumption  of  specie  payments  comes,  when  this 
bill  provides  for  actual  redemption  in  coin  of  all  notes  presented.  It 
has  always  been  a  question  in  the  minds  of  many  people  as  to  whether 
it  is  wise  to  fix  a  day  for  specie  payments.  That  matter  was  discussed 
at  the  last  session  of  Congress  by  many  Senators,  and  the  general  opin- 
ion seemed  to  be  that,  if  we  would  provide  the  means  by  which  specie 
payments  would  be  resumed,  it  might  not  be  necessary  to  fix  the  day ; 
but,  on  the  other  hand,  it  is  important  to  have  our  laws  fix  a  probable 
time,  or  a  certain  time,  when  everybody  may  know  that  his  contracts 
will  be  measured  by  the  coin  standard.  We  also  know  that  other 
nations  which  have  found  themselves  in  the  condition  in  which  we  are 
now  placed,  and  some  of  the  States  when  specie  payments  were  sus- 
pended, adopted  a  specific  day  for  the  resumption  of  specie  payments. 
In  England,  by  the  bank  act  of  1819,  they  provided  for  the  resumption 
of  specie  payments  in  1823,  making  four  years.  In  our  own  State — in 
JSTew  York,  in  Ohio,  in  nearly  all  the  States — when  there  has  been  a 
temporary  suspension  of  specie  payments,  a  time  was  fixed  when  the 
banks  were  compelled  to  resume,  and  this  bill  simply  follows  the  ex- 
ample that  has  been  set  by  the  States,  by  England,  and  by  other 
nations,  when  they  have  been  involved  in  a  like  condition. 

This  bill  also  provides  ample  means  to  prepare  for  resumption,  and 
to  maintain  it.  I  may  say  J;he  whole  credit  and  money  of  the  United 
States  are  placed  by  this  bill  under  the  direction  of  the  proper  execu- 
tive ofiicers,  not  only  to  prepare  for  resumption,  but  to  maintain  it, 
and  no  man  can  doubt  that,  if  this  bill  stands  the  law  of  the  land  from 
this  time  until  the  1st  day  of  January,  1879,  specie  j)ayments  will  be 
resumed,  and  that  our  United  States  notes  will  be  converted  at  the 
will  of  the  holder  into  gold  and  silver  coin. 

Mr.  President,  these  are  all  the  provisions  contained  in  this  bill. 
They  are  simple  and  easily  understood,  and  every  Senator  can  pass  his 
judgment  upon  them  readily, 

i^ow  I  desire  to  approach  a  class  of  questions  that  is  not  embraced 
in  this  bill.  Many  such  questions,  and  I  could  name  fifty,  are  not  in- 
cluded in  this  bill ;  and  I  may  say  this  :  that  if  there  should  be  a  suc- 
cessful effort  by  the  Senate  of  the  United  States  to  ingraft  any  of  this 


THE  RESUMPTION  ACT.  469 

multitude  of  doubtful  or  contested  questions  upon  the  face  of  this  bill 
it  would  inevitably  tend  to  its  defeat.  I  am  free  to  say  that  if  I  were 
called  upon  to  frame  a  bill  to  accomplish  the  purpose  declared  in  the 
title  of  this  bill,  I  would  have  provided  some  means  of  gradual  redemp- 
tion between  this  and  the  time  fixed  for  final  specie  payments.  All  of 
these  means  are  open  to  objection.  There  have  been  three  different 
plans  proposed  to  prepare  for  specie  payments,  and  only  three. 

One  is  what  is  called  the  contraction  plan.  The  simplest  and  most 
direct  way  to  specie  payments  is  undoubtedly  the  gradual  withdrawal 
of  United  States  notes  or  the  contraction  of  the  currency.  Now,  we 
know  very  well  the  feeling  witli  which  that  idea  is  regarded  not  only 
in  this  Senate,  but  all  through  the  country.  It  is  believed  to  operate 
as  a  disturbing  element  in  all  the  business  relations  of  life ;  to  add  to 
the  burden  of  the  debtor  by  making  scarce  that  article  in  which  he  is 
bound  to  pay  his  debts ;  and  there  has  been  an  honest,  sincere  opposi- 
tion to  this  theory  of  contraction.  Therefore,  although  it  may  be  the 
simplest  and  the  best  way  to  reach  sjjecie  payments,  it  is  entirely  omit- 
ted from  this  bill. 

The  second  plan,  one  that  I  have  favored  myseK  often,  and  would 
favor  now  if  I  had  my  own  way  and  had  no  opinion  to  consult  but  my 
own,  is  that  of  converting  United  States  notes  into  a  bond  that  would 
gradually  appreciate  our  notes  to  par  in  gold.  That  has  always  been  a 
favorite  idea  of  mine.  There  is  nothing  of  that  kind  in  this  bill  ex- 
cept those  provisions  which  authorize  the  Secretary  of  the  Treasury  to 
issue  bonds  to  retire  the  greenbacks  as  bank  notes  are  issued,  and  to 
issue  bonds  to  provide  for  and  to  maintain  resumption.  I  therefore 
have  been  compelled  to  surrender  my  ideas  on  this  bill  in  order  to 
accomplish  a  good  object  without  using  the  means  that  have  been  held 
objectionable  by  many  Senators. 

The  third  plan  of  resumption  which  has  been  favored  very  exten- 
sively in  this  country  is  that  of  a  graduated  scale ;  what  I  call  the 
Enghsh  plan.  That  is,  that  we  provide  now  for  the  redemption  at  a 
fixed  rate  or  scale  of  rates  of  so  much  gold  for  a  specific  sum  of  United 
States  notes.  At  present  rates  we  would  give  about  $90  of  gold  for 
$100  of  greenbacks,  and  then  provide  for  a  graduated  scale  by  which 
we  would  approach  sj)ecie  payments  constantly,  and  reach  it  at  a  fixed 
day.  This  may  be  called  a  gradual  redemption.  This,  also,  is  objec- 
tionable to  many  persons,  from  the  idea  that  it  compels  us  to  enter  the 
money  markets  of  the  world  to  discount  our  own  paper.  It  is  an  ideal 
objection,  but  a  very  strong  objection  ;  an  objection  that  has  force  with 
a  great  many  people.  We  have  undertaken  to  redeem  these  notes  in 
coin,  and  it  is  at  least  a  question  of  doubtful  ethics  whether  we  ought 
to  enter  into  the  markets  of  the  world  and  buy  our  own  notes  at  a  dis- 
count. Although  that  plan  was  adopted  in  England  and  successfully 
caiT'ed  into  execution,  yet  there  is  a  strong  objection  to  it  in  this 
country,  and  therefore  that  mode  is  abandoned.  Either  of  these  plans 
I  could  readily  support ;  but  they  have  met  and  will  meet  with  such 
opposition  that  we  can  not  hope  to  carry  them  or  to  ingraft  them  in 
this  bill  without  defeating  it.  We  have  then  fallen  back  on  these 
gradual  steps :  first,  to  retire  the  fractional  cun-ency ;  second,  to  reduce 


470  SPEECHES   AND  REPOETS  OF  JOHN  SHERMAN. 

United  States  notes  as  bank  notes  are  increased ;  and  then  to  rest  our 
plan  of  redemption  upon  tlie  declaration  made  on  the  faith  of  the 
United  States  that  at  the  time  fixed  by  the  bill  we  will  resume  the 
payment  of  the  United  States  notes  in  coin  at  par.  That  is  the  whole 
of  this  bill. 

IN'ot  only  are  all  these  plans  of  gradual  redemption  omitted  from  the 
bill,  but  there  are  also  many  troublesome  questions  omitted  from  the 
bill.  If  we  undertake  to  define  precisely  what  shall  be  done  fom*  years 
hence  on  the  resumption  of  specie  payments,  to  say  whether  the  legal- 
tender  act  shall  then  be  repealed,  or  whether  it  shall  be  repealed  before 
or  not,  we  enter  upon  a  very  diflicult  field,  and  will  undoubtedlj'^  divide 
the  Senate  and  divide  the  country.  Is  it  not  better  to  postpone,  until 
the  time  comes  to  meet  them,  these  questions  which  must  then  arise, 
rather  than  to  engage  in  an  attempt  to  settle  them  now,  four  years  in 
advance  ? 

We  declare  the  time  when  specie  payments  shall  be  resumed  in 
order  to  give  fair  notice,  so  that  market  values  for  the  future  may  be 
adjusted  and  so  that  people  will  prepare  themselves  for  resumption. 
Our  people  may  then  base  their  transactions  upon  that  solemn  declara- 
tion made  by  Congress. 

In  regard  to  the  other  point  as  to  the  reissue  of  the  fractional  cur- 
rency, it  will  be  seen  that  the  first  section  is  carefully  worded  to  require 
an  equal  amount  in  number  and  denomination  of  the  fractional  currency 
to  be  redeemed,  and  that  tliis  process  is  to  continue  until  the  whole 
amount  of  the  fractional  currency  outstanding  shall  be  redeemed.  But 
it  is  said  that  perhaps  after  all  this  is  done  we  can  not  compel  people 
who  hold  the  fractional  currency  to  present  it  for  redemption.  It  must 
be  remembered  that  we  can  not  coin  sufficient  money  to  redeem  all  the 
forty-seven  millions  now  outstanding  in  less  than  three  years.  The 
question  is  raised  whether  at  the  end  of  the  three  years  during  which 
this  process  will  go  on  we  shall  provide  by  peremptory  law  that  the 
fractional  currency  shall  not  be*reissued  under  any  circumstances.  We 
do  not  undertake  to  do  it,  and  I  simply  say  that  we  should  leave  this 
question  just  where  the  section  leaves  it.  We  have  provided  for  the 
sure  and  certain  redemption  of  this  fractional  currency  in  a  course  of 
time  which  can  not  exceed  three  years,  and  therefore  we  do  not  propose 
to  go  further  and  decide  whether  it  may  be  issued  again  or  not.  Until 
it  is  fully  redeemed  the  currency  can  not  be  reissued,  and  then  it  will 
be  time  enough  to  determine  its  issue  or  reissue. 

In  regard  to  the  absolute  cancellation  of  the  legal-tender  notes  that 
may  be  redeemed  under  the  operations  of  the  free  i)auking  clause,  that 
matter  is  also  provided  for  in  the  same  way : 

And  whenever,  and  so  often  as,  circulating  notes  shall  be  issued  to  any  such 
banking  association,  so  increasing  its  capital  or  circulating  notes,  or  so  newly  organ- 
ized as  aforesaid,  it  shall  be  tlie  duty  of  the  Secretary  of  the  Treasury  to  redeem  the 
legal-tender  United  States  notes  in  excess  only  of  $300,000,000  to  the  amqunt  of  80 
per  cent,  of  the  sum  of  national-bank  notes  so  issued  to  any  such  banking  association 
as  aforesaid,  and  to  continue  such  redemption  as  such  circulating  notes  are  issued 
until  there  shall  be  outstanding  the  sum  of  $300,000,000  of  such  legal-tender  United 
States  notes,  and  no  more. 

How  long  will  it  take  before  this  contingency  shall  arise  ?     How 


THE   RESUMPTION   ACT.     '  471 

long  will  it  be  before  $100,000,000  of  circulating  notes  will  be  issued 
to  national  banks  ?  How  long  will  it  be  before  this  process  conies  to 
such  an  end  that  the  question  is  at  all  material  ?  No  one  can  tell  how 
fast  these  notes  will  be  issued,  or  how  rapidly  they  will  be  called  for. 
In  the  present  condition  of  affairs  none  probably  will  be  issued,  but  no 
doubt  with  the  revival  of  industry,  with  the  local  demand  for  banks 
here  and  there,  with  the  probable  new  wants  of  currency  made  neces- 
sary by  the  increase  of  business,  banks  will  be  organized,  how  rapidly 
no  man  can  tell.  At  any  rate  the  question  is  not  material  until  the 
whole  amount  of  $82,000,000  is  reduced,  until  the  limit  of  $300,000,000 
is  reached.  It  is  therefore  scarcely  necessary  for  us  to  ingraft  in  this 
bill  provisions  that  will  undoubtedly  lead  to  controversy  and  dispute, 
in  order  to  meet  a  question  that  will  be  provided  for  in  the  future. 

At  all  events  I  say  frankly  that  we  do  not  propose  to  decide  that 
question  in  this  bill.  I  have  no  doubt  that,  when  the  time  arrives  when 
the  question  becomes  material,  it  will  be  met.  Undoubtedly  until  the 
reduction  of  the  United  States  notes  to  $300,000,000  they  can  not  be 
reissued.  The  p]  'ess  must  go  on  jpari  jpassu  until  the  amount  of 
legal-tender  notes  is  reduced  to  $300,000,000.  Before  that  time  will 
probably  arrive  in  the  course  of  human  affairs,  at  least  one  or  two  Con- 
gresses will  have  met  and  disappeared,  and  we  may  leave  to  the  future 
these  questions  that  tend  to  divide  us  and  distract  us,  rather  than  un- 
dertake to  thnist  them  into  this  bill  and  thus  divide  us  and  prevent  us 
from  doing  something  in  the  direction  at  which  we  aim. 

It  is  said  that  the  bill  is  oj^en  to  the  construction  that  the  Secretary 
of  the  Treasury  may  gather  up  the  80  per  cent,  as  a  reserve  and  reissue 
the  notes  again,  and  that  it  is  the  intent  of  those  who  made  the  bill  that 
it  shall  be  open.  I  leave  that  question  to  be  decided  upon  the  law  as 
it  stands.  The  case  that  is  put  of  what  I  regarded  as  an  illegal  issue  of 
notes  probably  may  never  arise,  and  certainly  it  can  not  arise  for  a  con- 
siderable period  of  time.  But  if  there  is  any  doubt  upon  that  ques- 
tion, I  leave  every  Senator  to  construe  the  law  for  himself ;  and  if 
there  is  a  doubt  about  it,  I  say  it  is  not  wise  as  practical  men  dealing 
with  practical  affairs,  seeking  to  accomplish  a  result,  to  introduce  into 
this  bill  a  controversy  which  will  prevent  that  unity  that  is  necessary 
to  carry  the  good  that  is  contained  in  this  bill. 

I  am  asked  whether  in  my  own  mind  the  bill  is  open  to  that  con- 
struction. 

I  do  not  care  to  give  my  opinion  now.  I  have  given  my  opinion 
once  or  twice  before  in  regard  to  these  questions.     For  instance,  I 

fave  my  opinion  when  a  bill  was  originally  before  the  Senate  four  or 
ve  years  ago  that  the  reserve  which  was  provided  in  that  bill  could 
not  be  reissued,  and  yet  that  opinion  did  not  conti'ol  the  Secretary  of 
the  Treasury  for  the  time  being.  I  prefer  to  leave  that  question  where 
the  law  leaves  it,  and  to  the  judgment  of  that  Congress  that  may 
come  hereafter. 

But  the  question  is  asked  whether  we  sliould  pass  a  Lill  on  a  sub- 
ject like  this,  so  delicate  and  so  important,  the  meaning  of  which  is  so 
obscure  that  the  champion  of  the  bill  has  to  admit  himself  that  its 
construction  will  be  left  to  the  courts  of  the  United  States. 


472  SPEECHES  AND  KEPORTS  OF  JOHN  SHERMAN. 

In  supporting  a  bill  of  this  kind,  I  do  not  meet  all  possible  ques- 
tions that  may  arise  in  its  construction,  and  no  human  mind  could  do 
it.  I  know  this,  and  upon  tliis  rock  I  stand  :  that  this  bill  has  provi- 
sions in  it  which  tend  to  accomplish  the  purpose  which  I  have  so  dili- 
gently sought,  and  I  will  not  seek  to  obstruct  its  passage  or  defeat  it 
by  thrusting  into  it  doubtful  questions  of  law  or  public  policy  which 
may  tend  to  defeat  it.  I  take  this  bill  not  as  the  bill  that  I  should 
propose  myself,  a  bill  which  itself  surrenders  many  of  my  convictions 
as  to  the  means  to  be  employed  to  accomplish  the  particular  purpose 
designed,  but  I  take  it  because  I  see  that  every  pro\dsion  in  it  tends 
to  the  object  sought,  and  I  will  not  weaken  it  by  putting  in  questions 
of  grammar  or  construction  which  may  tend  to  weaken  and  destroy  it. 
It  seems  to  me  the  language  is  very  strong  and  the  provisions  ample 
and  potent : 

And  to  enable  the  Secretary  of  the  Treasury  to  prepare  and  provide  for  the 
redemption  in  this  act  authorized  or  required,  he  is  authorized  to  use  any  surplus 
revenues,  from  time  to  time,  in  the  Treasury  not  otlierwise  appropriated,  and  to, 
issue,  sell,  and  dispose  of,  at  not  less  than  par,  in  coin,  either  of  the  descriptions  of 
bonds  of  the  United  States  described  in  the  act  of  Congress  approved  July  14, 
1870,  entitled  "An  act  to  authorize  the  refunding  of  the  national  debt,"  with  like 
qualities,  privileges,  and  exemptions,  to  the  extent  necessary  to  carry  this  act  into 
full  effect,  and  to  use  the  proceeds  thereof  for  the  pm'pose  sioresaid. 

In  other  words,  to  prepare  for  and  maintain  redemption,  he  may 
issue  either  a  four  or  a  four  and  a  half  or  a  five  per  cent,  bond,  the 
lowest  that  he  can  sell  at  par  in  coin.  We  place  in  his  hands  the  sur- 
plus revenue  of  the  Government.  More  than  that,  we  here  by  law 
declare  our  purpose,  the  purpose  of  a  Government  and  a  people  that 
have  never  violated  their  obligations  when  distinctly  made,  that  at  this 
time  and  date  we  will  do  these  things  which  amount  to  a  resumption 
of  specie  payments. 

JSTow,  sir,  the  great  weakness  of  our  currency  is  that  we  have  under- 
taken to  pay  our  notes  in  coin,  and  do  not  fulfill  our  promise.  ISTo  man 
denies  that  obligation.  It  is  so  written  upon  the  statute  books,  now 
six  years  old.  But  from  the  fact  that  we  have  not  said  at  what  time 
we  will  do  it,  the  question  is  still  open  to  rest  upon  the  construction 
which  each  Senator  and  member  may  give  to  the  words  "  as  early  as 
practicable  " — an  indefinite  phrase  at  least,  and  one  that  applies  to  all 
future  ages.  The  object  of  this  bill  and  the  objective  point  of  this  bill 
is  to  fix  a  time  within  w^hich  the  honor  of  the  United  States  is  pledged 
to  redeem  these  notes  in  coin  ;  and  that  pledge,  if  made  by  Congress, 
and  I  trust  it  may  be  made  by  the  whole  of  Congress  of  all  parties  and 
made  by  the  whole  people — that  pledge,  if  made,  will  be  redeemed. 
It  is  true  a  subsequent  Congress  may  repeal  it.  Anything  we  can  do 
may  be  repealed  by  a  subsequent  Congress.  All  we  can  do  is  in  our 
time  to  pledge  the  faith  of  the  United  States  to  do  this  in  the  future ; 
and  if  the  people  in  their  power  and  might,  through  agents  hereafter 
elected,  violate  this  promise,  there  is  no  power  in  our  Government  to 
prevent  it.  "We  only  know  that  they  probably  will  not  do  it ;  that  a 
pledge  thus  specific,  made  as  to  a  definite  day  and  time,  with  ample 
powers  given  to  an  executive  officer  to  execute  it,  wiU  be  maintained. 


THE  EESUMPTION  ACT.  473 

I  desire  to  say  one  word  more,  that  this  pledge  is  made  knowing 
the  full  extent  of  the  obligation  imposed  by  this  law,  and  I  beheve  that 
every  Senator  who  votes  for  this  bill  is  personally  pledged — all  his 
political  influence  is  pledged — to  maintain  that  declaration,  just  as  our 
fathers  felt  themselves  bound  by  their  lives,  their  fortunes,  and  their 
sacred  honor  to  maintain  the  pledges  they  made  in  the  Declaration  of 
American  Independence. 

The  following  is  the  act  as  passed  by  the  two  Houses  : 

An  Act  to  provide  for  the  resumption  of  specie  payments. 

Be  it  enacted  hy  the  Senate  and  House  of  Representatives  of  the  United  States  of 
America  in  Congress  assembled.  That  the  Secretary  of  the  Treasury  is  hereby  au- 
thorized and  required,  as  rapidly  as  practicable,  to  cause  to  be  coined,  at  the  mints 
of  the  United  States,  silver  coins  of  the  denominations  of  ten,  twenty-five,  and  fifty 
cents,  of  standard  value,  and  to  issue  them  in  redemption  of  an  equal  number  and 
amount  of  fractional  currency  of  similar  denominations,  or,  at  his  discretion,  he 
may  issue  such  silver  coins  through  the  mints,  the  sub-treasuries,  public  deposita- 
ries, and  post-oflices  of  the  United  States;  and,  upon  such  issue,  he  is  hereby  au- 
thorized and  required  to  redeem  an  equal  amount  of  such  fractional  currency,  until 
the  whole  amount  of  .such  fractional  currency  outstanding  shall  be  redeemed. 

Sec.  2.  That  so  much  of  section  three  thousand  five  hundred  and  twenty-four 
of  the  Eevised  Statutes  of  the  United  States  as  provides  for  a  charge  of  one  fifth 
of  one  per  centum  for  converting  standard  gold  bullion  into  coin  is  hereby  re- 
pealed ;  and  hereafter  no  charge  shall  be  made  for  that  service. 

Seo.  3.  That  section  five  thousand  one  hundred  and  seventy-seven  of  the  Ee- 
vised Statutes,  limiting  the  aggregate  amount  of  circulating  notes  of  national  bank- 
ing associations,  be,  and  is  hereby,  repealed  ;  and  each  existing  banking  association 
may  increase  its  circulating  notes  in  accordance  with  existing  law  without  respect 
to  said  aggregate  limit ;  and  new  banking  associations  may  be  organized  in  accord- 
ance with  existing  law  without  respect  to  said  aggregate  limit ;  and  the  provisions 
of  law  for  the  withdrawal  and  redistribution  of  national  bank  currency  among  the 
several  States  and  Territories  are  hereby  repealed.  And  whenever,  and  so  often 
as,  circulating  notes  shall  be  issued  to  any  such  banking  association,  so  increasing- 
its  capital  or  circulating  notes,  or  so  newly  organized  as  aforesaid,  it  shall  be  the 
duty  of  Secretary  of  the  Treasury  to  redeem  the  legal-tender  United  States  notes 
in  excess  only  of  three  hundred  million  of  dollars,  to  the  amount  of  eighty  per  cen- 
tum of  the  sum  of  national-bank  notes  so  issued  to  any  such  banking  association  as 
aforesaid,  and  to  continue  sucli  redemption  as  such  circulating  notes  are  issued  until 
there  shall  be  outstanding  the  sum  of  three  hundred  million  dollars  of  such  legal- 
tender  United  States  notes,  and  no  more.  And  on  and  after  the  first  day  of  Janu- 
ary, anno  Domini  eighteen  hundred  and  seventy-nine,  the  Secretary  of  the  Trea- 
sury shall  redeem,  in  coin,  the  United  States  legal-tender  notes  then  outstanding,  on 
their  presentation  for  redemption  at  the  office  of  the  Assistant  Treasurer  of  the 
United  States  in  the  city  of  New  York,  in  sums  of  not  less  than  fifty  dollars.  And 
to  enable  the  Secretary  of  the  Treasury  to  prepare  and  provide  for  the  redemption 
in  this  act  authorized  or  required,  he  is  authorized  to  use  any  surplus  revenues,  from 
time  to  time,  in  the  Treasury  not  otherwise  appropriated,  and  to  issue,  sell,  and  dis- 
pose of,  at  not  less  than  par,  in  coin,  either  of  the  descriptions  of  bonds  of  the 
United  States  described  in  the  act  of  Congress  approved  July  fourteenth,  eighteen 
hundred  and  seventy,  entitled  "An  act  to  aathorize  the  refunding  of  the  national 
debt,"  with  like  qualities,  privileges,  and  exemptions,  to  the  extent  necessary  to 
carry  this  act  into  full  effect,  and  to  use  the  proceeds  thereof  for  the  purposes  afore- 
said. And  all  provisions  of  law  inconsistent  with  the  provisions  of  this  act  are 
hereby  repealed. 

Approved  January  14,  1875. 


474  SPEECHES  AND  EEPORTS   OF  JOHN  SHEPtMAN. 

THE   CUKEEXCY. 

AT  MARION,   LAWRENCE  COUNTY,    OHIO,  JULY  31,   1875. 

Fellow  Citizens  :  I  accepted  your  invitation  to  accompany  Gov- 
ernor Hayes  to  this  opening  meeting  of  the  canvass,  partly  from  a  de- 
sire to  visit  again  this  beautiful  region  of  Ohio,  but  chiefly  that  I  might 
present  to  you,  in  the  clearest  and  simplest  way,  my  view  of  the  finan- 
cial questions  involved  in  the  canvass.  I  am  personally  indebted  to  the 
people  of  Lawrence  County  for  their  support  during  my  oflicial  life, 
and  have  been  in  hearty  accord  with  the  views  that  have  prevailed 
among  you.  I  know  very  well  the  general  interests  which  occupy  you. 
You  have  here  a  great  diversity  of  emplo}Tnents.  You  are  farmers, 
mind's,  and  manufacturers.  You  sell  food,  coal,  and  iron.  You  suffered 
from  the  jDanic  of  1873,  and  still  suffer  from  the  low  price  of  iron. 
You  are  largely  interested  in  questions  of  currency  and  taxation.  You 
have  among  you  some  differences  of  opinion  on  these  subjects.  I 
therefore  need  not  apologize  to  you  when  I  say  that  I  mean  to  confine 
myself  on  this  occasion  entirely  to  such  topics.  I  am  bound  by  my 
duty  to  you  and  to  the  people  of  Ohio  to  speak  frankly  upon  the  nnan- 
cial  policy  of  the  Kepublican  party,  with  a  confident  behef  that  you  are 
both  able  and  willing  to  give  to  this  policy  your  thoughtful  considera- 
tion. 

And,  fellow  citizens,  let  us  approach  directly  the  questions  involved. 
They  relate  to  your  currency,  and,  incidentally,  to  the  principles  that 
should  guide  us  in  levying  taxes  on  imported  goods.  These  matters 
are  directly  presented  to  you  by  both  political  parties,  and  the  decision 
of  the  people  of  Ohio  upon  them  will  have  a  wide-reaching  influence 
upon  the  whole  people  of  the  United  States.  What  do  we  mean  by 
the  currency  question  ?  Currency  is  that  which,  by  law  or  custom, 
passes  from  hand  to  hand  in  exchange  for  labor  and  its  productions, 
and  for  land,  and  all  acquired  wealth.  Properly,  the  word  currency  in- 
cludes gold  and  silver,  as  well  as  paper  money ;  but,  now  that  we  have 
a  depreciated  currency,  it  will  be  best  understood  if  we  regard  our  cur- 
rency as  including  only  the  United  States  notes,  bank  notes,  and  frac- 
tional currency  in  common  use  in  the  United  States.  The  fii*st  and 
principal  question  is,  shall  this  currency  be  made  equal  in  purchasing 
power  to  gold  and  silver  1  Upon  this  question  there  ought  to  be  no  dif- 
ference of  opinion  among  intelligent  men.  By  common  consent,  in  all 
ages  of  the  world,  in  all  civilized  and  semi-civilized  nations,  both  Chris- 
tian and  pagan — gold  and  silver  have  been  regarded  as  the  best  attain- 
able standards  of  value.  They  are  not  only  easily  made  into  current 
coin,  but  tliey  are,  in  any  form  and  wherever  found,  of  intrinsic  value, 
easily  divided,  indestructible,  and  readily  transported.  Different  na- 
tions have  tried  many  expedients  to  substitute  something  else  as  a 
standard  of  value,  but  experience  has  uniformly  driven  them  back  to 
gold  and  silver.  Even  now,  in  the  United  States,  where  we  have  a 
legal-tender  paper  currency,  its  depreciation  is  daily  measured  by  the 
standard  of  gold.     All  our  business  with  foreign  countries,  and  most 


THE   CURPwENCY.  475 

of  the  large  transactions  in  commercial  cities,  are  based  on  gold  values. 
And  now,  in  spite  of  our  law,  the  market  value  of  all  your  productions — 
your  wheat,  your  iron,  your  labor — is  measured  by  gold.  We  deceive 
ourselves,  as  did  the  Israelites  of  old,  by  making  gods  and  worshiping 
them.  We  make  our  paper  money  a  legal  tender,  a  standard  of  value, 
and  naturally  think  it  measures  the  price  of  gold.  We  think  we  see 
gold  rising  and  falling  for  the  play  of  the  bulls  and  bears  of  New  York  ; 
but  it  is  our  j^aper  money — the  public  credit — that  is  rising  and  falling. 
Many  hundred  years  ago  men  saw,  as  we  now  see,  the  sun  rising  in  the 
East,  passing  over  the  firaiament,  and  setting  in  the  West.  It  appeared 
to  them  that  the  sun  was  a  mere  tender  to  the  earth — a  satellite,  to 
render  its  daily  offices  for  our  use.  Galileo  and  others  proved  that  all 
this  was  deceptive ;  that  the  earth  moves  around  on  its  axis  once  a  day, 
and,  as  one  of  the  smallest  of  the  planets,  on  its  orbit  once  a  year  ;  and 
that  tlie  sun  was  the  center  of  our  system,  and  was  itself  but  one  of  in- 
numerable stars.  Though  this  has  been  demonstrated,  and  we  all  now 
admit  it,  yet  we  still  say  the  sun  rises,  and  the  sun  sets,  just  as  the 
brokers  say  that  gold  has  risen,  or  gold  has  fallen.  And  yet,  fellow 
citizens,  if  we  are  not  blinded  by  ignorance  and  heedlessness,  Ave  know 
that  gold  has  not  risen  any  more  than  the  sun  has  risen ;  that  gold  does 
not  go  down  any  more  than  the  sun  goes  down.  It  is  the  public  credit, 
the  promise  of  the  United  States  to  pay  a  dollar  in  coin,  that  rises  and 
falls.  Paper  money  is  worth  nothing  excej^t  what  it  promises  to  be  paid 
in  gold ;  and  then  its  value  is  in  precise  proportion  to  the  expectation 
that  it  will  be  paid  in  gold,  according  to  promise.  The  commercial 
world  measures  the  value  of  our  currency  by  its  estimate  or  conjecture  as 
to  the  time  when  we  will  redeem  it  in  gold.  All  know  that  we  have 
the  ability  to  redeem  it,  but  they  speculate  upon  our  willingness  to  do  it, 
and  measure  in  this  way  the  depreciation  of  our  note,  just  as  they 
measure  the  value  of  an  Erie  Railroad  bond,  or  any  other  security. 
Convince  the  commercial  world  that  you  will  redeem  this  currency  in 
gold  when  presented,  and  it  at  once  becomes  at  par  in  gold.  It  will 
then  buy  as  much  food  and  clothing  as  will  the  best  gold  coin  ever 
issued  from  the  mint.  When  we  can  redeem  it,  it  will  be  like  the 
Frenchman's  bank  bill — "  If  you  have  the  money  I  don't  want  it,  if 
you  haven't  I  do."  Then  the  gold  and  the  note  will  circulate  side  by 
side,  the  one  interchangeable  for  the  other.  To  accomplish  this  is  now 
the  highest  object  of  statesmanship,  and  the  greatest  good  to  all  classes, 
but  especially  those  who  labor  for  their  daily  bread. 

And  here,  fellow  citizens,  you  may  ask  :  If  gold  is  the  best  standard 
of  value,  why  have  any  other  money  ?  Why  have  paper  money  at  all  ? 
Why  not  fall  back  upon  hard  money,  as  the  only  currency  ?  This  was 
the  old  doctrine  of  the  Democratic  party  of  Jackson  and  Benton — yes, 
and  of  Governor  Allen,  too,  forty  years  ago.  The  answer  is  that  the 
experience  of  commercial  nations  has  demonstrated  that  j)aper  money 
is  a  great  convenience  in  promoting  exchanges.  It  is  more  portable ; 
can  be  transferred  more  readily  from  hand  to  hand ;  it  can  be  more 
easily  guarded  from  thieves  ;  and  it  gives  life  and  activity  to  trade  by 
substituting  credit  for  actual  coin.  But  all  this  is  of  paper  money  con- 
vertible into  coin  at  the  will  of  the  holder — not  of  depreciated  paper 


476  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

money.  We  have  bad  in  Oliio  a  varied  experience  with  paper  money, 
from  the  wild-cat  banks  that  sprang  into  existence  after  the  "War  of 
1812,  to  our  State  bank  system.  Still,  though  we  have  suffered  many 
losses  through  bad  paper  money,  yet  we  may  consider  it  as  a  closed 
question  in  this  country  that  we  shall  continue  to  have  some  form  of 
paper  cm*rency.  The  Republican  party  cured  one  defect  of  our  old 
bank  currency,  by  giving  us  national  money  of  uniform  value  through- 
out the  United  States,  instead  of  the  local  currency  of  State  banks. 
What  we  still  want  is  national  money  readily  convertible  into  gold. 

Let  us  examine  the  reasons  why  our  currency  should  be  made  equal 
to  gold.  The  first  and  most  obvious  one  is  that  the  United  States 
promises  to  pay  its  notes  in  gold.  Here  is  a  dollar  bill.  It  reads . 
"  The  United  States  will  pay  to  the  bearer  one  dollar."  What  is  a  dol- 
lar ?  The  statutes  of  the  United  States  declare  a  dollar  to  be  a  coin 
weighing  twenty-five  and  eight  tenths  grains  of  standard  gold.  Why 
is  this  dollar  not  paid  ?  Are  we  unable  now,  as  during  the  war,  to 
meet  this  obligation  ?  It  is  said  that  the  note  does  not  fix  the  time  of 
payment.  This  would  be  no  defense  by  an  individual  in  a  suit  at  law, 
for  the  court  would  say  that  such  a  note  is  payable  on  demand,  and 
would  compel  him  to  pay.  The  United  States  can  not  be  sued,  but  it 
ought  to  be  honest ;  it  ought  to  observe  those  rules  of  honesty  which 
it  prescribes  for  its  citizens.  Admit  that  it  has  the  power  to  say  that 
the  time  of  payment  is  a  question  of  public  policy ;  yet  a  public  policy 
that  delays  the  payment  of  such  an  obligation,  after  the  nation  is  able 
to  pay,  seriously  impairs  the  public  faith,  and  sets  an  evil  example. 

Another  reason  why  these  notes  should  be  made  equal  to  gold  is 
that  the  purchasing  power  of  depreciated  paper  money  depends  upon 
the  caprice  of  speculators,  who  put  its  value  up  or  down,  according  to 
their  whim  or  interest.  Every  holder  of  one  of  these  notes  finds  its 
value  daily  changing.  It  may  be  worth  twenty-three  gi'ains  of  gold  to- 
day, and  to-morrow  twenty-two.  It  is  like  a  variable  yard-stick,  or  a 
changeable  ton.  Surely,  a  promise  depending  on  the  faith  of  a  great 
nation  like  ours  should  be  as  unchangeable  as  the  best  gold  coin  ever 
issued  from  the  mint. 

Again,  a  payment  with  such  a  note,  to  a  laborer  for  his  hire,  or  to 
a  farmer  for  his  grain,  is  a  delusion.  The  note  calls  itself  a  dollar ;  it 
promises  a  dollar ;  the  United  States  promises  to  pay  for  it  a  dollar ; 
and  yet  it  will  only  buy  as  much  as  will  eighty-five  cents  in  real  money. 
Suppose  its  purchasing  jDower  were  made  equal  to  coin,  then  the  decep- 
tion would  cease.  The  United  States  would  then  have  redeemed  its 
promise,  and  all  business  transactions  would  rest  upon  real  values. 

But  it  is  said  that  this  note  is  good.  So  it  is — good  to  pay  taxes ; 
for  the  taxing  power  agrees  to  take  it,  and  the  same  power  declares 
that  it  shall  be  a  legal  tender  in  payment  of  debts.  But  would  it  not 
be  better  if  it  would  buy  as  much  wheat  and  coni  and  clothing  as  gold 
will  buy  ?  It  would  then  be  good  for  all  purposes.  There  is  no  power 
in  human  law  to  fix  its  value  in  gold,  or  wheat,  or  labor,  or  clothing. 
Its  value  changes  daily.  While  it  is  good  in  the  sense  that  the  United 
States  is  able  to  pay  it,  it  is  not  good  in  the  sense  that  the  United 
States  does  pay  it  according  to  promise.      Governor  Allen  said,  the 


THE  CUERENCY.  477 

other  day,  at  Newark,  that  the  United  States  note  and  the  United 
States  bond  rest  upon  the  same  basis.  So  they  do,  but  with  this  differ- 
ence— that  the  bond  rests  upon  a  promise  duly  performed,  while  the 
note  rests  upon  a  promise  not  performed.  The  difference  is  equal  to 
eighteen  per  cent,  of  the  value  of  the  note.  We  wish  to  place  the 
note-holder  upon  the  same  footing  as  the  bond-holder,  by  making  our 
promise  to  one  as  good  as  that  to  the  other.  The  question  we  have  to 
deal  with  is,  are  we  now  ready  to  enter  upon  this  policy  of  honesty,  of 
equality  between  note-holder  and  bond-holder;  this  policy  of  good 
money,  national  money,  with  paj^er  and  gold  equal,  the  one  to  the  other  ? 

Now,  fellow  citizens,  what  are  the  objections  to  this  policy  ?  The 
first  and  most  obvious  objection  is  that  existing  debts  and  contracts, 
based  upon  depreciated  paper  money,  would  be  advanced  to  the  gold 
standard.  If  this  were  done  suddenly,  without  notice  or  time  for  pre- 
paration, it  would  be  wrong ;  but,  if  reasonable  time  be  given,  contracts 
will  be  adjusted  to  meet  the  change.  Nearly  every  one  is  a  creditor  as 
well  as  a  debtor,  and  debts  due  you  will  balance  what  you  owe.  The 
advance  toward  a  specie  standard  will  be  so  gradual  as  to  be  impercep- 
tible. The  fluctuations  in  the  value  of  paper  money  have,  in  a  single 
year,  more  than  equaled  the  present  depreciation,  and  yet  we  allow  four 
years  for  the  change.  When  the  notes  were  first  issued  all  contracts 
were  payable  in  gold,  and  the  creditor  then  suffered  from  a  rapid  de- 
preciation of  the  notes ;  but  since  1865  there  has  been  a  gradual  appre- 
ciation of  our  currency.  By  a  wise  policy  we  could  long  since  have 
reached  a  specie  standard,  but  by  reason  of  this  very  fear  of  debtors  we 
have  failed  to  take  the  proper  measures.  Ten  years  have  passed  away 
since  the  close  of  the  war,  and  still  we  are  fourteen  per  cent,  from  the 
specie  standard,  and  have  now  been  so  for  five  years.  Shall  this  always 
continue  ?  Somebody  will  always  be  in  debt.  All  existing  debts  are 
based  upon  the  knowledge  that  we  must  reach  a  specie  standard  at  some 
time.  Why  not  now  adopt  this  policy,  and  give  full  notice  of  the  time 
and  manner  of  resumption  ?  Will  debts  diminish  by  postponing  im- 
measurably the  time  ?  We  know  they  will  not.  Would  you  attempt 
the  impossible  feat  of  scaling  the  debt,  according  to  the  value  of  the 
currency  when  it  was  contracted  ?  This,  though  often  proposed,  has  as 
often  been  rejected  as  imjDracticable.  The  only  true  policy  is  to  give 
ample  time  and  notice  of  resumption,  so  that  debtor  and  creditor  may 
adjust  their  obligations,  and  then  steadily  to  pursue  that  policy  until 
your  United  States  notes  shall  be  equal  to  gold  ;  and  this,  as  I  will  show 
you,  is  the  policy  now  proposed  by  the  Republican  j^arty. 

Another  objection  meets  us,  whenever  we  attempt  to  advance  the 
value  of  our  currency  to  the  gold  standard.  We  are  told  that  specie 
payments  involve  a  great  contraction  of  the  currency,  and  that  a  con- 
traction of  the  currency  will  make  money  scarce,  and  add  to  the  pres- 
ent distress.  This  objection  rests  upon  a  fallacy.  I  deny  both  the 
premise  and  the  conclusion.  It  rests  upon  the  fallacy  that  we  can,  by 
law,  fix  the  amount  of  currency  necessary  for  the  wants  of  business. 
From  the  very  nature  of  a  good  currency  it  ebbs  and  flows,  contracts 
and  expands,  to  meet  the  demands  of  ti'ade.  If  idle,  it  ought  to  be 
redeemed ;  if  needed  for  the  purchase  of  productions,  it  should  be 


478  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

issued  to  meet  the  demand.  The  only  law  required  to  regulate  its 
amount  is  to  provide  for  the  issue  of  all  that  can  be  maintained  at  par 
in  gold.  If  it  is  below  j)ar,  there  is  too  much.  If  it  can  not  be  readi- 
ly had  in  exchange  for  productions  for  which  there  is  a  demand,  then 
there  is  too  little.  Under  this  rule  the  great  body  of  our  present  cir- 
culation could  be  maintained  at  par  in  gold,  and  all  of  the  gold  now 
lying  idle,  and  all  that  is  produced  by  mining,  will  be  added  to  and 
mingle  with  the  paper  money  in  daily  use.  It  is  so  in  France,  where 
an  aggregate  currency  of  paper  money  and  gold  is  maintained  as  large 
as  or  larger  than  ours.  It  is  so  in  England,  where  Bank  of  England 
notes  and  gold  coin  are  both  in  circulation.  So  it  was  in  specie-paying 
times  in  our  own  country,  except  that  the  paper  money,  being  then 
issued  by  State  authority,  was  of  limited  circulation.  And  now,  under 
our  admirable  system  of  United  States  notes  and  national-bank  notes, 
both  can  be  maintained  in  circulation  at  par  with  gold,  and  form  a  cur- 
rency as  safe  and  perfect  as  human  ingenuity  has  ever  devised.  All 
labor  and  productions  will  then  be  measured  by  an  unchangeable  stand- 
ard,* and  all  the  money  will  circulate  that  is  necessary  to  j)m*chase,  at 
the  gold  standard,  every  product  of  human  industry. 

Sometimes  it  is  said  that  the  recent  panic  was  caused  by  a  want  of 
currency,  or  a  contrac;tion  of  the  currency.     This  is  a  great  error. 

In  September,  1873,  when  the  panic  commenced,  the  amount  of 
United  States  notes  outstanding  was  $356,000,000,  that  of  fractional 
currency  was  $45,000,000,  and  of  bank  circulation  $339,000,000— in 
all,  $740,000,000,  or  more  than  it  had  ever  been  before.  The  panic 
came  with  this  vast  sum  afloat,  and  Secretary  Richardson,  without  au- 
thority of  law,  issued  $26,000,000  more  of  United  States  notes,  for  the 
laudable  purpose,  as  he  thought,  of  easing  the  money  market.  It  near- 
ly all  went  into  the  banks,  and  there  remained  in  unbroken  packages. 
If  flooding  a  country  with  currency  would  prevent  a  panic,  or  stop  one, 
here  we  had  the  trial.  But  it  was  only  like  pouring  oil  upon  a  fire. 
It  is  demonstrable  that  nearly  all  panics,  except  only  such  as  are  trace- 
able to  war,  famine,  or  like  causes,  spring  from  expanded  credits,  and, 
in  many  cases,  from  excessive  issues  of  paper  money.  Over-production 
is  the  inevitable  result ;  improvident  contracts,  unj^rofitable  enterprises, 
and  wild  speculations,  always  follow  expanded  credits,  whether  by  cor- 
porations, banks,  or  individuals.  Inflation!  The  very  name  implies 
buoyancy,  expansion,  lightness,  destruction ;  and  alas !  the  destruction 
often  falls  on  those  who  did  not  breed  the  storm.  ISTow  that  time  has 
given  us  a  full  view  of  the  expanded  credits  and  improvident  enter- 
prises of  1873,  we  only  wonder  that  the  wreck  was  not  more  over- 
whelming and  enduring.  Surely  prudent,  sensible  men,  who  will  study 
sucli  financial  waves,  must  conclude  that  the  only  remedy  is  to  reduce 
credits  to  a  substantial  basis.  A  few  articles  may,  for  a  time,  be  slow 
of  sale,  because  there  is  no  demand  for  them,  or  because  there  is  an 
over-supply.  But  this  will  soon  pass  away.  Industry  is  gradually  re- 
viving, and  now  is  the  time  to  base  our  enterprises  upon  specie-paying 
money,  and  upon  thrift,  industry,  and  economy. 

But  we  Republicans  are  often  told  that  if  gojd  is  the  standard  of 
value,  why  was  paper  money  issued  at  all  in  excess  of  the  amount  that 


THE   CUKRENCY.  479 

could  be  kept  at  ^jar  in  gold  ?  The  answer  is  that  it  was  issued  under 
the  overwhelming  necessities  of  a  great  civil  war.  I  remember  well  the 
circumstances  connected  with  the  first  and  with  all  the  succeeding 
issues  of  United  States  notes,  and  took  as  effective  a  part  as  any  one  in 
providing  for  those  issues.  It  was  in  February,  1862,  after  all  the 
banks  had  suspended  specie  payments,  and  when  our  armies  had  made 
no  progress,  our  revenues  were  cut  off  by  the  war,  and  our  expendi- 
tures were  more  than  $1,000,000  a  day,  that  the  first  issue  was  au- 
thorized. There  were  then  lying  on  the  table  of  Mr.  Chase,  Secretary 
of  the  Treasury,  requisitions  for  over  $80,000,000,  with  which  to  pay 
our  soldiers,  and  to  supply  them  with  food,  ammunition,  and  trans- 
portation. Our  bonds  could  not  be  sold,  for  there  was  no  currency 
with  which  to  pay  for  them.  We  had  to  issue  the  notes  of  the  United 
States  in  the  form  of  currency,  and  yet  as  a  part  of  the  public  debt. 
The  only  question  was,  whether  they  should  be  made  a  legal  tender 
between  individuals,  in  the  payment  of  debts.  Upon  this  point  I  had 
clear  convictions.  I  felt  that  if  our  soldiers  were  to  Ije  compelled  to 
take  these  notes  as  money,  we  were  bound,  if  we  could,  to  require 
everybody  else  to  take  them  as  money.  We  could  not  leave  these 
notes  to  the  tender  mercies  of  creditors,  shavers,  and  unpatriotic  men, 
who  would  gladly  decry  and  repudiate  them.  We  therefore  made 
them  a  legal  tender,  and  the  Supreme  Court  has  uiDheld  our  power  to 
do  so.  But  we  took  every  precaution  to  prevent  their  depreciation. 
We  made  them  receivable  for  all  internal  taxes  ;  we  made  them  a  legal 
tender  in  payment  of  all  deots ;  and  we  also  made  them  convertible 
into  bonds,  the  interest  of  which  was  payable  in  gold,  while  the  duties 
or  taxes  on  imported  goods  were  made  also  payable  in  gold,  so  that  we 
should  have  an  ample  fund  in  gold  to  pay  the  interest  on  the  bonds. 
After  all  this,  we  limited  their  amount — beyond  which  we  would  never 
go — to  four  hundred  millions.  Such  was  the  care  and  solicitude  with 
which  we  hedged  in  the  greenbacks ;  and  every  dollar  of  them  was 
issued  with  the  understanding  and  declared  public  policy  that,  after 
the  war  was  over,  they  would  be  redeemed  in  gold.  The  great  error 
of  our  financial  policy  was  in  repealing,  instead  of  suspending  during 
the  war,  the  right  of  each  holder,  at  his  will,  to  convert  his  greenbacks 
into  bonds.  But  for  that  repeal  they  would  have  been  restored,  soon 
after  the  war,  to  par  in  gold.  The  consequence  of  this  eiTor  has  been 
to  involve  us  in  the  discredit,  now,  ten  years  after  the  war  is  over,  of 
forcing  everybody  to  take  our  notes  at  a  depreciation  of  fourteen  per 
cent.,  while  the  United  States,  with  ample  means,  refuses  to  redeem 
them  according  to  the  promise  printed  on  their  face ;  and  this  now 
involves  us  in  a  struggle  with  the  Democratic  party,  which  you  are 
this  fall  called  upon  to  decide.  The  Eepublican  party  issued  these 
notes  as  a  means  for  the  salvation  of  our  country  from  a  Democratic 
rebellion.  The  Democratic  Eepresentatives  then  in  Congress  declared 
that  we  had  no  power  to  issue  notes ;  that  we  had  no  right  to  make 
them,  a  legal  tender ;  that^^if  issued,  they  would  depreciate  until  they 
were  worthless;  and  that  they  would  be  bought  by  the  cord.  And 
now  they  are  trying  to  make  their  prophecy  good.  AYe,  as  Republi- 
cans, are  now  trying,  perhaps  too  carefully  and  cautiously,  to  make 


480  SPEECHES  AND  REPORTS   OF  JOHN"  SHERMAN. 

these  promises  good.  We  mean  to  do  so.  We  will  do  so,  not  only 
without  sacrificing  any  business  interests,  but  so  as  to  promote  them. 
But  the  Democratic  party  of  Ohio,  witli  the  insane  folly  that  has 
marked  its  course  since  the  beginning  of  the  war,  is  bent  on  reducing 
our  currency  to  the  standard  of  the  old  Continental  money,  of  the 
French  assignats,  of  the  wild-cat  money  of  forty  years  ago,  or  of  the 
Confederate  currency  ten  years  since,  when  it  became  utterly  value- 
less. 

Now,  fellow  citizens,  I  have  gone,  perhaps  at  too  great  length,  into 
some  of  the  more  obvious  arguments  for  a  restoration  of  our  currency 
to  a  gold  standard.  Let  us  now  examine  the  precise  position  taken  by 
the  two  great  parties  on  this  important  question.  At  the  first  session 
of  the  late  Congress,  in  December,  1873,  after  the  panic  had,  by  its 
resistless  progress,  swept  great  enterprises  out  of  existence ;  when  the 
demand  for  iron,  and  fabrics  of  iron,  and,  indeed,  for  all  leading  manu- 
factures had  ceased ;  when  industry,  in  all  its  branches,  was  suffering 
from  paralysis ;  then  Congress  was  called  uj^on  definitely  to  face  this 
financial  question.  All  previous  efforts  to  restore  our  currency  to  the 
gold  standard  had  failed,  because  of  irreconcilable  differences  of  opin- 
ion, among  all  parties,  and  in  all  sections,  as  to  the  measure  and  method 
most  suitable  for  this  purpose.  Then  the  Committee  on  Finance  in 
the  Senate  reported  a  resolution,  very  general  in  its  terms,  which  said 
that  it  was  the  duty  of  Congress  to  take  definite  action  to  restore  our 
currency  to  the  gold  standard.  This  led  to  a  debate  memorable,  at 
least,  for  its  length,  but  with  practically  no  result,  and  Congress  ad- 
journed without  adopting  any  definite  financial  policy.  This  was  the 
first  time  in  its  history  that  the  Republican  party  ever  failed  to  grapple 
with  the  issue  of  the  hour.  It  went  into  the  canvass  last  fall,  di\'ided 
in  its  counsels  and  silent,  when  it  should  have  spoken.  The  result  was 
our  defeat,  and  the  restoration  of  the  Democratic  party  to  power  in 
the  House  of  Kepresentatives,  with  some  eighty  Confederate  officers 
among  them  to  represent  the  Lost  Cause.  When  Congress  met  at  its 
last  session,  this  severe  defeat  had  at  least  one  good  effect,  in  convinc- 
ing its  Republican  members  that  a  party  charged  with  the  administra- 
tion of  the  Government  must  be  able  to  agree  upon  the  most  pressing 
question  of  the  time.  The  result  was  that,  after  the  most  careful  de- 
liberation, after  the  freest  exchange  of  opinions,  after  mutual  conces- 
sions by  Republicans  of  differing  ^dews.  Congress  did  pass  a  law  which 
does  definitely  declare  a  public  policy,  and  which  provides  ample  means 
to  restore  our  currency  to  the  gold  standard  by  the  1st  day  of  January, 
1879. 

As  I  reported  this  law,  advocated  it,  voted  for  it,  and  now  heartily 
defend  and  approve  it,  I  may  still  be  allowed  to  say  that  it  does  not 
prescribe  all  the  agencies  and  means  which  I  would  have  selected  to 
bring  about  the  result  aimed  at.  I  do  not  conceal  from  you  my  firm 
conviction  that  the  time  policy  was  gradually  to  fund  United  States 
notes,  until  the  residue  of  them  were  at  par  with  gold.  The  bank 
notes,  being  redeemable  in  United  States  notes,  would  also  arise  to  par 
at  the  same  time.  A  declared  policy  of  this  kind,  boldly  pursued, 
would  not,  in  my  opinion,  have  reduced  in  any  considerable  degree  the 


THE  CURRENCY.  481 

volume  of  the  currency,  but  would  have  added  gold  and  silver  to  it, 
and  would  have  inspired  such  confidence  as  at  once  to  start  again  into 
activity  many  industries  now  languishing  and  depressed.  But  many 
good  Republicans  thought  otherwise,  and  we  therefore  agreed  to  post- 
pone actual  resumption  until  January  1,  1879,  except  in  so  far  as  it 
would  be  indirectly  promoted  by  the  circulation  of  silver  coins  and  the 
preparations  which  the  Secretary  of  the  Treasury  was  fully  authorized 
to  make  in  anticipation  of  resumption  at  the  time  stated.  While, 
therefore,  this  law  does  not  fully  meet  my  views,  every  provision  of  it 
tends  in  the  right  direction.  Leading  editors,  forming  hasty  conclu- 
sions, have  declared  it  a  sham ;  but  they  often  have  occasion  to  revise 
their  opinions,  and  some  of  them  have  done  so  as  to  this  law.  Though 
remote  as  to  time  of  operation,  yet,  if  the  duties  enjoined  by  this  law  on 
the  Secretary  of  the  Treasury  are  performed,  we  shall,  at  the  time 
fixed,  as  sure  as  fate,  have  United  States  notes  and  bank  notes  advanced 
to  par  with  gold.  The  Republican  convention  of  Ohio,  in  their  second 
resolution,  declare,  "  That  a  policy  of  finance  be  steadily  pursued,  which, 
without  unnecessary  sliock  to  business  or  trade,  will  ultimately  equalize 
the  purchasing  capacity  of  the  coin  and  paper  dollar."  The  same  policy 
has  been  declared  by  every  Republican  State  convention  held  this  year ; 
so  that  we  may  now  announce,  as  the  fixed  policy  of  the  Republican 
party,  a  steady  march  toward  specie  payments,  and  no  step  backward. 

What  is  the  position  of  the  Democratic  party  on  this  question? 
When  the  Finance  Bill  was  pending  in  December  last,  the  objection 
made  by  the  Democratic  Senators  was  that  it  would  not  accomplish 
resumption  soon  enough.  My  colleague.  Judge  Thurman,  was  quite 
facetious  about  our  caution  and  timidity.  Senator  Bayard  made  a 
strong  speech  against  it,  because  it  did  not  provide  at  once  for  a  con- 
traction of  the  currency.  Every  Democratic  Senator  and  Representa- 
tive voted  against  it ;  some  wishing  to  repeal  the  legal-tender  act, 
others  desiring  resumption  in  July,  1876,  and  all  denouncing  our  slow 
progress  toward  specie  payments.  But  now,  "  presto,  change  !  "  they 
are  in  favor  of  more  money.  Judge  Thurman  is  muzzled — allowed  to 
appear  only  before  selected  audiences — and  my  old  friend  Sam  Gary 
is  let  loose  to  lead  this  new  cry  of  more  money.  Well,  moi'e  money  is 
a  pretty  good  cry,  for  we  all  want  money  ;  but  it  is  not  by  such  a  party 
cry  as  this  that  an  intelligent  people  will  be  led  to  approve  the  issue  of 
more  and  more  of  a  depreciated  paper  currency,  in  defiance  of  the 
warnings  of  experience,  of  reason,  of  law,  and  of  public  honor. 

Before  reading  this  new  Democratic  gospel,  let  me  invite  the  atten- 
tion of  my  Democratic  hearers  to  the  attitude  in  which  that  old  his- 
tonc  party  now  presents  itself.  If  there  was  anything  which  was 
definite  in  its  old-time  policy  it  was  "  hard  money  " — the  "  money  of 
the  Constitution  " — "  money  that  jingles."  Even  during  the  war,  when 
the  issue  of  paper  money  was  vital,  there  was  something  manly  in  its 
opposition  to  it.  But  now,  when  the  Republican  party  seeks  to  make 
this  currency  equal  in  value  to  "  hard  money,"  the  Democratic  party,  in 
Convention  assembled,  forgetting  its  traditions  and  former  teachings, 
demands  more  money,  more  depreciated  money ;  no  limit,  no  restric- 
tion, no  provision  for  its  payment,  no  specie  standard.  Can  you  see 
31 


4S2  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

anything  in  tliis  but  sheer  demagogism ;  base  trifling  with  your  inter- 
ests ;  the  vain  hope  that  in  a  time  of  temporary  depression  you  will 
forget  all  the  teachings  of  history,  and  vote  them  into  power  ?  Is  the 
Democratic  party  of  to-day  the  same  party  which,  by  its  boldness  and 
courage  under  Jackson,  secured  the  confidence  of  its  su]3porters  and  the 
respect  of  its  adversaries  ?  No,  sir.  Ever  since  the  Republican  party 
came  into  power,  the  Democratic  party  has  been  on  tliis  as  on  every 
other  question  of  public  policy,  including  every  measure  for  the  prose- 
cution of  the  war,  simply  an  opposition  party,  a  party  of  negation,  pro- 
posing no  definite  measure,  and  unable  to  agree  upon  any  afiirmative 
legislation.  And  now,  on  this  vital  question,  the  ''  World  "  denounces 
the  "  Enquirer,"  and  the  "  Enquirer  "  denounces  the  "  World,"  while 
Governor  Allen  is  made  to  ride  upon  a  platform  which  is  in  contradic- 
tion to  every  expressed  sentiment  of  his  life. 

Now,  fellow  citizens,  that  I  may  do  no  injustice,  I  pui-pose  to  read 
to  you  the  eighth,  ninth,  tenth,  eleventh,  and  twelfth  planks  of  the 
Democratic  platform,  which  present  the  governing  issues  of  this  canvass, 
and  to  expose,  as  well  as  I  am  able,  the  errors  of  fact  and  of  argument 
contained  in  them.     The  eighth  resolution  I  will  now  read  : 

Eighth — That  the  contraction  of  the  currency  heretofore  made  by  the  Repub- 
lican party,  and  the  further  contraction  proposed  by  it,  with  a  view  to  the  forced 
resumption  of  specie  payment,  have  ah-eady  brought  disaster  to  the  business  of  the 
country,  and  threaten  it  with  general  bankruptcy  and  ruin.  We  demand  that  this 
policy  be  abandoned,  and  that  the  volume  of  the  currency  be  made  and  kept  equal 
to  the  wants  of  trade,  leaving  the  restoration  of  legal  tenders  to  par  with  gold  to 
be  brought  about  by  promoting  the  industries  of  the  people,  and  not  by  destroying 
them. 

This  resolution  commences  with  a  perversion  of  fact.  When  did 
the  Republican  party  contract  the  currency  of  the  country  ?  That 
party  devised  and  brought  into  existence  our  present  paper  currency, 
both  of  United  States  notes  and  national-bank  notes.  The  maximum 
of  United  States  notes  was  fixed  in  18B4  at  four  hundred  millions  of 
dollars.  The  only  reduction  or  contraction  of  these  notes  was  made  by 
Secretary  McCulloch,  under  the  administration  of  Andrew  Johnson, 
when  the  Treasury  notes  were  gradually  reduced  from  four  hundred 
to  three  hundred  and  fifty-six  millions.  This  reduction  of  the  cur- 
rency was  suspended  by  the  act  of  Congress  of  Februarj^  4,  1868. 
The  volume  of  United  States  notes  then  remained  until  October,  1873, 
at  three  hundred  and  fifty-six  millions,  when  Secretary  Richardson,  as 
before  stated,  issued  twenty-six  millions  more,  making  a  total  of  three 
hundred  and  eighty-two  millions.  During  all  the  time,  however,  since 
March,  1865,  there  has  been  a  steady  increase  of  the  fractional  currency 
and  national-bank  notes  ;  so  that,  instead  of  a  contraction,  there  has 
been  a  steady  expansion  of  the  currency.  As  I  stated  before,  there 
was  more  paper  currency  outstanding  at  the  moment  the  panic  came 
upon  us  than  ever  before ;  and,  with  the  vain  hope  of  stopping  the 
panic,  Mr.  Richardson  issued  twenty-six  millions  more  of  United  States 
notes.  It  is  true,  as  Mr.  Pendleton  stated  at  Gallipolis,  that,  during 
the  war,  Treasury  notes  of  various  forms,  compound-interest  notes  and 
time  bills,  all  bearing  interest  and  convertible  into  bonds,  were  issued. 
But  these  did  not  form  any  part  of  the  currency,  but  were  held  for  the 


THE  CUKRENCY.  483 

accruing  interest ;  and  they  were  all  retired  by  Mr.  McCullocli,  and 
before  General  Grant  came  into  power.  So  that  all  this  cry  about  the 
contraction  of  the  currency  is  untrue. 

But  the  Democratic  party  says  that  a  further  contraction  of  the 
currency  is  now  proposed,  with  a  view  to  a  forced  resumption  of  spe- 
cie payments.  Well,  gentlemen,  the  finance  bill  of  last  session  pro- 
vides for  free  banking,  so  that  all  men  who  want  more  money,  and 
can  give  security  for  its  payment,  may  have  it.  In  that  event  United 
States  notes  are  to  be  redeemed  to  the  extent  of  eiglity  per  cent,  only 
of  the  bank  notes  issued,  thus  issuing  five  dollars  and  withdrawing 
four.  Banks  may  also,  at  their  pleasure,  retire  their  circulating  notes. 
Now,  we  have  had  within  a  few  days  an  official  statement  from  the 
Comptroller  of  the  Currency,  showing  the  actual  operation  of  the  law. 
Since  its  passa2:e  circulating  notes  have  been  issued,  to  new  and  old 
banks,  to  the  amount  of  $7,785,525,  and  $6,228,420  of  United  States 
notes  have  been  withdrawn,  leaving  an  increase  of  the  currency  of  over 
$1,500,000.  But  there  has  been  a  reduction  of  the  currency  by  the 
voluntary  surrender  by  national  banks  of  their  circulation,  to  an  amount 
greater  than  this  increase.  The  reduction  of  United  States  notes  de- 
jjends  upon  the  issuing  of  new  bank  currency,  and  this  is  the  weakness 
of  that  law,  and  for  which  we  were  denounced  by  Democratic  Senators 
and  newspapers  last  winter  ;  and  now  Governor  Allen  and  Mr.  Pen- 
dleton denounce  ns  for  doing  what  we  did  not  do.  They  say  that  this 
contraction  brought  disaster  to  the  business  of  the  country.  But  as 
the  disaster  came  in  1873,  when  there  had  been  no  contraction  what- 
ever, but  an  actual  and  steady  expansion  of  all  forms  of  paper  money 
and  credit,  it  is  conclusive  that  the  panic  was  not  caused  by  contrac- 
tion. It  was  the  failure  to  contract,  and  the  continued  expansion  of 
paper  credits,  which  led  to  the  wild  enterprises,  the  forced  produc- 
tion, and  the  sudden  collapse,  which  involved  the  innocent  with  the 
guilty  in  wide  destruction.  Fellow  citizens,  there  is  no  delusion  of 
human  natui-e  that  has  been  more  injurious  in  its  effects  upon  the  hap- 
piness of  mankind  than  has  that  which  seeks  to  build  prosperity  upon 
broken  promises,  npon  depreciated  paper  money,  and  upon  the  wild 
speculations  engendered  by  them.  How  often  must  our  race  be  taught 
that  there  is  no  sure  basis  for  substantial  wealth  but  industry,  honesty, 
prudence,  and  economy  ? 

But  what  does  the  Democratic  party  propose  ?  "  That  the  volume 
of  currency  be  made  and  kept  equal  to  the  wants  of  trade."  Who 
shall  fix  that  volume  ?  What  caucus  could  regulate  the  amount  ? 
What  Congress  shall  decree  it  ?  What  shall  be  its  standard  of  value  ? 
Shall  it  be  coal  lands  at  $1,000  an  acre,  or  gold  at  twenty-five  and 
eight  tenths  grains  to  a  dollar  ?  Shall  it  be  enotig-h  to  float  the  North- 
ern Pacific  Eailroad  into  premature  birth  ?  How,  then,  will  jon 
measure  your  daily  toil  ?  How  the  price  of  your  wheat — the  fruit  of 
hard  labor  and  solid  acres  ?  If  you  get  your  pay  in  gold,  or  in  money 
steadily  approaching  the  gold  standard,  you  know  what  it  will  buy ; 
but  if  its  value  and  volume  have  no  fixed  basis,  and  are  to  fluctuate  to 
meet  somebody's  notions  of  the  wants  of  trade,  you  will  be  exchang- 
ing your  labor,  your  grain,  your  coal  and  iron,  for  money. 


484  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

"  as  variable  as  the  shade 
By  the  light,  quivering  aspen  made." 

Now,  if  this  resolution  read,  "  that  the  volume  of  paper  money, 
always  redeemable  in  gold  and  silver,  shall  be  equal  to  the  wants  of 
trade,"  it  would  be  all  right ;  we  should  then  have  a  standard  of  value. 
But  the  resolution,  as  it  stands,  is  the  most  transparent  demagogism. 
It  would  be  as  if  the  merchant  should  regulate  the  length  of  his  yard- 
stick by  the  necessities  of  his  purse  ;  as  if  the  coal  and  iron  man  should 
regulate  the  weight  of  their  ton  by  the  amount  of  their  debts ;  as  if 
the  farmer  were  to  reduce  the  number  of  pounds  in  a  bushel  of  wheat 
so  as  to  obtain  the  same  number  of  bushels,  whether  the  crop  is  good 
or  bad.  It  is  this  palpable  fallacy  which  dismisses  from  a  dollar  the 
attribute  of  fixed,  intrinsic  measure  and  value,  into  which  Governor 
Allen  has  fallen  at  Gallipolis,  and  which  misleads  many  an  honest 
man,  and  has  caused  many  of  the  wrecks  that  mark  the  history  of  hu- 
man error. 

But  our  Democratic  platform-makers,  recalhng  the  old  Democratic 
ideas  about  gold,  tell  us  tliat  they  are  in  favor  of  leaving  the  restora- 
tion of  legal  tenders  to  par  with  gold  to  be  brought  about  by  promoting 
the  industries  of  the  people,  and  not  by  destroying  them.  How  do 
they  propose  to  promote  your  industries  ?  Is  it  by  protecting  them, 
and  building  up  your  manufactories  ?  Oh,  no.  They  tell  you  plainly 
that,  in  framing  their  tariff  laws,  they  will  look  only  to  the  revenue 
they  can  get  from  you,  and  not  to  the  benefit  they  can  confer  upon 
you.  What  then  ?  Echo  answers,  what  ?  What  did  the  Democratic 
party  do  for  thirty  years  to  promote  the  interests  of  labor  ?  Nothing 
but  for  the  labor  of  slaves.  It  is  to  the  Republican  party  that  you  owe 
your  homestead  law — the  policy  that  has  made  us  a  nation  of  free  men. 
It  is  to  the  Bepublican  party  you  owe  the  protection  of  your  labor,  and 
the  creation  of  the  very  currency  which  the  Democratic  party  seeks  to 
destroy.  What  party  now  threatens  a  reaction  against  all  the  measures 
of  the  war  ?  A¥hat  party  has  formed  a  coalition  against  your  common- 
school  system,  and  only  awaits  a  favorable  time  to  carry  it  out  ?  But 
they  tell  you  that  they  will  restore  your  legal  tenders  to  par  in  gold. 
When  ^     If  not  now,  why  not  three  years  hence  ? 

Why  not,  my  fellow  citizens,  support  the  Republican  policy  ?  It 
needs  no  argument  to  convince  you  that  the  men  who  framed  the 
Democratic  platform  have  no  intention  to  restore  the  gold  standard 
except  through  repudiation.  That  is  their  process.  The  "wants  of 
trade,"  as  construed  by  them,  will  lead,  step  by  step,  into  infiation, 
general  bankruptcy,  and  repudiation.  Judge  Thiirman  was  riglit  when 
he  said  in  the  Senate,  in  1874,  that  if  this  policy  were  adopted  he  should 
not  live  to  see  again  in  circulation  good  old  Democratic  money — gold 
and  silver.  The  war  for  American  Independence,  and  its  grim  neces- 
sities, drove  our  Revolutionary  fathers  into  this  policy ;  and  so  with 
France  in  the  throes  of  her  revolutionary  stmggles :  and  in  both  cases 
the  currency  was  repudiated  as  worthless.  Now,  after  our  war  is  hap- 
pily over,  and  all  its  hard  sacrifices  have  been  crowned  with  success, 
and  when  we  are  on  the  plain  road  to  a  specie  standard,  we  are  asked, 
in  the  name  of  the  "  demands  of  trade,"  to  adopt  the  same  policy,  to 


THE  CURRENCY.  485 

issue  more  money  without  any  plan  of  redemption,  on  the  promise  of 
the  Democratic  party  that,  at  some  time,  it  may  be,  they  will  restore  it 
to  par  in  gold,  "  by  promoting  the  industries  of  the  people."  For  one, 
fellow  citizens,  I  shall  want  a  more  specific  guarantee,  as  well  as  a  bet- 
ter guarantor  than  the  Democratic  party.  We,  the  Republicans,  who 
are  responsible  to  our  country  and  to  mankind  for  the  redemption  of 
the  promises  contained  in  these  greenback  notes,  must  see  to  their  re- 
demption, and  not  turn  over  to  our  adversaries  this  last  remaining  duty 
of  our  great  conflict.  France,  our  old  Kevolutionary  friend,  has  re- 
cently set  us  a  noble  example,  by  resuming  specie  payments,  after  her 
unsuccessful  war  with  Germany,  and  after  suffering  greater  sacrifices 
than  we  did ;  and  it  is  admitted  that  her  indiistries  are  now  more  pros- 
perous than  ever  before  in  her  long  history.  These  shadowy  fears, 
which,  in  the  minds  of  business  men,  sometimes  cloud  the  patliM'ay  of 
duty,  will  disappear  by  a  steady  adherence  to  the  Republican  policy. 

The  next  resolution  of  the  Democratic  platform  to  which  I  wish  to 
call  your  attention  is  the  ninth  :      ^ 

Ninth — That  the  policy  ah-eady  initiated  by  the  Republican  party,  of  abolishing 
legal  tenders  and  giving  national  banks  the  power  to  furnish  all  the  currency,  will 
iucrease  the  power  of  an  already  dangerous  monopoly,  and  the  enormous  burdens 
now  oppressing  tlie  people,  without  any  compensating  advantage;  and  that  we  op- 
pose to  this  policy  the  demand  that  all  the  national-bank  circulation  be  promptly 
and  permanently  retired,  and  legal  tenders  be  issued  in  their  place. 

The  substance  of  this  resolution  is  that  the  national  banks  shall  be 
promptly  destroyed,  and  that  the  greenback  circulation  shall  be  at  the 
same  time  increased  to  $710,000,000,  Before  examining  this  startling 
proposition,  let  us  dispose  of  some  of  the  errors  of  fact  contained  in  the 
resolution.  It  is  not  true  that  the  Republican  party  proposes  to  abolish 
the  legal  tenders,  or  to  give  to  the  national  banks  the  entire  circulation 
of  the  country.  This  is  a  question  of  the  future,  upon  which  parties 
have  not  yet  taken  their  position,  and  concerning  which,  no  doubt, 
differences  of  opinion  will  arise.  The  Republican  party  has  taken  the 
position  that,  by  the  1st  of  January,  1879,  both  legal  tenders  and  na- 
tional-bank notes  shall  be  redeemable  in  gold,  when  demanded.  To 
this  extent,  and  no  further,  have  they  taken  a  position.  For  one,  I  am 
free  to  say  that,  while  our  public  debt  exists,  I  am  for  maintaining  in 
circulation  the  United  States  notes  to  the  full  amount  at  which  they 
can  be  maintained  at  par  in  gold,  and  no  more ;  and  I  am  convinced 
that  such  notes,  payable  on  demand  in  coin,  or,  at  the  option  of  the 
Government,  in  a  fixed  bond,  which,  in  the  money  market,  is  usually 
at  par  in  gold,  would  keep  in  circulation  all  or  nearly  all  of  the  present 
volume  of  United  States  notes. 

But,  should  it  not,  there  is  no  reason  in  the  world  why  the  Govern- 
ment ought  not  to  pay  interest  on  a  debt  which  it  is  not  prepared  to 
pay  in  coin ;  and,  with  such  notes,  it  is  immaterial  whether  they  are  or 
are  not  a  legal  tender.  To  guard  against  the  sudden  effects  of  a  panic, 
I  would  leave  them  a  legal  tender  ;  but  these  are  my  individual  views 
only,  often  expressed  and  sincerely  entertained.  Upon  this  question, 
however,  the  Republican  party  has  taken  no  position,  nor  ought  it  to 
do  so  until  after  resumption. 


486  SPEECHES   AND   REPORTS   OF   JOHN   SHERMAN. 

As  to  the  national  banks,  tliey  are  entirely  in  tlie  j^ower  of  Con- 
gress. We  can  repeal  the  law  of  their  creation,  bnt  would  it  be  wise 
to  do  so  ?  They  are  denounced  as  a  monopoly,  but  this  is  now  untrue. 
For  a  time,  after  the  Hmit  fixed  by  law  for  national-bank  circulation 
was  reached,  they  were  in  one  sense  a  monopoly ;  but  since  the  act  of 
last  winter  banking  is  as  free  as  blacksmithing,  or  iron-making,  or  mer- 
chandising, and  freer  than  the  making  of  lawyers,  or  of  doctors,  or 
preachers.  Any  set  of  five  or  more  men  may  start  a  bank  in  any  part 
of  the  United  States,  on  the  terms,  conditions,  and  responsibilities  fixed 
by  the  banking  law.  Over  2,000  banks  have  been  authorized,  and  are 
scattered  all  over  the  United  States.  They  have  loaned  of  their  own 
money,  or  of  that  deposited  with  them,  $950,000,000,  and  this  consti- 
tutes a  large  part  of  the  active  capital  upon  which  the  manufacturing, 
commercial,  and  mining  industries  of  the  country  rests.  They  are  the 
principal  agents  for  the  deposit  and  exchange  of  money,  not  only  in 
the  United  States,  but  with  foreign  nations.  Their  business  reaches 
among  and  interlaces  with  that  of  ^very  citizen  of  the  United  States. 
They  are  private  corporations  ;  the  Government  has  nothing  to  do  with 
them  except  to  make  them  pay  taxes  and  obey  the  laws.  These  laws 
are  very  strict,  requiring  from  them  reports  under  oath,  and  subjecting 
them  to  frequent  examinations  at  unexpected  times,  and  maintaining 
over  them  the  strictest  surveillance.  The  only  privilege  these  banks 
enjoy  which  the  humblest  citizen  does  not  is,  that,  by  giving  ample 
security  in  United  States  bonds,  they  may  issue  a  certain  proportion  of 
circulating  notes.  They  pay  the  expenses  of  printing  these  notes ;  re- 
deem them  promptly  on  demand  with  lawful  money  of  the  United 
States  ;  keep)  money  in  the  Treasury  of  the  United  States  for  that  pur- 
pose ;  while  their  notes  are  not  a  legal  tender,  and  nobody  is  bound  to 
take  tliem.  When  this  is  all  done,  we  require  them  to  keep  on  hand  a 
large  reserve  in  cash ;  we  tax  them  all ;  the  States  tax  them,  and  the 
counties  and  towns  do  the  same,  so  that  their  aggregate  taxes  are  now 
$20,000,000. 

These  are  the  national  banks.  They  were  organized  by  the  Repub- 
lican party  to  take  the  place  of  the  State  banks — a  mongrel  crew,  under 
no  common  authority,  obeying  no  law,  giving,  in  some  States,  no  secu- 
rity, and  issuing  bills  easily  counterfeited  and  of  limited  circulation. 
Under  the  national-bank  law  there  can  be  no  successful  counterfeit- 
ing ;  the  notes  are  secured  beyond  the  possibility  of  loss,  for  the  bank 
may  break,  but  the  note  is  good ;  and  they  pass  without  question  any- 
where in  the  United  States.  The  banks  are  organized  for  twenty 
years ;  yet  the  law  can  be  repealed.  But  business,  in  some  branches, 
is  languid.  Debts  are  hard  to  pay  and  hard  to  collect.  Everybody  is 
trying  to  save  a  little  in  expenses,  and  to  make  a  little  more  croj).  And 
now  a  set  of  men,  self-appointed,  calling  themselves  a  Democratic  Con- 
vention— a  State  Convention,  remember,  not  a  National  Convention — 
meets  at  Columbus,  and  resolves  that  all  this  system  of  national  banks, 
interwoven  with  the  business  of  the  whole  people  of  the  United  States, 
shall  be  promptly  torn  up ;  that  this  vast  indebtedness  of  the  people  to 
the  banks  shall  be  immediately  paid  ;  and  that  all  the  bonds  of  the 
United  States  now  held  by  these  banks  shall  be  forced  upon  the  mar- 


THE   CURPwENCY.  487 

ket ;  and  that  the  United  States  shall  then  issue  its  legal-tender  notes 
to  the  additional  amount  of  three  hundred  and  fifty  millions.  Such  is 
the  financial  programme  of  the  Ohio  Democrats,  to  give  relief  to  the 
business  interests  of  the  country.  Is  there  any  business  man  who  hears 
me  who  does  not  know  that  such  a  measure,  if  adopted,  would  utterly 
destroy  the  country's  industries  ? 

Let  us  examine  this  proposition  -a  little  further.  The  first  difiiculty 
to  be  encountered  is,  that  the  issue  of  the  greenbacks  in  excess  of  four 
hundred  millions  would  be  a  plain  and  palpable  violation  of  the  public 
faith.  In  1864  the  United  States  solemnly  engaged  that  the  volume 
of  legal-tender  notes  should  never  exceed  the  sum  of  four  hundred  mil- 
lions ;  and  this  pledge  has  been  several  times  repeated,  and  is  the  sacred 
barrier  which  has  alone  maintained  the  purchasing  power  of  the  green- 
backs at  the  present  rate. 

Again,  the  validity  of  the  legal-tender  act  was  sustained  by  the 
Supreme  Court  on  the  sole  ground  that  it  was  the  exercise  of  the  war- 
making  powers  of  Congress,  held  to  be  essential  to  the  national  exist- 
ence ;  and  yet,  even  on  this  ground,  it  was  sustained  but  by  a  bare 
majority  only  of  that  court.  Who  believes,  for  a  moment,  that  the 
validity  of  legal-tender  notes  would  be  sustained  by  that  court  if  issued 
in  a  time  of  profound  peace,  in  violation  of  the  public  faith,  and  as 
a  part  of  a  policy  designed  to  maintain  in  perpetuity  an  irredeemable 
cuiTeney  ? 

Again,  for  what  purpose  could  the  United  States  issue  these  notes? 
Would  it  be  to  purchase  the  bonds  of  the  Government  now  held  as 
security  for  bank  notes  ?  Those  bonds  are  the  property  of  the  banks, 
and  could  only  be  purchased,  like  other  bonds,  in  the  open  market,  at 
a  large  premium.  This  premium  would  rapidly  advance  as  the  irre- 
deemable notes  were  issued.  How  long  would  this  process  continue 
before  these  platform-makers  w^ould  assert  the  right  to  pay  the  bonds 
in  greenbacks,  and  thus  again  violate  the  public  faith,  pledged,  by  the 
act  of  March,  1869,  to  strengthen  the  public  credit  ?  Or,  would  they 
loan  the  greenbacks  to  the  people,  as  the  bank  notes  are  now  loaned, 
and  thus  convert  the  Government  into  a  bank,  not  only  of  loan,  but  of 
discount  ?  It  is  idle  to  follow  further  the  evil  consequences  and  dan- 
gerous effects  of  the  Democratic  policy  announced  in  these  resolutions. 
Their  end  would  be  utter  bankruptcy  and  ruin. 

But  what  good  do  they  hope  to  accomplish  ?  They  will  answer  that 
they  desire  to  save  the  interest  on  the  notes  now  issued  by  the  banks. 
They  want  the  Government  to  have  the  profit  of  issuing  notes  for  cir- 
culation. In  gaining  this  they  would  violate  the  public  faith ;  they 
would  lose  all  the  taxes  now  received  from  the  national  banks ;  and 
would  utterly  destroy  all  ideas  of  fixed  values.  The  profit  derived 
from  this  circulation  has  been  over-estimated — so  much  so  that  now 
more  circulation  is  being  retired  by  banks  than  is  issued  to  them.  The 
privilege  is  now  open  to  all,  and  yet  it  is  not  generally  taken.  If  the 
Government  were  to  assume  the  sole  and  exclusive  privilege  of  issuing 
these  notes,  it  could  not  engage  in  the  business  transactions  by  which 
alone  that  privilege  can  be  made  profitable,  and  the  business  public 
would  lose  the  benefit  of  discounts  and  loans. 


488  SPEECHES   AND   REPORTS   OF   JOHN   SHERMAN. 

But  the  real  motive  lies  back  of  all  this.  These  men  want  more 
money,  more  money  ;  not  real  money,  but  depreciated  paper  money — 
cheap  money,  becoming  cheaper  and  cheaper  as  more  is  issued,  making 
it  easier  to  pay  debts.  But  will  a  dollar  of  this  money  buy  what  a  dol- 
lar of  gold,  or  even  a  dollar  of  paper  money,  will  now  buy  i  We 
know  it  will  not.  It  will  depreciate,  even  in  greater  proportion,  as  its 
volume  increases.  Your  grain,  your  iron  and  coal,  may  bring  you 
more  money  than  you  now  receive,  but  the  money  received  will  buy 
less  than  now,  and  you  will  be  constantly  cheated  by  a  false  weight 
and  a  false  standard.  How  strange  it  is  that  human  experience,  so 
often  repeated,  does  not  stamp  upon  the  mind  of  every  human  being 
the  truth  proclaimed  by  Webster,  acted  upon  by  Jefferson  and  Jack- 
son, and  which  lies  at  the  foundation  of  the  laws  of  currency :  that, 
of  all  the  contrivances  for  cheating  the  laboring  classes  of  mankind, 
none  has  been  more  effectual  than  that  which  deludes  them  with  de- 
preciated paper  money  !  Ordinary  tyranny,  oppression,  excessive  taxa- 
tion— these  bear  lightly  on  the  happiness  of  the  mass  of  the  commu- 
nity, when  compared  with  a  fraudulent  currency,  and  the  robberies 
committed  thereby. 

Now,  fellow  citizens,  to  return  once  more  to  the  national  banks, 
which  the  Ohio  Democrats  propose  at  once  to  destroy.  I  need  not  re- 
mind you  that,  next  to  Mr.  Chase,  then  Secretary  of  the  Treasury,  I 
had  as  much  to  do  with  the  passage  of  the  national  bank  act  as  any 
one  ;  and  yet  I  regarded  it  as  an  experiment,  and  chiefly  supported  it  as 
a  means  of  driving  out  of  existence  the  heterogeneous  multitude  of 
State  banks  that,  during  the  war,  threatened  to  overwhelm  us  with 
paper  money  of  limited  circulation  and  no  security.  The  national 
banking  system  has  proved,  on  the  whole,  to  be  a  great  success.  Mr. 
McCulloch,  in  his  report  as  Secretary  of  the  Treasury  in  1867,  care- 
fully reviewed  the  whole  system ;  and  I  refer  my  Democratic  friends 
to  tiiat  report  for  some  wholesome  reading.  Since  he  wrote,  the  bank- 
ing system  has  been  improved  by  making  it  free,  and  by  providing  for 
the  prompt  redemption  by  each  bank  of  its  notes,  at  the  Treasury  of 
the  United  States.  The  national  banks  have  yet  to  bear  the  test  of 
coin  redemption.  When  the  United  States  notes  shall  have  advanced 
to  par  in  gold,  the  banks  must  redeem  their  notes  at  par  in  gold.  If, 
then,  experience  shall  show  that  this  system  will  furnish  to  the  people, 
through  local  banks,  circulating  notes  which  shall  be  freely  convertible 
into  gold,  then  the  Republican  party  will  stand  by  it.  If  not,  that 
party  will  modify  or  dispense  with  it.  And,  in  dealing  with  this  ques- 
tion, I  trust  that  the  Republican  party  will  do  as  it  has  done  with  other 
great  problems  of  human  government  which  it  has  successfully  solved, 
acting  with  moderation  and  wise  statesmanship,  and  relying  upon  the 
intelligence  of  an  educated  people,  rather  than  upon  that  spirit  of  blind 
demagogism  which  has  plainly  led  to  the  adoption  of  this  ninth  resolu- 
tion. 

There  is  one  other  financial  plank  in  the  Democratic  platform  that 
is  easily  disposed  of.     I  will  read  it : 

Tenth — That  the  public  interest  demands  that  the  Government  should  cease  to 
discredit  its  own  currency,  and  should  make  its  legal  tenders  receivable  for  all 


THE  CURRENCY.  489 

public  dues,  except  where  respect  for  the  obligation  of  contracts  requires  payment 
in  coin,  and  that  we  favor  the  payment  of  at  least  one  half  of  the  customs  in  legal 
tenders. 

This  resolution,  apparently  plausible,  not  only  involves  grave  errors 
of  fact,  but  is  ridiculous  in  its  logic.  It  says  that  the  Government 
should  cease  to  discredit  its  own  currency,  and  yet  the  Democratic 
party  does  not  propose  to  pay  it.  I  suppose  that  the  utmost  discredit 
that  can  be  put  on  any  currency  or  any  promise  to  pay  is  to  refuse  to 
redeem  it.  The  same  platform  which  thus  reproaches  us  for  discredit- 
ing our  currency  proposes  to  issue  three  hundred  and  fifty  millions 
more  of  it,  when  every  note  is  a  broken  promise,  and  every  additional 
issue  will  cause  a  further  depreciation.  But  consistency  can  scarcely 
be  expected  in  a  Democratic  platform.  The  adoption  of  this  proposi- 
tion would  reduce  our  duties  on  imported  goods  to  an  extent  equal  to 
one  half  of  the  discount  of  our  paper  money,  when  compared  with 
gold,  or  at  this  time  about  seven  per  cent.  !N^ow,  as  a  revenue  measure 
this  is  certainly  a  bad  one,  when  our  present  income  is  barely  sufficient 
to  meet  our  expenditures.  But  a  still  graver  objection  to  this  resolu- 
tion exists.  By  the  law  as  it  now  stands,  passed  in  February,  1862, 
and  upon  which  every  bond  of  the  United  States  now  outstanding  was 
issued — the  very  foundation  of  our  public  credit — it  was  provided  : 

Section  5.  That  all  duties  on  imported  goods  shall  be  paid  in  coin,  .  .  .  and 
the  coin  so  paid  sliall  be  set  apart  as  a  special  fund,  and  shall  be  applied  as  follows: 

1.  To  the  payiiieut  in  coin  of  the  interest  on  the  bonds  and  notes  of  the  United 
States. 

2.  To  the  purchase  and  payment  of  one  per  centum  of  the  entire  debt  of  the 
United  States,  to  be  made  witliin  each  fiscal  year  after  1862,  which  is  to  be  set  apart 
as  a  sinking  fund,  and  the  interest  of  which  shall  in  like  manner  go  to  the  jjurchase 
or  payment  of  the  public  debt. 

3.  The  residue  thereof  to  be  paid  into  the  Treasury  of  the  United  States. 

Now,  fellow  citizens,  nnder  this  law  the  United  States  has  acted, 
and  is  compelled  to  act  until  the  public  debt  shall  be  paid.  Under  it  all 
duties  on  imported  goods  are  paid  in  gold,  and  these  duties  now  yield 
us  #  revenue  of  about  $160,000,000  in  gold.  This  money  is  mortgaged 
to  the  public  creditors,  and  we  dare  not  violate  that  pledge  at  the  cost 
of  national  dishonor.  Of  this  money,  something  over  $100,000,000  a 
year  is  recpiired  to  pay  the  interest  on  your  public  debt.  Over  $30,- 
000,000  is  required  for  what  is  called  the  sinking  fund,  for  the  gradual 
redemption  of  the  debt.  We  have  other  exjDcnditures  which  must  be 
paid  in  gold — such  as  our  foreign  intercourse,  and  our  navy,  when 
abroad.  This  will  leave,  perhaps^  $25,000,000  to  $30,000,000  of  gold, 
which  is  paid  into  the  Treasury,  and  is  sold  for  United  States  notes, 
and  the  proceeds  used  for  current  expenditures.  Now,  this  resolution 
demands  that  this  gold,  thus  sacredly  pledged,  shall  be  diverted,  in  vio- 
lation of  your  public  faith.  And  for  what  ?  To  reduce  the  duties  or 
taxes  on  foreign  goods  seven  per  cent.  !  No  language  is  strong  enough 
to  denounce  such  a  policy.  A  small  portion  of  this  fund,  about  twenty- 
five  millions,  may  be  used  for  any  proper  jjurpose  of  expenditure ;  and 
therefore  Judge  Thurman,  last  winter,  proposed  to  receive  one  fifth  of 
the  customs  duties  in  currency.  But  even  this  was  opposed,  on  the 
ground  that  it  would  impair  the  trust  fund,  and  as  against  public  policy. 


490  SPEECHES   AND   EEPOETS   OF   JOIIX   SHERMAN. 

Senator  Bayard,  of  Delaware,  a  leading  Democrat,  took  strong  ground 
against  it,  and  it  was  overwhelmingly  defeated.  Now  tlie  Ohio  Demo- 
crats propose  to  surrender  one  half  of  our  gold  revenue,  to  dishonor 
our  pledges,  and  to  drive  the  Secretary  of  the  Treasury  into  the  market 
to  buy  gold  with  which  to  pay  the  interest ;  and  all  to  lower  the  duties 
that  yield  our  revenues  and  protect  our  industries. 

The  eleventh  resolution  in  this  platform  is  only  important  in  that 
it  promises  you,  in  place  of  your  national  banks,  a  system  of  free  banks 
of  discount  and  deposit ;  in  other  words,  broker-shops.  Xo  doubt  these 
are  a  great  blessing,  but  I  think  we  have  now  enough  of  them.  At  all 
events,  we  have  now  in  every  State  the  right  to  go  into  the  brokerage 
business,  free  from  all  restraints ;  and  -we  need  not  place  the  Demo- 
cratic party  in  power  for  the  purpose  of  gaining  this  great  blessing. 

The  only  other  financial  plank  in  this  platform  is  very  brief  : 

Twelfth — A  tariff  for  the  sole  purpose  of  revenue. 

This  resolution  is  a  blow  at  that  system  of  tariff  laws  which  had  its 
origin  in  Washington's  administration,  and  has  been  continued  ever 
since,  varied  in  details,  but  retained  in  principle,  and  strengthened  and 
improved  by  the  Republican  party ;  and  Avhich,  while  looking  to  im- 
ported goods  as  the  chief  source  of  Federal  revenue,  also  regards  the 
fostering  and  protection  of  domestic  industry  as  a  national  object,  in- 
cident to  all  revenue  laws,  and  deserving  of  the  most  considerate  and 
favorable  care.  If  that  be  the  meaning  of  the  resolution,  we  accept  the 
issue  promptly.  We  do  seek,  while  levying  taxes,  not  only  to  make 
their  operation  as  light  and  just  as  possible,  but  also  to  advance  our  own 
industry  without  impairing  the  sources  of  revenue.  In  this  sense  we 
are  for  the  protection  of  American  industry,  and  proudly  point  to  the 
vast  development  of  our  home  manufactures  as  the  result  of  Republi- 
can policy.  I  do  not  think  it  necessary,  before  you,  to  enter  into  the 
common  arguments  that  have  been  made  upon  this  subject,  for  I  know 
you  are  familiar  with  them.  I  have  always  regarded  a  tariff  law  as  a 
subject,  not  of  political  dispute,  but  for  the  application  of  good,  com- 
mon sense  in  the  adjustment  of  the  details — applying  the  higher  duties 
to  articles  of  luxury,  fair  average  duties  on  articles  that  come  into  com- 
petition with  our  own  industries,  and  low  duties,  or  none  at  all,  on  those 
of  common  necessity,  which  either  can  not  be  economically  produced 
here,  or  enter  as  raw  articles  into  our  domestic  manufactures.  In  pass- 
ing such  a  tariff,  we  do  look  to  something  else  than  the  mere  money 
we  wring  from  our  people  as  taxes. 

Take  this  whole  financial  platform  of  the  Democratic  party,  and  it 
opens  up  to  you  the  most  dangerous  errors,  the  wildest  clemagogism, 
the  greatest  departure  not  only  from  fundamental  principles  of  public 
policy,  but  from  cherished  principles  of  the  Democratic  party.  We 
already  hear  the  voice  of  remonstrance,  the  cry  of  alarm  from  all  parts 
of  the  United  States.     The  question  is.  What  will  they  do  with  it  i 

Governor  Allen,  much  to  the  surprise  of  some  of  his  friends, 
readily  yields  his  old  convictions,  and,  if  I  understand  his  speeches  at 
Newark  and  Gallipolis,  adopts  the  whole  platform.  Many  of  the 
Democratic  papers,  however,  oj^enly  repudiate  it.     The  Democratic 


THE  CURRENCY.  491 

editor  in  the  city  in  whicli  I  live,  and  who  is  in  every  respect  a  very 
excellent  man,  rejects  the  platform  and  supports  Governor  Allen  in 
his  hard-money  records  of  forty  years  ago.  But,  fellow  citizens,  politi- 
cal contests  are  not  decided  by  candidates,  editors,  or  office-holders ;  it 
is  by  the  quiet,  intelligent  judgment  of  moderate  men,  who  sensibly 
weigh  questions  of  public  policy,  and  who  are  above  party  dictation. 
It  is  this  body  of  independent  men  who  give  the  ebb  and  tiow  to  party 
politics  in  Ohio ;  it  is  to  them  I  appeal  with  confidence,  to  give  their 
seal  of  condemnation  to  the  dangerous  doctrines  contained  in  the  Dem- 
ocratic platform. 

To  my  Republican  associates  I  can  speak  with  confidence  and  hope. 
We  have  a  State  ticket  every  name  on  which  must  command  your  sin- 
cere respect.  We  have  a  platform  that  speaks  no  uncertain  sound,  and 
meets  our  approbation.  We  are  united  on  the  wise  and  moderate 
financial  policy  which  has  hitherto  guided  our  party  and  sustained  the 
public  faith  and  the  public  credit,  which  has  given  us  ample  means  to 
carry  on  a  great  war  and  build  up  our  industries,  and  wdiich  has  now 
for  the  first  time  j^rovided  for  us  a  safe  national  currency,  needing  only 
one  attribute  to  make  it  perfect,  while  now  we  are  agreed  on  a  slow 
and  steady  progress  to  make  that  currency  equal  to  gold.  What  more 
do  we  want,  my  Republican  friends,  than  to  march  forward  with  unity, 
confidence,  and  strength?  You  may  here  and  there  find  men  who 
falter  or  discover  faults  to  criticise  ;  your  officers  and  agents  may  fail ; 
but  your  cause  is  good  and  your  work  is  honorable — not  free  from 
faults,  but  better  than  that  of  any  party  that  preceded  it. 

See,  now,  this  broad  country  of  ours.  United  we  stand.  Many  of 
our  ancient  enemies  now  glory  in  our  success.  The  prayers  of  four 
millions  of  freedmen  rise  perpetually  to  Almighty  God  for  the  Repub- 
lican party.  Great  names  adorn  our  history,  written  there  by  us. 
Memorable  events  for  fifteen  years  have  lifted  our  country  from  a  con- 
federacy of  discordant  States — left  by  a  Democratic  administration  to 
the  chances  of  civil  war — to  the  position  of  a  nation  of  the  highest 
rank,  destined  to  mold  a  continent  and  to  guide  a  world  to  free  insti- 
tutions. Let  us  not  apologize  to  our  adversaries  for  the  faults  that 
are  human,  nor  examine  with  a  microscope  the  failings  of  friends.  If 
only  the  great  objects  we  have  sought,  the  good  measures  we  have 
accomplished,  and  the  policy  marked  out  for  us  are,  on  the  whole, 
wiser  and  better  than  are  proposed  by  our  adversaries,  then  our  path 
of  duty  is  with  the  Republican  party.  Inspire  it,  if  you  please,  with 
better  principles,  with  higher  aims,  and  by  a  good  example  ;  but  rest 
assured  that  you  must  rely  upon  that  party  for  any  progress  that  is 
made  in  framing  or  executing  good  laws.  And,  fellow  citizens,  you 
who  have  at  any  time  acted  with  the  Republican  party,  during  the  war 
or  since  the  war,  and  from  whatever  cause  have  been  dissatisfied  with  the 
party  to  which  you  belonged,  let  us  come  together  again.  We  have  for- 
given the  rebels  ;  let  us  forgive  each  other.  I  am  liberal  enough  to  confess 
that  tlie  Republican  party  has  committed  some  errors.  And  I  am 
Republican  enough  to  know  that  its  history,  its  principles,  its  policy, 
and  its  tendencies  give  us  the  best  assurance  for  an  honest  and  able 
administration  of  the  ^National  and  State  Governments. 


492  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

NATIONAL  FINANCES— SPECIE  PAYMENTS. 

IN  THE  SENATE,  MARCH  6,  1876. 

Oif  the  motion  to  refer  the  resolutions  of  the  Chamber  of  Commerce  of  the 
State  of  New  York,  relative  to  the  national  finances,  and  in  favor  of  the  resumption 
of  specie  payments,  at  the  time  now  provided  by  law,  Mr.  Sherman  said  : 

Mr.  President  :  I  have  taken  the  unusual  course  of  arresting  the 
reference  to  the  Committee  on  Finance  of  the  memorial  of  the  Cham- 
ber of  Commerce  of  New  York  in  order  to  discuss  in  an  impersonal 
and  non-partisan  way  one  of  the  questions  presented  by  that  memorial, 
and  one  which  now  tills  the  public  mind  and  must  necessarily  soon, 
occupy  our  attention.  That  question  is,  "  Ought  the  resumption  act 
of  1875  to  be  repealed  ?"  The  memorial  strongly  opposes  such  repeal, 
while  other  memorials,  and  notably  those  from  the  Boards  of  Trade  of 
New  York  and  Toledo,  advocate  it.  These  opposing  views  are  sup- 
ported in  each  House  of  Congress,  and  will,  w4ieu  our  time  is  ipore 
occupied  than  now,  demand  our  vote. 

And,  sir,  we  are  forced  to  consider  this  question  when  the  law  it  is 
proposed  to  repeal  is  only  commencing  to  operate,  now,  three  years 
before  it  can  have  full  effect — during  all  of  which  time  its  operation 
will  be  under  your  eye  and  within  your  power — and  while  the  passions 
of  men  are  heated  by  a  presidential  combat,  when  a  grave  question, 
affecting  the  interests  of  every  citizen  of  the  United  States,  will  be  in- 
fluenced by  motives  entirely  foreign  to  the  merits  of  the  proposition. 

And  the  question  presented  is  not  as  to  the  best  means  of  securing 
the  resumption  of  a  specie  standard,  but  solely  whether  the  only  mea- 
sure that  promises  that  result  shall  be  repealed.  AYe  know  there  is  a 
wide  and  honest  diversity  of  opinion  as  to  the  agency  and  means  to 
secure  a  specie  standard.  When  any  practicable  scheme  to  that  end  is 
proposed  I  am  ready  to  examine  it  on  its  merits  ;  but  we  are  not  con- 
sidering the  best  mode  of  doing  the  thing,  but  whether  instead  we 
will  recede  from  the  promise  made  by  the  law  as  it  stands,  as  well  as 
refuse  all  means  to  execute  that  promise.  If  the  law  is  deficient  in  any 
respect  it  is  open  to  amendment.  If  the  powers  vested  in  the  Secre- 
tary are  not  sufficient,  or  you  wish  to  limit  or  enlarge  them,  he  is  your 
servant,  and  you  have  but  to  speak  and  he  obeys.  It  is  not  whether 
we  will  accumulate  gold  or  greenbacks  or  convert  our  notes  into  bonds, 
nor  whether  tlie  time  to  resume  is  too  early  or  too  late.  All  these  are 
subjects  of  legislation.  But  the  question  now  is  whether  we  will  or 
will  not  repudiate  the  legislative  declaration,  made  in  the  act  of  1S75, 
to  redeem  the  promise  made  and  printed  on  the  face  of  every  United 
States  note,  a  promise  made  in  the  midst  of  war,  when  our  nation  was 
struggling  for  existence,  a  promise  renewed  m  March,  1869,  in  the 
most  unequivocal  language,  and  finally,  by  the  act  of  1875,  made  spe- 
cific as  to  time. 

And  let  us  not  deceive  ourselves  by  supposing  that  those  who  oppose 
this  repeal  are  in  favor  of  a  purely  metallic  currency,  to  the  exclusion 
of  paper  currency,  for  all  intelligent  men  agree  that  every  great  com- 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  493 

mercial  nation  must  have  both :  the  one  as  the  standard  of  value  by 
which  all  things  are  measured,  which  daily  measures  your  bonds  and 
notes  as  it  measures  wheat,  cotton,  and  land  ;  and  the  other  as  a  paper 
or  credit  currency,  which,  from  its  convenience  of  handling  or  transfer, 
must  be  the  medium  of  exchanges  in  the  great  body  of  the  business  of 
life.  Statistics  show  that  in  commercial  countries  a  large  proportion  of 
all  transfers  is  by  book  accounts  and  notes,  and  more  than  nine  tenths 
of  all  the  residue  of  payments  is  by  checks,  drafts,  and  such  paper  tools 
of  exchange.  Of  the  vast  business  done  in  New  York  and  London, 
not  live  per  cent,  is  done  with  either  paper  money,  or  gold  or  silver, 
but  by  the  mere  balancing  of  accounts,  or  exchange  of  credits.  And 
this  will  be  so  whether  your  paper  money  is  worth  forty  per  cent,  or 
one  hundred  per  cent,  in  gold.  The  only  question  is,  whether  in  using 
paper  money  we  will  or  will  not  have  that  which  is  as  good  as  it  prom- 
ises— as  good  as  that  of  Great  Britain,  France,  or  Germany,  as  good  as 
coin  issued  from  your  mints — or  whether  we  will  or  will  not  content 
ourselves  with  depreciated  paper  money,  worth  ten  per  cent,  less  than 
it  promises,  every  dollar  of  which  daily  tells  your  constituents  that  the 
United  States  is  not  rich  enough  to  pay  more  than  ninety  per  cent,  on 
the  dollar  for  its  three  hundred  and  seventy  millions  of  promises  to  pay, 
or  that  you  have  not  courage  enough  to  stand  by  your  promise  to  make 
the  payment. 

Nor  are  we  to  decide  whether  our  paper  money  shall  be  issued  di- 
rectly by  the  Government  or  by  banks  created  by  the  Government ;  nor 
whether  at  a  future  time  the  legal-tender  quality  of  United  States  notes 
shall  continue.  I  am  one  of  those  who  believe  that  a  United  States 
note  issued  directly  by  the  Government  and  convertible  on  demand 
into  gold  coin,  or  a  Government  bond  equal  in  value  to  gold,  is  the 
best  currency  we  can  adopt ;  that  it  is  to  be  tlie  currency  of  the  future, 
not  only  in  the  United  States,  but  in  Great  Britain  as  well ;  and  that 
such  a  currency  might  properly  continue  to  be  a  legal  tender  except 
where  there  is  a  specific  stipulation  for  coin. 

But  these  are  not  the  questions  we  are  to  deal  with.  It  is  whether 
the  promise  of  the  law,  that  the  United  States  shall  pay  such  of  its 
notes  as  are  presented  on  and  after  the  1st  day  of  January,  1879,  in 
coin,  shall  or  shall  not  be  fulfilled ;  and  whether  the  national  banks 
will  or  will  not,  at  the  same  time,  redeem  their  notes  either  in  coin  or 
in  United  States  notes  made  eqaai  to  coin ;  or  whether  the  United 
States  shall  or  shall  not  revoke  its  promise  and  continue  for  an  indefi- 
nite period  to  force  upon  the  people  a  depreciated  currency,  always 
below  the  legal  standard  of  gold,  and  fluctuating  daily  in  its  deprecia- 
tion as  Congress  may  threaten  or  promise,  or  sjDeculators  may  hoard,  or 
corner,  or  throw  out  your  broken  promises.  It  is  the  turning-point  in 
our  financial  history,  which  will  senously  affect  the  life  of  individuals 
and  the  fate  of  parties,  but,  more  than  all,  the  honor  and  good  faith  of 
our  country. 

At  the  beginning  of  our  national  existence,  our  ancestors  boldly  and 
hopefully  assumed  the  burden  of  a  great  national  debt,  formed  of  the 
debts  of  the  old  confederation  and  of  the  States  that  composed  it ;  and, 
with  a  scattered  population  and  feeble  resources,  they  honestly  met  and 


4:94  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

paid,  in  good  solid  coin,  every  obligation.  After  the  war  of  1812,  which 
exhausted  our  resources,  destroyed  our  commerce,  and  greatly  increased 
our  obligations,  a  Republican  administration  boldly  funded  our  debt, 
placed  its  currency  upon  the  coin  basis,  promptly  paid  its  interest,  and 
reduced  the  principal ;  and  within  twenty  years  after  that  war  was  over, 
under  the  first  Democratic  President,  it  paid  the  debt  in  coin,  both 
principal  and  interest,  to  the  last  dollar.  And  now,  eleven  years  after 
a  greater  war,  of  grander  proportions,  in  which  not  merely  foreign 
domination  threatened  us,  but  the  very  existence  of  our  nation  was  at 
stake,  and  after  our  cause  has  been  blessed  with  unexampled  success, 
with  a  country  teeming  with  wealth,  with  our  credit  equal  to  that  of 
any  nation,  we  are  debating  whether  we  will  or  will  not  redeem  our 
promises  according  to  their  legal  tenor  and  effect,  or,  instead,  to  attempt 
their  repeal  and  cancellation. 

I  invoke  in  the  consideration  of  this  question  the  example  of  those 
who  won  our  independence  and  preserved  it  to  us,  that  it  may  inspire 
us  to  so  decide  this  question  that  those  who  come  after  us  may  point 
to  our  example  of  standing  by  the  public  faith  now  solemnly  pledged, 
even  though  to  do  so  may  not  run  current  with  the  temporary  pressure 
of  the  hour  or  may  entail  on  us  some  sacrifice  and  hardship.- 

What  then  is  the  law  it  is  proposed  to  repeal  ?  I  will  state  its  pro- 
visions f  ally  in  detail ;  but  the  main  proposition — the  essential  core  of 
the  whole — is  the  j^romise  to  which  the  public  faith  is  pledged,  that 
the  United  States  will,  on  and  after  the  1st  day  of  January,  1879,  re- 
deem in  gold  coin  any  of  its  notes  that  may  be  presented  to  the  Trea- 
sury. This  is  the  vital  object  of  the  law.  It  does  not  undertake  to 
settle  the  nature  of  our  paper  money  after  that,  whether  it  shall  or  shall 
not  be  reissued  again,  whether  it  shall  or  shall  not  thereafter  be  a  legal 
tender,  nor  whether  it  shall  or  shall  not  supersede  bank  notes.  All  this 
is  purposely  left  to  the  future.  But  it  does  say  that,  on  and  after  that 
day,  the  United  States  note  promising  to  jDay  one  dollar  shall  be  equal 
to  the  gold  dollar  of  the  Mint. 

The  questions  then  arise  : 

1.  Ought  this  promise  to  be  performed  ? 

2.  Can  we  perform  it  ? 

3.  Are  the  agencies  and  measures  prescribed  in  the  law  sufficient 
for  the  purpose  ? 

4.  If  not,  what  additional  measures  should  be  provided  ? 

Let  us  consider  these  questions  in  their  order  with  all  serious  delib- 
eration that  their  conceded  importance  demands. 

And  first,  ought  this  promise  to  be  fulfilled  ? 

To  answer  this  we  must  fully  understand  the  legal  and  moral  obli- 
gations contained  in  the  notes  of  the  United  States.  The  purport  of 
the  note  is  as  follows  : 

The  United  States  promises  to  pay  the  bearer  one  dollar. 

Tliis  note  is  a  promise  to  pay  one  dollar.  The  legal  effect  of  this 
note  has  been  announced  by  the  unanimous  opinion  of  the  Supreme 
Court  of  the  United  States,  the  highest  and  final  judicial  authority  in 
our  Government. 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  495 

The  legal-tender  attribute,  given  to  tlie  note,  lias  been  the  subject 
of  conflicting  decisions  in  that  court,  but  the  nature  and  purport  of  it 
is  not  only  plain  on  its  face,  but  is  concurred  in  bj  every  judge  of  that 
court  and  by  every  judicial  tribunal  before  which  that  question  has 
been  presented. 

In  the  case  of  Bank  vs.  Supervisors,  7  Wallace,  31,  Chief  Justice 
Chase  says : 

But,  on  the  other  hand,  it  is  equally  clear  that  these  notes  are  obligations  of  the 
United  States.  Their  name  imports  obligation.  Every  one  of  them  expresses  upon 
its  face  an  engagement  of  the  nation  to  pay  to  the  bearer  a  certain  sum.  The  dol- 
lar note  is  an  engagement  to  pay  a  dollar,  and  the  dollar  intended  is  the  coined  dol- 
lar of  the  United  States,  a  certain  quantity  in  weight  and  fineness  of  gold  or  silver, 
authenticated  as  such  by  the  stamp  of  the  Government,  No  other  dollars  had  be- 
fore been  recognized  by  the  legislation  of  the  National  Government  as  lawful  money. 

Again,  in  the  case  of  Bronson  vs.  Rhodes,  7  Wallace,  251,  Chief 
Justice  Chase  says : 

The  note  dollar  was  the  promise  to  pay  a  coined  dollar. 
In  the  legal-tender  cases,  12  Wallace,  560,  Justice  Bradley  says : 

It  is  not  an  attempt  to  coin  money  ont  of  a  valueless  material,  like  the  coinage 
of  leather,  or  ivory,  or  cowry  shells.  It  is  a  pledge  of  the  national  credit.  It  is  a 
promise  by  the  Government  to  pay  dollars ;  it  is  not  an  attempt  to  mal'e  dollars. 
The  standard  of  value  is  not  changed.  The  Government  simply  demands  that  its 
credit  shall  be  accepted  and  received  by  public  and  private  creditors  during  the 
pending  exigency.  .  .  . 

No  one  supposes  that  these  Government  certificates  are  never  to  be  paid ;  that 
the  day  of  specie  payments  is  never  to  return.  And  it  matters  not  in  what  form 
they  arc  issued.  .  .  .  Through  whatever  changes  they  pass,  their  ultimate  destiny 
is  to  he  paid. 

In  all  these  legal-tender  cases,  there  is  not  a  word  in  conflict  with 
these  opinions. 

Thus,  then,  it  is  settled  that  this  note  is  not  a  dollar,  but  a  debt  due  ; 
a  promise  to  pay  a  dollar  in  gold  coin.  Congress  may  define  the  weight 
and  fineness  of  a  dollar,  and  it  has  done  so  by  providing  a  gold  coin 
weighing  25^^  grains  of  standard  gold  -^-^  fine.  The  promise  is  specific 
and  exact,  and  its  nature  is  fixed  by  the  law  and  announced  by  the 
court.  Here  I  might  rest,  as  to  the  nature  of  the  United  States  note  ; 
but  it  is  proper  that  I  state  the  law  under  which  it  was  issued  and  the 
subsequent  laws  relating  to  it. 

The  act  of  February  25,  1862,  gave  birth  to  this  note  as  well  as  to 
tlie  whole  financial  policy  of  the  war.  The  first  section  of  that  act  au- 
thorizes the  Secretary  of  the  Treasuiy  to  issue,  upon  the  credit  of  the 
nation.  United  States  notes  to  the  amount  of  8150,000,000,  payable  to 
bearer  at  the  Treasury  of  the  United  States.  The  amount  of  these 
notes  was  subsequently  increased  during  the  war  to  the  maximum  sum 
of  §450,000,000,  but  tlie  nature  and  character  of  the  notes  was  the  same 
as  of  the  first  issue.  The  enlargement  of  the  issue  did  not  in  the  least 
affect  the  obligation  of  the  United  States  to  pay  them  in  coin.  This 
obligation  was  recognized  in  every  loan  law  passed  during  the  war ; 
and  to  secure  the  note  from  depreciation  the  amount  was  carefully 
limited,  and  every  quality  was  added  to  maintain  its  value,  that  was 
possible  during  the  exigencies  of  the  war.    I  might  show  you,  from  the 


496  SPEECHES   AND   REPORTS   OF  JOHN  SHERMAN. 

contemporaneous  debates  in  Congress,  that  at  every  step  of  the  war  the 
notes  were  regarded  as  a  temporary  loan,  in  the  nature  of  a  forced  loan, 
but  a  loan  cheerfully  borne,  but  to  be  redeemed  soon  after  the  war  was 
over.  It  was  not  until  two  years  after  the  war,  when  the  advancing 
value  of  the  note  created  an  interest  to  depreciate  it  to  advance  prices 
for  spaculative  purposes,  that  there  was  any  suggestion  of  putting  off 
the  payment  of  the  note.  The  policy  of  a  gradual  contraction  of  the 
currency  with  a  view  to  specie  payments  was,  in  December,  1865,  con- 
curred in  by  the  almost  unanimous  vote  of  the  House  of  Representa- 
tives, and  the  act  of  April  12,  1866,  authorized  the  retiring  and  cancel- 
lation each  month  of  $1,000,000  in  notes.  No  one  then  questioned  the 
policy,  the  duty,  or  the  obligation  of  the  United  States  to  redeem  these 
notes  in  coin. 

Why  has  not  this  duty  been  performed  ?  How  comes  it  that,  four- 
teen years  after  these  notes  have  been  issued,  and  eleven  years  after 
the  exigency  is  over,  we  are  debating  whether  they  shall  or  shall  not  be 
paid,  and  when  they  shall  be  j)aid  ?  We  may  well  pause  to  examine 
how  this  plain  and  positive  obligation  has  so  long  been  deferred  by  a 
nation  always  sensitive  to  the  public  honor. 

The  fatal  commencement  of  this  long  delay  was  in  this  provision  of 
the  act  approved  March  3,  1863,  as  follows : 

And  the  holders  of  United  States  notes  issued  under  and  by  virtue  of  said  acts 
shall  present  the  same  for  the  purpose  of  exchanging  the  same  for  bonds  as  therein 
provided  on  or  before  the  1st  day  of  July,  1863,  and  thereafter  the  right  so  to  ex- 
change the  same  shall  cease  and  determine. 

Thus,  under  the  pressure  of  war,  and  the  plausible  pretext  of  a  stat- 
ute of  limitations,  the  most  essential  legal  attribute  of  the  note  was  taken 
away.  This  act,  though  convenient  in  its  temporary  results,  was  a  most 
fatal  step,  and  for  my  part,  in  acquiescing  in  and  voting  for  it,  I  have 
felt  more  regret  than  for  any  other  act  of  my  official  life.  But  it  must 
be  remembered  that  the  object  of  this  provision  was  not  to  prevent  the 
conversion  of  notes  into  bonds,  but  to  induce  their  conversion.  It  was 
the  policy  and  need  of  the  Government  to  induce  its  citizens  to  ex- 
change the  notes  freely  for  the  bonds,  so  that  the  notes  might  again  be 
paid  out  to  meet  the  pressing  demands  of  the  war.  It  was  believed 
that  if  this  right  to  conv^ert  them  was  limited,  in  time  this  would  cause 
them  to  be  more  freely  funded ;  and  Mr.  Chase,  then  Secretary  of  the 
Treasury,  anxious  to  prevent  a  too  large  increase  of  the  interest  on  the 
public  debt,  desired  to  place  in  market  a  five  per  cent,  bond  instead  of 
a  six  per  cent.  bond.  The  fatal  error  was  in  not  changing  the  right  to 
convert  the  note  into  a  five  per  cent,  bond  instead  of  a  six  per  cent, 
bond.  This  was,  in  fact,  proposed  in  the  Committee  on  Finance ;  but 
it  was  said  that  a  right  to  convert  a  note  into  a  bond  at  any  time  was 
not  so  likely  to  be  exercised  as  it  would  be  if  it  could  only  be  exercised 
at  the  pleasure  of  the  Government.  And  this  plausible  theory  to  in- 
duce the  conversion  of  notes  into  bonds  was  made  the  basis,  after  the 
war  was  over,  for  the  refusal  of  the  United  States  to  allow  the  conver- 
sion of  its  notes  into  bonds,  and  has  been  the  fruitful  cause  of  the  con- 
tinued depreciation  and  dishonor  of  United  States  notes  during  the  last 
five  years,  while  our  five  per  cent,  bonds  have  been  at  par  with  gold, 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  497 

and  while  our  notes  rise  and  fall  in  the  gamut  of  depreciation  from  six 
to  twenty-two  per  cent,  below  gold. 

Although  the  right  to  convert  notes  into  bonds  was  taken  away,  yet 
in  fact  they  were  during  the  war  received,  par  for  par,  for  bonds ;  and 
after  the  war  was  over  all  the  interest-bearing  securities  were  converted 
into  bonds ;  but  the  notes — the  money  of  the  people — the  artificial 
measure  of  value,  the  most  sacred  obligation,  because  it  was  past  due, 
was  refused  either  payment  or  conversion,  thus  cutting  it  off  from  the 
full  benefit  of  the  advancing  credit  of  the  Govemment,  and  leaving  to 
it  only  the  forced  quality  of  legal  tender  in  payment  of  debts. 

Shortly  after  the  war  was  over,  and  notably  during  the  presidential 
campaign  of  1868,  the  question  arose  as  to  whether  the  bonds  of  the 
United  States  were  or  were  not  payable  in  coin  or  United  States  notes. 
Both  notes  and  bonds  were  then  below  par  in  coin,  the  notes  ranging 
from  sixty-seven  to  seventy-five  cents  in  coin ;  and  five  per  cent,  bonds 
from  seventy-two  to  eighty  cents  in  coin.  Here  again  the  opportunity 
was  lost  to  secure  the  easy  and  natural  appreciation  of  our  notes  to  the 
gold  standard.  Had  Congress  then  authorized  the  conversion  of  notes 
into  bonds  when  both  were  dej^reciated,  both  would  have  advanced  to 
par  in  gold ;  but  on  the  one  hand  it  was  urged  that  this  would  cause  a 
rapid  contraction,  and  on  the  other  that  the  right  to  convert  a  note  into 
a  bond  was  not  specie  pajnnent,  but  only  the  exchange  of  one  promise 
for  another.  It  was  specie  payment  they  decidedly  favored,  but  that 
they  did  not  have  the  wisdom  then  to  secure.  If  the  advocates  for 
specie  payment  had  then  supported  a  restoration  of  the  right  to  convert 
notes  into  bonds,  they  would  have  secured  their  object  with  but  little 
opposition.  But  all  measures  to  fund  the  notes  at  the  pleasure  of  the 
holder  were  defeated,  and  instead  there  was  ingrafted  into  the  act  to 
strengthen  the  public  credit — 

First,  a  declaration  "  that  the  faith  of  the  United  States  is  solemnly 
pledged  to  the  payment  in  coin,  or  its  equivalent,  of  all  the  obligations 
of  the  United  States  not  bearing  interest,  known  as  United  States 
notes,  and  of  all  the  interest-bearing  obligations  of  the  United  States  " 
except  such  as  by  the  law  could  be  paid  in  other  cuiTency  than  gold 
and  silver. 

Second,  "  and  the  United  States  also  solemnly  pledges  its  faith  to 
make  provision,  at  the  earliest  practicable  period,  for  the  redemption 
of  the  United  States  notes  in  coin." 

Here  again  the  obligation  of  fhe  Govemment  to  pay  these  notes  in 
coin  was  recognized,  its  purpose  declared,  and  the  time  fixed,  "  as  early 
as  practicable."  What  was  the  effect  of  this  important  act  of  Con- 
gress ?  Without  adding  one  dollar  to  the  public  debt,  or  the  burden  of 
the  debt,  both  bonds  and  notes  rose  in  value.  Within  one  year  the 
bonds  rose  to  par  in  gold,  making  it  practicable  to  commence  the  re- 
funding of  six  per  cent,  bonds  into  five  per  cent,  bonds.  The  notes 
rose  under  the  stimulus  of  this  new  promise  in  one  year  from  seventy- 
six  cents  to  eighty-nine  cents  in  gold,  but  no  steps  whatever  were  taken 
for  their  redemj)tion. 

The  amount  of  bank  notes  authorized  was  increased  fifty-four  mil- 
lions. The  executive  department  pursued  the  policy  of  redeeming 
32 


498  SPEECHES   AND  REPORTS   OF  JOHN  SHERMAN". 

debts  not  due,  and,  from  an  overflowing  Treasury,  reduced  very  largely 
the  public  debt ;  but  no  steps  whatever  were  taken  to  advance  the 
value  of  our  notes.  The  effect  of  the  act  of  1869  was  exhausted  on 
the  adjournment  of  Congress  in  March,  1870,  when  the  United  States 
notes  were  worth  eighty-nine  cents  in  gold  ;  and  thereabouts,  up  and 
down,  with  many  fluctuations,  they  have  remained  to  this  day.  The 
bond-holder,  secure  in  the  promise  to  him,  is  happy  in  receiving  his 
interest  in  gold,  with  his  bond  above  par  in  gold.  The  note-holder, 
the  farmer,  the  artisan,  the  laborer,  whose  labor  and  production  are 
measured  in  greenbacks,  still  receives  our  dej)reciated  notes  worth  ten 
per  cent,  less  than  the  gold  promised  him  "  at  the  earliest  day  practi- 
cable." The  one  has  a  promise  performed  ;  the  other  a  promise  post- 
poned. 

Thus  w^e  stood  when  the  panic  of  '73  came  upon  us  ;  we  had  then 
more  paper  money  afloat  than  ever  before  circulated  in  any  country  of 
the  world.  Even  then,  had  we  stood  firmly,  the  hoarding  tendency  of 
the  panic  would  have  advanced  our  notes  toward  the  gold  standard  ; 
and  in  fact  it  did  so  during  the  months  of  September  and  October,  and 
until  the  premium  on  gold  had  fallen  to  eight  per  cent.  But,  sir,  at 
this  critical  moment,  the  Secretary  of  the  Treasury,  acting  no  doubt  in 
good  faith,  but  I  think  without  authority  of  law,  issued  twenty-six 
millions  more  United  States  notes — part  of  the  notes  retired  and  can- 
celed under  previous  acts.  And  now,  notwithstanding  all  the  talk 
about  contraction  of  the  currency,  we  have  not  withdrawn  one  half  of 
this  illegal  issue.  On  the  1st  of  September,  1873,  we  had  three  hun- 
dred and  fifty-six  million  notes  outstanding.  Three  months  afterward 
we  had  three  hundred  and  eighty-two  million  ;  and  now  we  have  three 
hundred  and  seventy-one  million. 

Sir,  it  was  under  the  light  of  these  events,  after  the  fullest  discus- 
sion ever  given  in  Congress  to  any  question — after  debate  before  the 
people  during  the  recess  of  Congress,  and  full  deliberation  last  winter — 
that  this  act  was  passed.  There  was  and  is  now  great  difference  of 
opinion  as  to  the  details ;  but  the  vital  promise  made  the  note-holder, 
to  make  his  note  as  good  as  gold  in  January,  1879,  w^as  concurred  in  by 
a  large  majority  of  both  Houses,  many  of  whom  opposed  the  bill  as 
too  slow  in  its  operations.  This  act  of  honor  and  public  faith  was 
applauded  by  the  civilized  world,  and  concurred  in  by  our  constitu- 
ents ;  the  only  doubts  being  as  to  the  machinery  for  carrying  it  into 
effect.  The  time  for  the  act  to  go  into  operation  was  fixed  by  those 
who  most  feared  resumption  ;  but  no  one  proposed  a  remoter  date. 
My  honorable  friend  from  Indiana  [Mr.  Morton]  truly  said  (in  the 
recent  campaign  in  Ohio)  that  he  participated  in  framing  it ;  and  he 
and  those  who  agreed  with  him  fixed  a  time  so  remote  as  to  excite  the 
unfounded  charge  that  the  bill  was  a  sham,  a  mere  contrivance  to 
bridge  an  election. 

And  now,  sir,  to  recapitulate  this  branch  of  the  question  :  It  is 
shown  tliat  the  holder  of  these  notes  has  a  promise  of  the  United 
States,  made  in  February,  1862,  to  pay  him  one  dollar  in  gold  coin ; 
that  the  legal  purj)ort  of  this  promise  has  been  declared  l3y  the  Su- 
preme Court ;  that  we  have  taken  away  from  this  note  one  of  the  legal 


NATIONAL  FINANCES -SPECIE  PAYMENTS.  499 

attributes  given  it,  wlncli  would  long  since  have  secured  its  payment 
in  coin  ;  that  when  the  note  was  authorized  and  issued  it  was  under- 
stood as  redeemable  in  coin  when  the  war  was  over ;  that  our  promise 
to  pay  it  was  renewed  in  1869 — "  at  as  early  a  day  as  practicable  "  ; 
that  by  reason  of  our  failure  to  provide  for  its  payment  it  is  still  depre- 
ciated below  par  more  than  one  tenth  of  its  nominal  value  ;  that  we 
renewed  this  promise  and  made  it  definite  as  to  time  by  the  act  of  18Y5  ; 
and  that  it  is  a  debt  due  from  the  United  States,  and  due  now  in  coin, 
in  law  and  honor.  Yet  it  is  proposed  to  recall  our  promise  to  redeem 
this  note  in  coin  three  years  hence.  I  say,  sir,  this  would  be  national 
dishonor.  It  would  destroy  the  confidence  with  which  the  public  cred- 
itor rests  upon  the  promises  contained  in  your  bonds.  It  would  tend 
to  arrest  the  process  by  which  the  interest  on  your  bonds  is  reduced. 
It  would  accustom  our  people  to  the  substitution  of  a  temporary  wave 
of  popular  opinion  for  its  written  contract  or  promise.  It  would 
weaken  in  the  public  mind  that  keen  sense  of  honor  and  pride  which 
has  always  distinguished  the  English-speaking  nations  in  dealing  with 
public  obligations. 

An  old  writer  thus  describes  "  public  credit  "  : 

Credit  is  a  consequence,  not  a  cause  ;  the  effect  of  a  substance,  not  a  substance ; 
it  is  the  sunshine,  not  the  sun  ;  the  quickening  sometldng,  call  it  what  you  will,  that 
gives  life  to  trade,  gives  being  to  the  branches  and  moisture  to  the  root ;  it  is  the 
oil  of  the  wheels,  the  marrow  in  the  bones,  the  blood  in  the  veins,  and  the  spirits  in 
the  heart  of  all  the  negoce,  trade,  cash,  and  commerce  in  the  world. 

It  is  produced,  and  grows  insensibly,  from  fair  and  upright  dealing,  punctual 
compliance,  honorable  performance  of  contracts  and  covenants ;  in  short,  it  is  the 
offspring  of  universal  probity. 

It  is  apparent  even  by  its  nature  ;  it  is  no  way  dependent  upon  persons,  parlia- 
ment, or  any  particular  men  or  set  of  men  as  such  in  the  world,  but  upon  their  con- 
duct and.  just  behavior.  Credit  never  was  chained  to  men's  names,  but  to  their 
actions ;  not  to  families,  clans,  or  collections  of  men  ;  no,  not  to  nations.  It  is  the 
honor,  the  Justice,  the  fair  dealing,  and  the  equal  conduct  of  men,  bodies  of  men, 
nations,  and  people,  that  raise  the  thing  called  credit  among  them.  Wheresoever 
this  is  found  credit  will  live  and  thrive,  grow  and  increase ;  where  this  is  wanting, 
let  all  the  power  and  wit  of  man  join  together,  they  can  neither  give  her  being  nor 
preserve  her  life. 

Arts  have  been  tried  on  various  occasions  in  the  world  to  raise  credit ;  art  has 
been  found  able  with  more  ease  to  destroy  credit  than  to  raise  it.  The  force  of  art, 
assisted  by  the  punctual,  fair,  and  just  dealing  abovesaid,  may  have  done  much  to 
form  a  credit  upon  the  face  of  things,  but  we  find  still  the  honor  would  have  done 
it  without  the  art,  but  never  the  art  without  the  honor.  Nor  will  money  itself, 
which,  Solomon  says,  answers  all  things,  j)urchase  this  thing  called  credit  or  restore 
it  when  lost.  .  .  . 

Oar  credit  in  this  case  is  a  public  thing.  It  is  rightly  called  by  some  of  our 
writers  national  credit.  The  word  denominates  its  original.  It  is  produced  by  the 
nation's  probity,  the  honor  and  exact  performing  national  engagements. 

And,  sir,  passing  from  considerations  of  public  honor,  which  for- 
bid the  repeal  of  the  act  of  1875,  let  us  now  consider  also  the  reasons 
oi  piiblic  policij  hj  which,  it  is  prohibited.  That  act  was  regarded  as 
the  settlement  of  a  financial  policy,  by  which  at  least  the  party  in 
power  is  bound  and  upon  the  faith  of  which  business  men  have  con- 
ducted their  affairs  and  made  their  contracts.  Debts  have  been  con- 
tracted and  paid  with  the  expectation  that  at  the  time  fixed  the  gold 
standard  would  measure  all  obligations,  and  a  repeal  of  the  act  would 


500  SPEECHES  AITD  EEPORTS  OF  JOHN  SHEPvMAN. 

now  reopen  all  tlie  wild  and  dangerous  scliemes  of  speculation  that 
feed  and  fatten  upon  depreciated  paper  money.  The  influence  that 
secures  this  repeal  will  not  stop  here.  If  we  can  recall  our  promise  to 
pay  our  outstanding  notes,  why  should  we  not  issue  more  ?  If  we  can 
disregard  our  promise  to  pay  them,  wdiy  shall  we  regard  our  promise 
not  to  issue  more  than  $400,000,000  as  stipulated  for  by  the  act  of 
1864  ?  If  we  can  reopen  the  question  of  the  payment  of  our  notes, 
why  may  we  not  reopen  the  question  of  the  payment  of  our  bonds? 
Is  the  act  of  1869  any  more  sacred  than  the  act  of  1875  ?  If  we  re- 
open these  questions,  why  not  reopen  the  laws  requiring  the  payment 
of  either  interest  or  principal  of  the  public  debt  ?  They  rest  upon  acts 
of  Congress  which  we  have  power  to  repeal.  If  the  public  honor  can 
not  protect  our  promise  to  the  note-holder,  how  shall  it  protect  our 
promise  to  the  bond-holder  ?  Already  do  we  see  advocated  in  high 
places,  by  numerous  and  formidable  organizations,  all  forms  of  repudia- 
tion, which,  if  adopted,  would  reduce  the  credit  of  our  nation  to  that 
of  a  robber  chief — to  a  credit  worse  than  that  of  an  Algerine  pirate, 
who  at  least  would  not  plunder  his  own  countrymen.  And  if  the  pub- 
lic creditor  has  no  safety,  what  chance  can  the  national  banks — crea- 
tions of  our  own  and  subject  to  our  will — have  in  Congress  ?  It  is  al- 
ready proposed  to  confiscate  their  bonds,  premium  and  all,  as  a  mode 
of  paying  their  notes  with  greenbacks.  What  expedient  so  easy  if  we 
would  make  money  cheap  and  abundant  ?  Or,  if  so  extreme  a  measure 
could  be  arrested,  what  is  to  prevent  the  permanent  dethronement  of 
gold  as  a  measure  of  value,  and  the  substitution  of  an  interconvertible 
currency  bond  bearing  3*65  per  cent,  interest  as  a  standard  of  value ; 
and,  when  it  becomes  too  expensive  to  print  the  notes  to  pay  the  inter- 
est, reduce  the  rate?  AVhy  not?  Why  pay  3*65  per  cent,  when  it  is 
easier  to  print  3  per  cent.  ?  It  is  but  an  act  of  Congress.  And  when 
the  process  of  repudiation  goes  so  far  that  your  notes  will  not  buy 
bread,  why  then  declare  against  all  interest,  and  then,  after  passing 
through  the  valley  of  humiliation,  return  again  to  barter,  and  honor, 
and  gold. 

Sir,  there  is  but  one  end  if  you  once  commence  this  downward 
course  of  repudiation.  You  may,  like  Mirabeau  and  the  Girondists, 
seek  to  stem  the  torrent,  but  you  will  be  swept  away  by  the  spirit  you 
have  evoked  and  the  instruments  you  have  created.  You  complain 
now  of  a  want  of  confidence,  and  that  this  want  makes  men  hoard  their 
money.  Will  you,  then,  destroy  all  confidence  ?  l^o,  sir,  no  ;  the 
way  to  restore-  confidence  is  to  inspire  it ;  and  this  can  be  done  by  ful- 
filling your  obligations.  You  can  not  make  men  lend  to  you  ;  you  can 
not  make  them  sell  to  you  anything — either  bread,  or  meat,  or  wool,  or 
iron,  or  anything  that  is  or  that  can  be  created — except  for  that  which 
they  choose  to  take.  You  may  depreciate  the  money  which  you  offer, 
but  it  will  only  take  the  more  of  it  to  buy  what  you  want.  It  is  trae 
that  the  creditor  may,  by  your  laws,  be  compelled  to  take  your  money, 
however  much  you  depreciate  it ;  but  he  can  not  buy  back  with  it  that 
which  he  sold,  or  its  equivalent  in  other  necessaries  of  life ;  and  thus 
he  is  cheated  of  part  of  what  he  sold.  During  the  war,  while  money 
was  depreciating,  many  a  simple  man  gleefully  counted  his  gains  as  he 


Is^ATIONAL  FINANCES— SPECIE  PAYMENTS.  501 

sold  liis  goods  or  crops  at  advancing  prices ;  but  he  found  out  liis  mis- 
take when  with  his  swollen  pile  he  tried  to  replace  his  stock  in  trade, 
or  to  lay  in  his  supplies.  Sir,  this  policy  exhausts  itself  in  cheating 
the  man  who  buys  or  sells  or  loans  on  credit,  who  produces  something 
to  sell  on  credit ;  whether  that  something  be  or  be  not  food  or  clothing ; 
whether  it  be  or  be  not  a  necessity  or  a  luxury  of  life.  Productive 
labor,  honest  toil,  whether  of  the  farmer  or  the  artisan,  is  deeply  inter- 
ested in  credit.  It  is  credit  that  gives  life  and  competition  to  trade  ; 
and  credit  is  destroyed  by  every  scheme  that  impairs,  delays,  or  even 
clouds  an  obligation. 

Again,  sir,  an  irredeemable  and  fluctuating  currency  always  raises 
the  rate  of  interest  on  money,  while  the  rate  is  reduced  by  a  stable 
currency  or  an  improving  currency.  This  is  easily  shown  by  statistics, 
but  the  reason  is  so  obvious  that  proof  is  not  needed.  If  a  man  lends 
his  money  he  wants  it  back  again  with  its  increase ;  but  if  the  money, 
when  it  is  to  be  paid  back,  is  likely  to  be  worth  less  than  when  he 
thinks  of  loaning  it,  he  will  decline  to  lend  it  except  at  such  rates  as 
will  cover  the  risk  of  depreciation.  He  will  prefer  to  expend  it  in 
land  or  something  of  stable  value.  If  money  is  at  the  gold  standard 
or  is  advancing  toward  that  standard,  he  will  loan  it  readily  at  a  mod- 
erate interest,  for  he  knows  he  will  receive  back  money  of  at  least  equal 
value  to  that  he  loaned. 

Again,  sir,  with  a  depreciated  currency,  great  domestic  j)roductions 
are  cut  off  from  the  foreign  market ;  for  it  is  impossible  that  with  such 
a  currency  we  can  compete  on  equal  terms  with  rival  nations,  whose 
industry  rests  upon  a  specie  standard.  As  we  approach  such  a  stan- 
dard, we  are  now  able,  as  to  a  few  articles,  to  compete  with  foreign  in- 
dustry ;  but  it  is  only  as  to  articles  in  the  manufacture  of  which  we 
have  peculiar  advantages.  Let  us  rest  our  industries  on  that  standard, 
and  soon  we  can  compete  in  the  markets  of  the  world  in  all  the  articles 
produced  from  iron,  wood,  leather,  and  cotton,  the  raw  basis  of  which 
are  our  natural  productions.  And  it  must  be  remembered  that  aU  the 
countries  -with  which  we  compete  are  specie-paying  countries.  A  coun- 
tiy  that  does  not  rest  her  industry  upon  specie  is  necessarily  excluded 
from  the  great  manufacturing  industries  of  modern  civilization,  and  is 
self-condemned  to  produce  only  the  raw  basis  for  advanced  industry. 
Cheap  food,  climate,  soil,  or  natural  advantages,  such  as  cheap  land, 
vast  plains  for  pasture,  or  rich  mines,  may  give  to  a  country  wealth 
and  prosperity  in  spite  of  the  evils  of  depreciated  paper  money.  When 
we  come  into  competition  with  the  world  in  the  advanced  grades  of 
production  which  give  employment  to  the  skilled  mechanic,  we  must 
rest  such  industry  upon  the  gold  basis,  or  we  enter  the  Ksts  like  a  knight' 
without  his  armor. 

Again,  sir,  a  depreciated  and  fluctuating  currency  is  a  premium 
and  bounty  to  the  broker  and  money-changer.  Under  his  manipula- 
tion our  paper  standard  of  value  goes  up  and  down,  and  he  gambles 
and  speculates,  with  all  the  advantages  in  his  favor.  Good  people  look 
on  and  think  that  it  is  gold  that  is  going  up  and  down ;  that  their 
money  is  a  dollar  still,  and  trade  and  traffic  in  that  belief.  But  the 
shrewd  operator  calculates   daily  the  depreciation  of  our  note,  the 


502  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

shortening  of  the  yard-stick,  the  shrinking  of  the  acre,  the  lessening 
of  the  ton  ;  and  thns  it  is  that  he  daily  adds  to  his  gains  from  the  in- 
diiference  or  delusion  of  our  people. 

Sir,  this  is  an  old  story,  often  repeated  in  our  day,  and  it  was  elo- 
quently epitomized  by  Daniel  Webster  in  that  often-quoted  passage  of 
his  speech  in  which  he  said  : 

A  disordered  currency  is  one  of  the  greatest  of  political  evils.  It  nndermines 
the  virtues  necessary  for  the  support  of  the  social  system  and  encourages  propen- 
sities destructive  of  its  happiness.  It  wars  against  industry,  frugality,  and  econ- 
omy ;  and  it  fosters  the  evil  spirit  of  extravagance  and  speculation.  Of  all  con- 
trivances for  cheating  the  laboring  classes  of  mankind  none  has  been  more  eifec- 
tual  than  that  which  deluded  them  with  paper  money.  Ordinary  tyranny,  oppres- 
sion, excessive  taxation,  these  bear  lightly  on  the  happiness  of  the  mass  of  the  com- 
munity, compared  with  the  fraudulent  currencies  and  the  robberies  committed  by 
depreciated  paper.  Our  own  history  has  recorded  for  our  instruction  enough,  and 
more  than  enough,  of  the  demoralizing  tendency,  the  injustice,  and  the  intolerable 
oppression  of  the  virtuous  and  well-disposed  of  a  degraded  paper  currency  author- 
ized by  law  or  in  any  way  countenanced  by  Government. 

Sir,  we  must  meet  this  question  of  specie  payments,  not  only  be- 
cause we  have  pledged  to  it  the  public  honor,  but  also  for  the  lesser 
reason  that  it  is  for  our  interest.  The  only  questions  we  should  per- 
mit ourselves  to  discuss  are  the  means  and  measures  of  keeping  our 
promise. 

And  now,  sir,  let  us  examine  the  reasons  that  have  been  given  for 
the  repeal  of  the  resumption  act  by  those  who,  though  favoring  re- 
sumption, yet  think  the  act  should  be  repealed  for  one  or  other  of  the 
following  reasons : 

1.  That  it  is  not  advisable  to  fix  a  day  for  resumption, 

2.  Or  at  least  until  the  balance  of  trade  is  in  our  favor. 

3.  That  it  produces  a  contraction  of  the  currency. 

4.  That  it  injuriously  adds  to  the  burden  of  existing  debts. 
liCt  us  glance  at  these  objections. 

1.  As  to  fixing  a  day  for  resumption. 

If  it  was  possible  to  agree  upon  measures  that  would  secure  resump- 
tion without  fixing  a  time,  I  agree  it  would  not  be  indispensable, 
though  not  unadvisable,  to  take  this  step.  But  such  an  agreement  is 
utteriy  impossible.  Of  the  multitude  of  schemes  that  have  been  pre- 
sented to  me  by  the  intelligent  men  who  are  trying  to  solve  this  prob- 
lem, many  could  have  been  selected  that  in  my  opinion  would  be  prac- 
ticable ;  but  of  all  of  them  not  one  ever  has  or  is  likely  to  secure  the 
assent  of  a  majority  of  a  body  so  numerous  as  Congress.  One  diffi- 
culty we  have  encountered  is  that  the  Democratic  party,  though  in  the 
minority,  has  never  presented  in  any  form  through  any  leading  mem- 
ber a  plan  for  resumption,  but  with  widely  differing  opinions  have 
joined  in  opposing  any  and  every  measure  from  the  other  side,  I 
understand  from  the  papers  that  our  Democratic  friends,  through  a 
caucus,  and  through  a  caucus  committee  of  which  my  colleague  is 
chairman,  have  been  laboring  to  agree  upon  a  plan  for  specie  pay- 
ments. After  his  frequent  speeches  to  us  about  a  caucus  measure — a 
great  question  being  submitted  to  a  caucus — about  secret  conclaves, 
about  shams  and  deceptions  and  such  like  polite  and  friendly  com- 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  503 

ments  upon  tlie  work  of  the  Republican  party,  I  might  greet  my  eol- 
leage  with  such  happy  phrases  about  his  caucus  ;  but  I  will  not ;  on 
the  contrary  I  commend  his  labors,  and  sincerely  hope  that  he  and  his 
political  friends  may  agree  upon  some  plan  to  reach  a  specie  standard, 
and  not  one  to  avoid  it,  to  prevent  it,  to  defer  it.  Under  color  of  in- 
tending to  prepare  for  it,  I  hope  they  will  not  make  their  measure  the 
pretext  for  repealing  the  law  as  it  stands,  but  instead  that  they  will 
secure  the  end  we  both  aim  at,  by  fixing  the  day  for  resumption. 

I  frankly  state,  for  the  Republican  party,  that,  while  we  could  agree 
to  fixing  the  time  for  sj)ecie  payments  and  to  confer  the  ample  and 
suflicient  powers  upon  the  Secretary  of  the  Treasury  contained  in  this 
law,  we  could  not  agree  in  prescribing  the  precise  mode  in  which  the 
process  should  be  executed.  Nor,  in  my  opinion,  was  it  at  all  essen- 
tial that  we  should.  Much  must  be  left  to  the  discretion  of  the  officer 
charged  with  the  execution  of  such  a  law.  The  powers  conferred,  as 
I  shall  show  hereafter,  are  ample ;  and  the  discretion  given  will  be  ex- 
ercised under  the  eye  of  Congress. 

And,  sir,  there  is  strong  force  in  the  fact  that  in  every  example  we 
have  of  the  successful  resumjrtion  of  specie  payments  in  this  and  other 
countries,  a  fixed  day  has  been  named  by  legislative  authority,  and  the 
details  and  power  of  execution  have  been  left  to  executive  authority. 
Thus  in  Great  Britain,  the  act  of  Parliament  of  July  2,  1819,  fixed  the 
time  for  full  resumption  at  the  1st  day  of  May,  1823,  and  for  a  grad- 
uated resumption  in  gold  at  intemiediate  dates  ;  and  for  fractional  sums 
under  forty  shillings  to  be  paid  in  silver  coin  ;  and  the  governor  and 
directors  of  the  Bank  of  England  were  charged  with  its  execution,  and 
authorized  at  their  discretion  to  resume  payment  in  full  on  the  1st  day 
of  May,  1822.  France  is  now  successfully  passing  through  the  same 
process  of  resumption,  the  time  being  fixed  (two  years  ago)  for  January 
1,  1878,  and  now  practically  attained.  In  our  own  country  many  of 
the  States  have  presented  similar  laws  in  case  of  suspended  bank  pay- 
ments, and  in  some  cases  the  suspended  banks  have,  by  associated  ac- 
tion, fixed  a  time  for  general  resumption,  and  each  bank  adopted  for 
it  its  own  expedient.  Sir,  the  light  of  experience  is  from  the  lamp  of 
wisdom.  I  can  recall  no  case  oi  successful  resumption  where  a  fixed 
future  time  has  not  been  presented  beforehand,  either  by  law  or  agree- 
ment ;  while  the  historical  examples  of  repudiation  of  currency  have 
come  by  the  drifting  process,  by  a  gradual  decline  of  value,  by  in- 
creased issues,  and  by  a  refusal  to  provide  measures  of  redemption,  and 
w^ere  followed  by  the  disappearance  of  the  whole  mass,  dishonored  and 
repudiated. 

This  concurrence  in  the  mode  of  resumiDtion  by  so  many  govern- 
ments was  the  strongest  possible  instruction  to  Congress  when  fixing  a 
plan  of  resumption  for  the  United  States,  and  should  satisfy  reasonable 
men  of  its  wisdom. 

Besides,  it  would  seem  to  be  but  fair  that  every  one  should  have 
plain  notice  of  so  important  a  fact.  If  the  measures  only  were  pre- 
sented and  no  time  fixed,  it  would  be  a  matter  of  speculation,  and  the 
discretionary  powers  of  the  Secretary  of  the  Treasury  could  be  exercised 
with  a  view  to  hasten  or  postpone  the  time  to  the  injury  of  individuals. 


504 


SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 


As  to  the  date  selected,  I  can  only  repeat  it  was  placed  as  remote 
as  any  one  suggested ;  far  more  so  than  is  necessary  to  secure  the 
object,  and  so  that  the  fluctuations  of  value  will  scarcely  exceed  in  four 
years  what  they  have  frequently  been  in  a  single  year.  Ample  time  is 
given  to  arrange  all  the  relations  of  debtor  and  creditor,  and  to  enable 
Congress  to  provide  any  additional  measure  in  aid  of  resumption,  or  if 
events  make  it  expedient  to  even  make  further  postponement. 

Again,  it  has  been  objected  that  we  can  not  resume,  until  the  bal- 
ance of  trade  is  in  our  favor.  The  phrase,  ''  balance  of  trade,"  has 
been  a  favorite  with  visionaries  and  theorists,  and  is  sufficiently  indefi- 
nite to  confuse  and  mislead.  This  dogma  is  generally  understood  to 
mean  '"that  a  nation  that  imports  more  than  it  exports  is  growing 
poorer "  ;  or,  conversely,  "  that  a  nation  that  exports  more  than  it  im- 
ports is  prosperous."  Now,  sir,  both  propositions  have  been  proved 
false  in  many  cases,  though  both  in  some  may  be  true.  It  does  not 
follow  that  an  excess  of  imports  creates  distress,  or  that  a  deficiency 
of  exports  is  an  evidence  of  poverty.  Even  the  excess  of  imports  upon 
which  interest  is  paid  may  be  of  wealth-producing  productions;  or 
a  deficiency  of  exports  may  be  caused  by  an  increased  domestic  manu- 
facture of  raw  products  by  home  industry.  But  the  best  way  to  test 
the  fallacy  of  this  dogma  is  by  reference  to  examples.  Great  Britain 
is  known  to  be  a  prosperous  nation  of  accumulating  and  accumulated 
wealth  ;  and  yet  her  imports  have  exceeded  lier  exports  every  year  for 
twenty  years.  The  general  average  of  her  imports  in  excess  of  exports 
is  £50,000,000  or  $250,000,000  a  year.  I  have  here  the  detailed  state- 
ment of  her  imports  and  exports  for  1872  and  1873  : 

1872.  Imports £354,693,624 

Exports 314,588,834 

Excess  of  imports  over  exports £40,104,'790  or  $200,000,000 

1873.  Imports £371,287,372 

Exports 311,004,765 

Excess  of  imports  over  exports £60,282,607  or  $300,000,000 

Now,  according  to  the  dogma  of  the  "  balance  of  trade,"  Great 
Britain  is  going  into  a  rapid  decay ;  while  she  knows  this  large  excess 
of  imports  is  an  addition  to  her  national  wealth. 

But  take  our  own  country  and  compare  years  of  conceded  prosperity 
with  years  of  hard  times : 


1S67. 

1S63. 

Imports 

$391,121,801 
334,350,653 

$351,214  010 

Exports  at  gold  value,  including  gold 

352,788,202 

Balance  of  trade  against  us 

$56,771,148 

Yet  we  were  then  prosperous,  as  we  have  so  often  been  told,  with 
plenty  of  paper  money. 

Take  the  last  two  years,  when  we  are  told  so  often  that  distress, 
misery,  and  poverty  prevailed : 


NATIONAL  FINANCES— SPECIE  PAYMENTS. 


505 


1874. 

18T5. 

Exports  at  "old  value,  including  gold 

$652,913,445 
595,861,248 

$605,574,853 

Imports .         

553,906,153 

Balance  of  trade  in  our  favor 

$57,052,19*7 

$51,668,700 

And  the  balance  of  trade  in  our  favor  is  more  striking  during  the 
seven  months  of  the  present  fiscal  year,  from  the  1st  of  July,  1875,  to 
the  1st  of  February,  18T6. 

The  total  exports,  reduced  to  gold  values,  were $334,853,996 

The  total  imports  were 281,729,735 

Leaving  a  balance  in  our  favor  in  coin  for  seven  months  of $53,124,261 

All  these  amounts  are  reduced  to  a  coin  basis,  and  include  both  the 
importation  and  exportation  of  coin. 

According  to  the  dogma  of  the  "  balance  of  trade,"  now  is  the 
golden  moment  to  resume,  when  the  balance  is  in  our  favor  nearly  one 
hundred  millions  a  year.  Yet  many  people  cry  out,  "  Wait  for  the 
balance  of  trade ;  don't  force  resumption,"  Well,  the  time  has  come, 
and  yet  they  are  not  ready.  This  dogma  has  been  the  cause  of  infinite 
confusion,  but  is  now  abandoned.  McCulloch,  in  his  "  Dictionary  of 
Commerce,"  thus  refers  to  it : 

In  commerce  the  term  "  balance  of  trade  "  is  commonly  used  to  express  the  dif- 
ference between  the  value  of  the  exports  from  and  imports  into  a  country.  The 
balance  used  to  be  said  to  be  favorable  when  the  value  of  the  exports  exceeded  that 
of  the  imports,  and  unfavorable  when  the  value  of  the  imports  exceeded  that  of  the 
exports.  And  in  this  country  this  was  long  believed  to  be  the  case,  and  down  to  a 
late  period  we  were  annually  congratulated  by  our  finance  ministers  on  the  excess 
of  the  exports  over  the  imports. 

The  attainment  of  a  favorable  balance  was  formerly  regarded  as  an  object  of  tlie 
greatest  importance.  .  .  . 

The  truth  is,  however,  that  the  theory  of  the  balance  of  trade  was  not  erroneous 
merely  from  the  false  notions  which  its  advocates  entertained  with  respect  to  money, 
but  proceeded  on  radically  mistaken  views  as  to  the  nature  of  commerce.  .  .  . 

The  argument  about  the  balance  of  payments  is  one  of  those  that  contradict  and 
confute  themselves.  .  .  . 

Not  only,  therefore,  is  the  theory  with  respect  to  the  balance  of  trade  erroneous, 
but  the  very  reverse  of  that  theory  is  true.  .  .  . 

It  is  difficult  to  estimate  the  mischief  which  the  absurd  notions  relative  to  the 
balance  of  trade  ha'^e  occasioned  in  almost  every  commercial  country;  here  they 
have  been  particularly  injurious. 

This  author  fortifies  his  position  with  ample  details  ;  but  it  is  suffi- 
cient to  say  that  if  the  dogma  is  false  we  should  not  regard  it,  and,  if 
it  is  true,  now  is  the  golden  moment  for  resumption,  for  the  balance  of 
trade  is  in  om*  favor.  In  my  view  it  is  utterly  immaterial  to  the  ques- 
tion before  us. 

The  third  objection  is  that  the  law  produces  a  great  contraction  of 
the  currency. 

iN^ow,  sir,  it  ought  to  be  confessed,  for  it  is  true,  that  any  plan  for 
specie  resumption  will,  when  it  is  about  to  take  effect,  produce  some 
contraction  of  the  paper  currency.  The  drifting  process,  if  it  succeeds, 
must  cause  it  as  well.     To  wait  for  resumption  until  resmnption  will 


506  SPEECHES  AND   REPORTS   OF  JOHN"   SHERMAN. 

produce  no  temporary  contraction  is  to  wait  until  the  rivers  cease  to 
flow,  or  the  mountains  are  level  with  the  plains.  In  each  of  the  his- 
torical cases  I  have  referred  to,  resumption  was  preceded  by  contrac- 
tion. Remedies  for  bodily  or  political  ailments  are  apt  to  be  unpleas- 
ant. All  we  can  say  is  that  public  honor  and  public  policy  demand  the 
remedy  for  the  dishonor  and  the  evil  of  a  depreciated  currency ;  that 
the  time  is  ripe  for  the  cure,  and  the  means  we  have  prescribed  are 
suitable  to  the  end. 

And,  sir,  the  degree  of  contraction  and  the  effects  of  it  are  greatly 
exaggerated.  The  only  contraction  of  the  currency  provided  for  by 
the  act  is  in  the  substitution  of  one  form  of  currency  for  another. 
Thus,  in  place  of  the  fractional  currency  is  issued  silver  currency ;  and 
where  national-bank  notes  are  issued  eighty  per  cent,  of  the  amount  in 
United  States  notes  is  retired.  Thus  far  we  have  called  in  no  fractional 
currency ;  but,  as  I  will  show  hereafter,  we  can  now  and  will,  if  the  law 
stands,  issue  as  much  silver  currency  as  any  one  may  wish  in  exchange 
for  either  fractional  currency  or  United  States  notes ;  and,  as  to  bank 
notes,  the  amount  issued  since  the  act  took  effect  is  $13,820,Y60,  and 
the  amount  of  United  States  notes  retired  is  $11,056,608,  leaving  of 
United  States  notes  still  outstanding  $?,r0,913,392,  or  $14,900,000  more 
than  was  outstanding  when  the  act  of  March,  1869,  was  passed,  and 
the  same  amount  more  than  was  outstanding  on  the  Idth  day  of  Sep- 
tember, 1873,  when  the  panic  came.  Thus  it  appears  that  under  the 
law  the  amount  of  bank  notes  issued  is  $2,800,000  more  than  the  United 
States  notes  retired,  and  the  contraction  of  the  currency  prescribed  by 
this  law  is  a  myth. 

But  there  has  been  a  contraction  of  the  currency  since  the  panic, 
and  before  and  after  the  passage  of  the  act  of  1875,  which  will  go  on 
whenever  in  any  way  a  specie  standard  approaches,  and  that  is  by  the 
voluntary  retirement  by  national  banks  of  a  portion  of  their  circulating 
notes.  This  contraction  is  not  provided  for  by  the  resumption  act,  but 
is  authorized  by  the  national  banking  acts,  and  is  the  healthy  ebb  and 
flow  of  currency  which  it  was  the  object  of  the  law  to  secure.  Tlie 
national  banks  retired  $21,962,327  of  their  notes  by  depositing  that 
amount  of  United  States  notes  in  the  Treasury  of  the  United  States,  to 
be  used  exclusively  in  redeeming  their  bank  notes  when  presented. 
The  only  motive  for  this  deposit  was  that  in  the  opinion  of  those 
banks,  the  circulating  notes  could  not  be  profitably  used,  or  they  were 
not  strong  enough  to  maintain,  at  the  specie  basis,  all  of  their  notes. 
This  process  will,  and  ought  to,  go  on  until  each  bank  is  certain  it  can 
maintain  resumption  at  the  time  stated.  Kor  is  this  contraction  in  the 
slightest  degree  injurious  to  the  bank,  or  to  the  ability  of  the  bank  to 
loan  money  to  its  customers.  The  banks  will  not  withdraw  their  notes 
unless  it  is  to  their  interest  to  do  so.  When  they  do  surrender  or  re- 
deem them,  they  at  once  receive  a  larger  amount  of  their  bonds  held 
as  security  for  their  notes,  which  are  worth  about  30  per  cent,  more 
than  the  notes  redeemed.  Thus,  when  a  bank  surrenders  $9,000  of  its 
circulation,  it  lifts  from  the  lien  of  the  note-holder  $10,000  of  the 
United  States  bonds,  worth  to-day  about  $12,000.  If  the  bank  sells 
the  bonds,  it  has  $12,000  of  currency  to  loan,  and  has  strengthened 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  507 

itself  by  paying  $9,000  of  its  notes.  This  process,  instead  of  being  a 
cause  01  alarm,  should  be  encouraged  and  hastened ;  and  this  is  practi- 
cally the  only  contraction  effected  by  this  bill,  a  contraction  which  is  in 
the  very  line  clamored  for  by  those  who  oppose  national  banks ;  but 
still  it  is  a  voluntary  contraction,  made  by  the  silent  operation  of  the 
interest  of  the  bank,  w^iile  at  the  same  time  it  advances  the  residue  of 
notes  to  par  in  gold.  * 

Sir,  in  my  judgment,  the  real  solution  of  the  problem  of  specie 
resumption  will  thus  come  through  the  voluntary  act  of  national  banks, 
each  acting  for  itself,  under  the  general  direction  of  the  law,  precisely 
as  the  Bank  of  England,  the  Bank  of  France,  and  the  l!^ew  York  banks 
brought  about  and  maintained  resumption.  I  have  never  regarded 
with  solicitude  the  amount  of  United  States  notes  outstanding,  for,  as 
I  will  show,  they  can  be  easily  maintained  at  par  in  gold ;  but  the 
agency  of  the  banks  in  securing  resumption  and  the  effect  of  resump- 
tion upon  their  customers  were  matters  of  solicitude.  This  I  no  longer 
doubt  or  fear.  The  whole  problem  consists  in  a  partial  and  limited 
transfer  of  capital  now  invested  by  national  banks  in  United  States 
bonds,  to  individuals.  The  high  price  of  these  bonds  and  the  idle  capi- 
tal that  seeks  investment  in  them  will  enable  each  bank  to  strengthen 
itself  by  a  sale  of  bonds  without  in  the  least  impairing  its  ability  to  dis- 
count or  loan,  and,  in  fact,  to  increase  its  power  to  do  so  ;  and  the  bonds 
will  be  absorbed  by  the  increasing  demand  for  such  securities.  Strong 
banks  in  cities  do  not  need  the  currency,  for  their  currency  is  certified 
checks.  Their  cun-ency  is  largely  held  by  them,  and  what  they  have 
in  circulation  can  be  retired  and  canceled  without  impairing  in  the  least 
their  ability  to  loan  or  discount.  The  bank  currency  being  thus  dimin- 
ished, as  the  time  for  resumption  approaches,  the  United  States  notes, 
supported  by  a  gold  reserve  and  the  power  of  the  Secretary  to  sell 
bonds,  will  easily  be  maintained  at  the  gold  standard,  and  the  problem 
is  solved. 

And,  sir,  this  partial  contraction  of  bank  currency  will  unlock  and 
dissipate  a  greater  contraction  which  has  gone  on  since  the  panic,  and 
will  go  on  until  the  public  mind  rests  assured  that  the  day  of  resump- 
tion is  not  only  promised,  but  rendered  certain  by  the  course  of  events. 
An  increase  of  currency  will  follow  resumption.  Great  masses  of  notes 
now  lie  idle  in  bank  vaults  and  in  the  Treasury,  and  are  hoarded  in 
homesteads  all  over  the  land.  There  is  deposited  in  the  Treasury, 
without  interest  and  belonging  to  banks,  $31,005,000,  represented  by 
currency  certificates.  There  are  now  in  the  vaults  of  the  national  banks 
$73,626,100  in  United  States  notes  and  fractional  currency,  $17,166,190 
in  bank  notes,  in  all  $90,792,290 ;  while  in  the  savings  banks.  State 
banks,  and  other  banks  that  have  made  returns  to  the  Comptroller  of 
the  Currency,  there  is  the  sum  of  $48,431,409,  making  in  all  $170,228,- 
699  ;  and  this  is  far  more  than  the  reserve  required  by  law.  The  prac- 
tice of  hoarding  currency  has  greatly  increased  from  the  day  of  the 
panic,  and  it  may  be  safely  said  that  there  is  among  the  people  and  in 
savings  banks  and  trust  companies  not  less  than  $200,000,000  of  idle 
currency.  Nothing  but  the  best  security  will  tempt  it  from  its  hiding- 
places  ;  but,  when  that  security  is  offered,  it  can  be  had  for  a  less  ri^te 


508  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAN. 

of  interest  tlian  ever  before.  Capital  met  its  periodic  shock  in  Sep- 
tember, 1873,  and  great  masses  of  it,  some  say  one  thousand  millions, 
vanished  as  a  dream,  and  those  millions  are  now  rej^resented  by  worth- 
less bonds,  bills,  notes,  and  certificates  of  stock,  worth  but  little  more 
than  the  paper  on  which  they  are  printed.  This  panic  came  upon  us 
when  the  paper  god  was  lord  of  the  ascendant ;  when  corner  lots,  at 
fictitious  prices,  were  the  par  of  excKange ;  when  unproductive  rail- 
roads were  the  El  Dorados  of  visionaries ;  and  wild  schemes  of  im- 
provement, both  in  this  city  and  in  all  the  cities  of  the  Union,  increased 
municipal  debts  to  an  unexampled  degree.  This  reckless  inflation  of 
credits  collapsed  long  before  this  law  was  passed.  Money,  the  agent 
of  cajutal — and,  when  idle,  capital  itself — was  hoarded,  and  still  re- 
mains inactive,  or  is  loaned  on  call  or  unquestioned  security.  This  is 
the  contraction  of  which  so  many  complain.  It  is  not  caused  by  the 
resumption  act,  but  by  a  want  of  confidence  in  proffered  investments. 
Confidence  can  not  be  restored  by  a  repeal  or  by  issuing  more  paper 
money.  But  the  occasion  offers  you  an  opportunity  to  withdraw  a 
portion  of  this  idle  money,  and  of  thus  reaching  a  specie  standard. 
The  banks  can  freely  surrender  a  portion  of  their  circulation,  and  thus 
be  strong  for  resumption  ;  while  frightened  and  timid  capital  will 
gladly  float  into  United  States  bonds  when  sold  by  the  banks.  ]S"o- 
thing  is  wanting  but  confidence,  faith,  and  time  to  secure  the  closing 
triumph  of  our  war  policy  by  the  redemption  of  the  only  promise  we 
then  made  that  has  not  been  honestly  redeemed. 

The  remaining  objection  to  the  law  is  that  it  will  add  to  the  burden 
of  existing  debts.  This  objection  is  also  inseparable  from  any  jjlan  of 
resumption.  Postponement  or  repeal  will  not  help  the  matter.  The 
time  for  redemrption  must  come.  Current  indebtedness  was  never  less 
than  now.  Liquidation  has  gone  on  rapidly  since  the  panic,  and  in 
many  cases  by  open  bankruptcy.  Debts  contracted  since  the  passage 
of  the  act  have  been  made  in  view  of  resumj)tion  in  1879.  Many  of 
the  old  debts  run  for  a  long  period  of  years,  and  when  issued  were 
made  upon  the  presumption  of  specie  payments  before  they  matured. 
Other  large  masses  of  debts  stipulate  for  the  payment  of  both  principal 
and  interest  in  coin.  IN'early  all  the  best  investment  securities  are  now 
at  or  near  par  in  gold  and  are  bought  and  sold  at  gold  values.  Current 
debts  in  trade  will  mature  and  be  paid  long  before  the  time  for  resump- 
tion ;  or  if  they  are  renewed,  the  debtor  and  creditor  will  adjust  the 
mode  of  payment.  All  new  transactions  are  based  upon  the  knowledge 
that  specie  payments  will  come  at  the  time  stated,  and  for  that  reason 
stipulation  is  made  for  lower  rates  of  interest.  When  it  is  once  fixed 
in  the  public  mind  that  on  the  1st  of  January,  1879,  paper  money  will 
be  advanced  to  the  specie  standard,  and  debtors  can  readily  borrow 
money  payable  in  that  standard  at  lower  rates  of  interest,  capital  wiU 
no  longer  be  invested  in  gold  bonds  from  the  fear  that  if  loaned  to  in- 
dividuals it  will  be  paid  back  in  depreciated  paper,  but  it  will  eagerly 
be  invested  at  low  rates  of  interest,  on  mortgage  or  other  security,  if  it 
is  to  be  paid  in  improved  and  improving  currency.  Industries  now 
languid  or  suspended  will  hopefully  revive,  as  stocks  are  reduced,  and 
productions  have  a  fixed  commercial  value,  not  only  in  home  markets 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  509 

but  in  the  markets  of  the  world.  Merchants  now  fear  the  shrinkage 
of  prices,  but  their  stocks  will  be  renewed  at  a  corresponding  reduction 
until  all  prices  are  measured  bj  the  gold  standard,  when  they  fear  no 
other  change  of  prices  except  those  arising  from  demand  and  supj)lj. 
Debtors  are  also  generally  creditors,  and  the  loss  and  gain  in  values  will 
balance  each  other,  and  the  time  is  ample  in  which  all  losses  can  be 
adjusted.  Never  could  our  condition  be  better  to  resume  the  specie 
standard  than  now,  unless  we  intend  to  perpetuate  the  use  of  depre- 
ciated paper  money  and  totally  disregard  the  pledge  of  the  public  faith 
to  redeem  United  States  notes  in  coin. 

There  are  two  objections  made  to  the  law  which  I  ought  not  to  pass 
over  without  reply.  One  is  that  this  law  f oi'ces  resumption ;  and  that 
it  is  better  to  drift  into  resumption.  It  will  come,  they  say,  by  natm*al 
causes.  The  other  objection  is  that  the  law  has  been  in  force  a  year 
and  we  are  no  nearer  resumption  ;  that  it  is  therefore  a  dead  letter  and 
ought  to  be  repealed.  These  two  olijections  are  not  consistent  with 
each  other ;  but  each  has  its  believers,  and  should  be  answered. 

The  drifting  process  has  been  tried  since  1868.  Then  the  law  fixed 
the  volume  of  United  States  notes  at  $356,000,000,  and  forbade  its  con- 
traction, and  the  amount  of  bank  notes  at  $300,000,000,  and  forbade 
its  enlargement.  It  was  said  we  would  grow  into  resumption.  This 
was  the  plausible  dogma  with  which  I  was  met  when  1  sought  the 
funding  of  notes  into  bonds.  The  result  I  have  already  stated.  In 
1870  the  sectional  inequality  of  the  distribution  of  bank  currency,  in- 
flamed into  a  passion  by  the  sectional  appeals  of  Horatio  Seymour  when 
a  candidate  for  President  in  1868,  forced  the  enlargement  of  the  limit 
of  bank  notes  to  $354,000,000 ;  and  the  vain  hope  of  stopping  a  panic 
by  paper  promises  forced  the  enlargement  of  the  limit  of  United  States 
notes  to  $382,000,000.  So  will  it  always  be  with  this  drifting  process. 
AVhen  we  reach  a  specie  standard  it  is  safe  enough.  If  national  banks 
then  issue  more  money,  upon  sufiicient  security  to  pay  in  coin,  they  do 
it  at  their  peril ;  and  the  people  can  not  lose,  nor  can  their  standard  of 
value  fluctuate.  But  even  if  it  was  possible  to  fix  the  present  volume 
of  currency  as  an  arbitrary  limit,  it  would  only  prolong  indefinitely  the 
evils  of  a  depreciated  currency.  Xo  one  believes  that  we  could  main- 
tain in  circulation  near  $800,000,000  of  paper  money  all  the  time  at 
par  in  gold.  It  must  have  the  quality  of  flexibility  in  amount  to  meet 
the  currents  of  trade  and  business — at  times  withdrawn,  and  when 
needed  reissued,  but  always  of  the  value  of  gold — and  these  qualities 
can  only  be  secured  by  prompt  redemption  when  it  is  not  needed,  and 
its  reissue  through  loans  and  discounts  by  banks  when  the  crojDS  are  to 
be  moved,  or  trade  becomes  active. 

And  as  to  the  objection  that  the  law  has  not  already  produced  more 
immediate  results,  I  admit  that  this  is  an  objection  to  the  law,  but  it 
was  miavoidable  under  the  circumstances.  The  time  for  resumption 
should  have  been  fixed  much  earlier,  so  that  its  effect  would  have  been 
more  rapid.  If  by  the  law  the  banks  had  been  compelled  to  prepare 
for  resumption  sooner,  the  appreciation  of  our  notes  would  have  been 
more  marked ;  and  its  effect  would  also  foUow  if  a  portion  of  the  notes 
could  be  funded,  or  either  gold  or  notes  could  be  held  in  reserve  by  the 


510  SPEECHES  AND  EEPOKTS   OF  JOHN   SHERMAN. 

sale  of  bonds.  Who  does  not  wish  that  our  notes  were  now  worth 
nmety-five  instead  of  eighty-nine  cents  on  the  dollar  ?  And  yet  to  have 
produced  that  result  we  must  have  either  hastened  the  day  for  resump- 
tion or  have  strengthened  the  measures  for  resumption.  But  what  is 
the  remedy  for  this  slow  process  ?  Is  it  to  repeal  the  law,  not  a  single 
provision  of  which  by  its  terms  has  been  put  in  full  operation  ?  Is  it 
to  revoke  our  promise  and  all  efforts  for  its  fulfillment  ?  Obviously 
not ;  the  remedy  is  to  stand  by  our  engagement  and  perfonn  it  sooner 
if  circumstances  will  allow. 

And  now,  sir,  I  come  to  the  second  proposition  stated :  Can  we  re- 
sume specie  payments  on  the  1st  day  of  January,  1879  ? 

On  this  projDosition  we  are  to  consider  the  question  as  it  affects  the 
national  banks,  the  fractional  currency,  and  the  United  States  notes. 

As  to  the  national  banks,  I  have  already  stated  how  redemption 
with  them  becomes  an  easy  and  natural  process,  to  be  performed  with- 
out injury  to  them,  or  to  their  customers,  or  to  their  usefulness,  by  a 
transfer  or  sale  of  United  States  bonds  especially  set  aside  for  that  pur- 
pose, and  only  to  the  extent  that  each  bank  may  deem  essential  to  its 
safety.  The  national  banks  are  now  exceptionally  strong.  Their  cir- 
culating notes  amount  to  $346,479,756.  Of  these  notes  they  have  in 
their  vaults  the  sum  of  $17,166,190,  They  have  with  the  Treasurer  of 
the  United  States  $356,680,150  in  United  States  bonds,  worth  $427,- 
947,224  in  currency  or  $374,582,200  in  coin.  They  also  hold  United 
States  bonds  to  secure  United  States  deposits  $13,981,500.  and  other 
United  States  bonds  held  in  their  vaults  to  the  amount  of  $16,909,550. 
They  have  a  surplus,  over  and  above  the  capital  fully  paid  up,  of  $192,- 
300,000.  With  the  great  body  of  them,  the  redemption  of  the  whole 
or  a  large  part  of  their  circulation  is  a  matter  of  indifference.  To  the 
extent  of  a  certain  per  cent,  of  their  deposits  and  five  per  cent,  of  their 
circulation  they  must  maintain  a  reserve  of  United  States  notes,  and  to 
that  extent  they  will  aid  the  United  States  in  maintaining  resumption. 
The  amount  of  this  reserve  now  required  is  $80,135,200,  but  the  amount 
in  hand  is  $118,800,987.  As  United  States  notes  are  equivalent  to 
coin  with  them,  they  will  seek  to  hold  as  much  as  they  can,  as  other 
banks  in  England  hold  the  notes  of  the  Bank  of  England.  Is  it  not, 
then,  apparent  that  the  national  banks  are  able  to  resume,  are  prepared 
to  resume,  and  that  resumption  by  them  need  not  be  delayed  a  single 
year ;  and  that,  so  far  as  their  notes  are  concerned,  it  is  a  shame  and 
scandal  that  they  are  only  worth  eighty-nine  cents  on  the  dollar — and 
all  because  the  United  States  will  not  advance  its  notes  to  par  in  gold  ? 

Now,  sir,  as  to  the  fractional  currency.  This  was  issued  to  take 
the  place  of  the  subsidiary  silver  coins  of  the  country  during  the  war. 
The  amount  outstanding,  as  shown  by  the  books  of  the  Treasury,  is 
$45,120,132  ;  but  of  this  many  millions  have  been  lost  and  destroyed; 
and  this  is  shown  by  the  large  amount  of  the  old  issues  never  pre- 
sented although  long  superseded.  It  is  probable  that  not  exceeding 
$40,000,000  will  be  presented  for  redemption.  Now,  sir,  as  to  this 
currency,  we  are  able  to-day  to  issue  silver  coin  of  legal  weight  and 
fineness  in  exchange,  dollar  for  dollar,  for  fractional  currency,  not  only 
without  loss,  but  with  an  actual  profit.     One  ounce  of  silver  bullion, 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  511 

of  four  hundred  and  eighty  grains  of  standard  fineness,  is  worth  in  the 
market  $1.05  in  coin.  One  dollar  of  our  silver  coin  contains  three 
hundred  and  eighty-four  grains  of  standard  silver ;  so  that  one  dollar 
of  silver  coin  will  cost  the  United  States  eighty-four  and  one  quarter 
cents  besides  the  cost  of  coining.  To  the  extent  that  our  people  will 
take  silver  coin  in  exchange  for  fractional  currency,  the  problem  is 
already  solved.  It  is  said  this  coin  will  be  hoarded.  So  much  the  bet- 
ter. We  can  furnish  from  our  own  mines  all  that  is  needed,  to  the 
extent  of  fifteen  millions  on  hand  and  two  millions  a  month  more,  that 
being  the  extent  of  our  coinage  facilities.  It  is  said  it  will  be  exported. 
No  such  good  luck  will  befall  us,  for  silver  bullion  is  cheaper  and  bet- 
ter for  export.  If  we  issue  it,  we  will  either  redeem  a  note  or  save 
paying  out  a  note,  and  either  way  we  make  a  profit.  If  fifty  millions 
silver  coin  is  held  by  our  people  it  is  to  that  extent  a  reserve  for  specie 
payments  where  it  is  most  useful  among  the  people.  I  wish  they  would 
take  one  hundred  millions,  but  I  do  not  doubt  that  enough  will  be 
taken  to  redeem  all  the  fractional  cuiTency  that  our  people  will  not 
prefer  to  retain. 

And  now  the  only  remaining  question  is.  Can  we  redeem  or  main- 
tain at  par,  by  the  1st  day  of  January,  1879,  the  United  States  notes  ? 

The  amount  of  these  notes  outstanding  to-day  is  $370,943,392,  less 
those  lost  and  destroyed.  Now,  many  who  fear  resumption  suppose 
the  whole  mass  of  United  States  notes  will  then  be  presented  for  the 
gold ;  and  they  have  counted  up  the  number  of  tons  of  gold  that  will 
be  required  for  their  payment.  They  figure  up  the  interest  at  five  per 
cent,  on  the  whole  sum,  and  add  that  to  our  annual  interest  account. 
It  is  not  necessary  to  reply  to  such  exaggerations ;  nor  can  we  state 
with  precision,  what  amount  of  United  States  notes  would  circulate  at 
par  in  coin.  They  could  then  be  made  receivable  for  customs  dues 
without  a  violation  of  the  public  faith.  They  will  always  be  the  re- 
serve of  national  banks.  They  could  then  be  made  receivable  for  Unit- 
ed States  bonds.  They  could  be  supported  by  the  power  to  sell  bonds 
to  redeem  them.  They  would,  as  a  matter  of  course,  be  supported  by 
the  whole  gold  reserve  in  the  Treasury.  They  would  take  the  place 
of  certificates  of  deposit,  and  be  used  in  clearing-house  exchanges. 

Now,  sir,  with  all  these  advantages,  with  the  growing  wealth  and 
credit  of  our  country,  I  do  not  believe  the  present  volume  of  United 
States  notes  need  be  largely  if  any  reduced  to  keep  them  at  par  in 
coin.  We  have  now  a  gold  balance  in  the  Treasury  of  $37,120,772.73 
and  a  currency  balance  of  $9,529,4:04  over  and  above  our  currency  and 
coin  certificates.  It  is  true  this  balance  is  subject  to  the  overdue  and 
accruing  demands  fully  stated  in  a  recent  letter  of  the  Secretary  of  the 
Treasury  ;  but  a  certain  amount  of  these  demands  always  remains  un- 
called for,  and  when  presented  are  met  by  accniing  revenue.  Suppose 
(what  I  regard  as  an  extreme  case)  that  w^e  add  to  this  reserve  $100,- 
000,000,  fifty  million  in  coin  certificates  and  fifty  million  in  coin,  does 
anybody  doubt  but  it  will  be  ample  to  redeem  any  note  that  is  pre- 
sented ?  Confidence  being  once  established  in  their  redemption,  who 
will  want  the  gold  for  them  ?  They  can  be  and  not  doubt  will  be  re- 
issued without  or  with  the  legal-tender  clause,  as  the  law  may  here- 


512  SPEECHES  AND  REPORTS   OF  JOHN"  SHERMAN. 

after  provide  ;  and  witli  their  credit  secured,  established  at  par  in  coin, 
they  will  not  only  circulate  in  Texas  and  on  the  Pacific  slope  as  well 
as  in  other  parts  of  the  United  States,  but,  like  the  Bank  of  England 
notes,  they  will  circulate  in  all  countries  with  which  we  have  commer- 
cial relations. 

Let  us  pursue  the  argument,  taking  the  full  burden  of  resumption 
as  the  interest  of  one  hundred  millions  per  annum.  The  rate  of  in- 
terest now  in  cuiTency  may  be  stated  at  four  per  cent,  or  four  and  a 
half  per  cent,  in  gold.  Thus  four  to  four  and  one  half  millions  a  year, 
three  years  hence,  is  the  extreme  burden  of  sj)ecie  payments.  Sir,  the 
sinking  fund  in  three  years  amounts  to  more  than  the  one  hundred 
millions  you  are  to  keep  in  reserve.  The  saving  already  made  thus 
far  by  funding  the  debt  into  five  per  cent,  bonds  is  five  millions  a 
year.  The  saving  that  you  will  make  by  the  funding  into  four  and 
one  half  per  cent,  will  be  seven  and  one  half  millions  in  gold,  or  near- 
ly twice  as  much  as  is  needed.  The  saving  of  four  millions  on  the 
appropriation  bills  sent  to  us  will  cover  the  cost.  It  can  be  paid  by  a 
duty  of  five  cents  on  each  gallon  of  whisky.  One  half  of  the  smallest 
duty  ever  levied  on  tea  and  coffee  will  do  it.  One  half  of  the  taxes 
now  levied  on  national  banks  by  the  United  States  will  do  it.  The 
increased  value  of  our  tax  on  whisky  and  tobacco  being  paid  in  coin 
will  twice  do  it.  Are  we  able  to  do  it  ?  Are  we  able  to  keep  our 
promises  when  made  specific  as  to  time,  place,  and  manner  ?  I  do  not 
care  to  discuss  this  question  further.  Sir,  the  United  States  has  been 
blessed  by  Divine  Providence  with  all  the  gifts  which  He  has  ever 
showered  upon  the  human  race.  We  have  a  broad  and  fruitful  land, 
with  almost  every  variety  of  climate  and  production.  We  have  forty 
millions  of  free  people,  industrious,  intelligent,  brave  as  becomes  men, 
shrewd  and  sagacious  in  trade  and  production,  and  loving  honor  and 
a  good  name.  To  say  that  we  can  not  redeem  our  promises  is  to  dis- 
honor the  blessings  of  God ;  it  is  to  eat  of  the  forbidden  fruit  when 
all  tlie  productions  of  nature  and  art  are  within  our  reach  ;  it  is  to 
dishonor  our  name  and  credit  when  the  world  is  ready  to  lend  us  at  a 
less  rate  of  interest  than  that  for  which  any  nation  of  the  world  except 
Great  Britain  has  ever  borrowed  ;  it  is  a  party  retreat ;  it  is  a  national 
retreat ;  it  is  a  retreat  of  cowardice  from  a  task  we  promised  to  per- 
form, that  we  are  able  to  perform,  and  which  every  noble  motive  that 
actuates  mankind  impels  us  to  perform. 

But,  it  is  asked,  where  is  the  gold  to  come  from  to  enable  us  to 
resume  'i  !Not  only  is  the  gold  of  the  world  open  to  our  competition, 
but  we  are  the  largest  gold-  and  silver-producing  country  of  the  world. 
The  product  of  our  mines  is  about  one  hundred  millions  a  year,  and  a 
single  year's  product  would  more  than  enable  us  to  resume.  Our  fa- 
cilities for  accumulating  gold  are  greater  than  those  of  aiij  other  nation. 
"  But  the  gold  is  exported."  So  it  is,  because  we  will  not  use  it  as  do 
the  other  nations.  Give  it  occupation  here  and  it  will  remain  here, 
and  the  products  of  our  farms  and  workshops  will  be  exported  instead. 
It  is  said  we  can  make  a  standard  of  something  else  that  is  not  export- 
able. So  we  can  ;  but  it  will  be  by  cutting  ourselves  off  from  the 
civilization  of  the  human  race. 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  513 

Sir,  I  have  been  struck  by  the  absohite  j^overty  of  invention  of 
those  who  in  our  day  seek  to  dispense  with  the  gold  standard.  Every 
plan  proposed,  every  idea  suggested,  is  but  the  repetition  of  plans  and 
ideas  proposed  in  the  American  colonies,  in  Great  Britain,  in  China, 
and  by  George  Law.  Their  schemes  have  been  tried  and  exploded 
over  and  over  again  for  four  thousand  years ;  and  yet  gold  and  silver 
now  measure  every  article  of  projDerty,  and  will  measure  the  daily  fluc- 
tuations of  the  contrivances  they  invent. 

And  now,  sir,  let  us  turn  from  the  main  point,  and  briefly  examine 
the  third  question :  Are  the  agencies  and  measures  prescribed  by  the 
act  of  1875  suflicient  for  the  pui-pose  ? 

I  need  not  remind  this  Senate  and  Senators  around  me  how  reluc- 
tantly I  came  to  the  support  of  this  bill,  because  it  does  not  contain 
provisions  that  for  years  I  have  struggled  to  secure.  Still,  sir,  I  feel 
bound  to  say  that  it  embodies  ample  agencies  and  powers  to  carry  it 
into  a  full  execution,  without  the  addition  of  a  single  pro\nsion  by  Con- 
gress. The  first  section  of  the  bill  is  limited  to  the  redemption  of  frac- 
tional currency.  This,  as  I  have  shown,  can  now  be  fully  executed, 
and  the  only  criticism  is  that  it  has  not  been  sooner  executed.  Not 
only  can  the  notes  be  redeemed  in  silver  without  loss,  but  the  actual 
cost  of  coining  the  silver,  strange  as  it  may  seem,  is  less  than  the  print- 
ing of  the  fractional  currency. 

The  cost  of  coining  subsidiary  silver  coin  is  shown  by  the  Director 
of  the  Mint  to  be  from  one  and  a  half  to  two  per  cent. ;  and  it  is  much 
less  when  the  mints  are  running  to  their  full  capacity. 

The  actual  profits  of  seigniorage  will  not  only  pay  this  cost,  but 
more  than  the  interest  on  the  bonds  we  may  sell  to  procure  the  bullion. 

On  the  other  hand,  the  cost  of  the  fractional  currency  is  three  and 
a  half  per  cent,  of  the  amount  issued ;  or,  to  be  exact,  the  expense  of 
preparing  and  redeeming  the  fractional  currency  for  the  year  1875  was 
$1,410,740.95.  The  amount  issued  was  $40,365,145.  And  what  is 
worse,  the  average  life  of  these  notes  is  less  than  one  year,  so  that  this 
expense  is  an  annual  one  almost  equal  to  the  interest  on  the  whole  sum. 
Thus  the  stopping  of  the  issue  of  fractional  currency  will  save  us 
$1,400,000,  The  silver  coin  pays  a  debt  when  issued,  while  the  frac- 
tional currency  only  renews  it,  and  it  must  be  replaced  by  another  note 
within  a  year.  Sir,  the  wisdom  of  this  provision  is  now  so  demon- 
strated that  a  committee  of  the  House  unanimously  refuse  to  print  the 
currency  and  demand  the  issue  of  the  silver  coin,  while  two  months  ago 
the  scheme  was  pronounced  visionary,  imj^racticable,  and  a  sham.  We 
are  now  at  a  specie  basis  for  our  fractional  currency  ;  and  yet  when  the 
law  was  enacted  we  were  told  it  would  be  hoarded,  bought  up  by 
money-changers,  or  exported.  We  are  now  told  "  jS^obody  M-ants  the 
silver ;  they  prefer  the  fractional  notes."  So  it  is  ;  and  so  also  it  will 
be  when  we  approach  the  gold  standard.  Xobody  will  want  to  give 
up  tlie  United  States  notes  for  gold  when  the  note  will  buy  fully  as 
much  as  gold. 

But  it  is  said  we  can  only  buy  the  silver  bullion  by  issuing  bonds. 
That  is  true  now,  because  our  suqjlus  revenue  is  not  large ;  but  how 
will  the  United  States  ever  pay  its  notes  at  a  cheaper  rate  ?     One  mil- 
33 


514  SPEECHES   AND   REPORTS   OF   JOim   SHERMxiN. 

lion  of  dollars  of  five  per  cent,  bonds  will,  to-day,  bny  sufficient  silver 
bullion  to  make  $1,200,000  in  subsidiary  silver  coin.  When  and  how 
can  this  operation  of  paying  our  debts  be  better  commenced,  unless  we 
mean  to  postpone  payment  indefinitely  ?  It  has  been  said  that  the  five 
per  cent,  bonds  authorized  have  been  exhausted?  ]^ot  so.  The  law  is 
plain  and  express,  and  was  designed  and  intended  to  authorize  the 
Secretary  of  the  Treasury,  not  only  to  use  any  surplus  revenue,  but 
'"  to  issue,  sell,  and  dispose  of,  at  not  less  than  par  in  coin,  either  of  the 
descriptions  of  bonds  of  the  United  States  described  in  the  act "  for 
refunding  the  public  debt.  The  refunding  act  is  only  referred  to  for 
the  "  description  "  of  the  bonds  authorized.  But  to  make  this  construc- 
tion more  clear,  it  is  provided  "  that  all  provisions  of  law  inconsistent 
with  this  act  are  hereby  repealed."  Thus,  not  only  the  public  faith, 
but  all  the  sur23lus  revenue  and  the  public  credit,  as  represented  by 
either  of  three  kinds  of  bonds,  to  wit,  those  bearing  four,  four  and  a 
half,  and  five  per  cent,  interest  in  gold,  is  granted  to  the  Secretary  to 
enable  him  to  execute  this  trust.  The  only  limit  in  amount  is  the 
amount  that  will  enable  him  to  execute  the  law.  The  only  limit  of 
price  at  which  he  can  sell  the  bonds  is  "  not  less  than  par  in 
coin." 

The  second  section  is  only  material  as  it  tends  to  induce  the  coining 
of  gold  by  repealing  the  mint  charge. 

So  much  of  the  third  section  as  relates  to  national  banks  is  not  ma- 
terial, except  as  it  provides  a  way  by  which  circulating  notes  may  be 
issued ;  but  if  issued  it  will  be  with  full  knowledge  that  in  due  time 
they  must  be  redeemed  in  coin  at  the  pleasure  of  the  holder. 

Then  comes  the  provision — the  vital  provision — of  the  law :  "  And 
on  and  after  the  1st  day  of  January,  a.  d.  1879,  the  Secretary  of  the 
Treasury  shall  redeem  in  coin  the  United  States  legal-tender  notes  then 
outstanding  on  their  presentation  for  redemption."  Then  follows  the 
ample  power  already  quoted  :  "  And  to  enable  the  Secretary  of  the 
Treasury  to  prepare  and  provide  for  the  redemption  in  this  act  author- 
ized or  required,  he  is  authorized  to  use  any  surplus  revenue  from  time 
to  time  in  the  Treasury  not  otherwise  appropriated,  and  to  issue,  sell, 
and  dispose  of,"  at  not  less  than  par  in  coin,  either  of  the  bonds  already 
referred  to.  Such  are  the  duties  enjoined,  and  such  are  the  powers 
conferred. 

Sir,  in  this  respect,  both  the  powers  and  duties  of  this  act  are  clear- 
er and  stronger  than  in  the  acts  under  which  Great  Britain  resumed 
and  France  is  now  resuming.  Who  can  doubt  that  with  or  without 
further  legislation  tlie  work  can  be  accomplished  by  a  Secretary  who 
will  obey  and  execute  the  law  ?  The  power  to  "  prepare  "  for  resump- 
tion is  a  broad  discretion  that  commences  with  the  passage  of  the  act 
and  continues  during  every  hour  and  day  of  its  existence,  but  is  one  to 
be  exercised  with  exceeding  caution  and  moderation. 

But,  sir,  this  is  not  all.  When  Congress  passes  an  act  imposing  a 
duty  upon  a  public  officer,  it  implies  an  ol)ligation  that  it  will  furnish 
all  the  aid  and  auxiliary  legislation  necessary  to  carry  it  into  execution. 
The  extent  and  nature  of  this  is  within  the  discretion  of  Congress ; 
but  when  tlie  2)0wer  conferred  upon  him  is  ample,  and  the  duty  imposed 


NATIONAL  FINANCES— SPECIE  PAYMENTS.  515 

• 

is  clear,  he  must  act  even  though  Congress  neglect  its  duty  to  support 
him  bv  auxiliary  legislation.     • 

And  this  brings  me  to  the  last  proposition  I  propose  to  discuss,  and 
that  is — 

What  additional  legislation  ought  Congress  now  to  adopt  in  aid  of 
the  law  ? 

The  Secretary  of  the  Treasury  recommends,  first,  that  the  legal- 
tender  quality  of  the  United  States  note  be  taken  from  it  before  1879. 
I  can  not  agree  to  this,  for  the  United  States  note  is  as  much  a  con- 
tract to  pay  money  as  a  bond  ;  and  we  can  not  take  from  that  note  any 
quality  that  gives  it  value,  until  we  are  prepared  to  redeem  it  in  coin. 
The  proposition  is  too  much  like  the  act  of  March,  1863,  already  re- 
ferred to,  which  strijjped  the  note  of  its  quality  of  convertibility  into 
bonds. 

His  second  recommendation  is — 

Thfit  autliority  be  given  for  funding  legal-tender  notes  into  bonds  bearing  a  low 
rate  of  interest.  ...  It  seems  probable  tliat  a  bond  bearing  interest  at  the  rate  of 
four  per  cent,  would  invite  the  funding  of  a  sutiicient  amount  of  legal-tender  notes 
to  lessen  materially  the  sum  of  gold  which,  in  the  absence  of  such  provision,  must 
be  accumulated  in  the  Treasury  by  the  1st  of  January,  1879,  to  carry  out  the  im- 
perative i-equiremeuts  of  the  act  of  January  14,  1875.  If  it  be  apprehended  that 
authority  to  the  Secretary  to  fund  an  unlimited  amount  of  notes  might  lead  to  too 
sudden  contraction  of  the  currency,  Congress  could  limit  the  amount  to  be  funded 
in  any  given  period  of  time.  The  process  being  in  no  sense  compulsory  as  to  the 
holders  of  United  States  notes,  and  the  rate  of  interest  on  the  bonds  being  made 
low,  it  is  not  probable  that  currency  which  could  find  profitable  employment  would 
be  presented  for  redemption  in  such  bonds.  Only  the  excess  of  notes  above  the 
needs  of  business  would  seek  such  conversion.  Authority  to  the  Secretary  of  the 
Treasury  to  redeem  and  cancel  two  million  of  legal-tender  notes  per  month  by  this 
process  would  greatly  fjicilitate  redemption  at  the  time  now  tixed  by  law,  and 
besides  would  have  the  advantage  of  publicity  as  to  the  exact  amount  to  be  with- 
drawn in  any  given  month.  Bonds  issued  for  this  purpose  should  be  of  the  denomi- 
nation of  fifty  and  one  hundred  dollars,  and  any  multiple  thereof,  in  order  to  meet 
the  convenience  of  all  classes  of  holders  of  United  States  notes. 

The  President  in  his  annual  message  recommends — 

That  the  Secretary  of  the  Treasury  be  aiithorized  to  redeem,  say,  not  to  exceed 
$2,000,000  monthly  of  legal-tender  notes,  by  issuing  in  their  stead  a  long  bond  bear- 
ing interest  at  the  rate  of  3"65  per  cent,  per  annum,  of  denominations  ranging  from 
$50  to  $1,000  each.  This  would  in  time  reduce  the  legal-tender  notes  to  a  volume 
that  could  be  kept  afloat  without  demanding  redemption  in  large  sums  suddenly. 

3.  That  additional  power  be  given  to  the  Secretary  of  the  Treasury  to  accumu- 
late gold  for  final  redemption,  either  by  increasing  revenue,  curtailing  expenses,  or 
both — it  is  preferable  to  do  both  ;  and  I  recommend  that  reduction  of  expenditures 
be  made  wlierever  it  can  be  done  without  impairing  Government  obligations  or 
crippling  the  due  execution  thereof. 

These  recommendations,  substantially  concurring,  are  wise,  and 
would  be  efficient ;  and  to  secure  them  ample  means  are  provided  by 
the  application  of  the  sinking  fund  for  two  or  three  years  without 
additional  taxation.  Indeed  it  is  neither  wise  nor  prudent  to  apply 
the  sinking  fund  to  the  purchase  of  bonds  not  due,  at  a  high  premium, 
when  it  ma}'  be  applied,  according  to  the  act  creating  it,  to  the  pur- 
chase of  notes  already  due. 

The  honorable  Senator  from  Yermont  [Mr.  Morrill]  has  introduced 


516  SPEECHES   AND   EEPORTS   OF  JOHN  SHERMAN. 

a  bill,  and  a  number  of  other  billa  and  propositions  relating  to  this 
subject  have  been  referred  to  the  Committee  on  Finance  :  and  the 
elaborate  resolutions  of  the  Chamber  of  Commerce  of  New  York  are 
now  before  us.  , 

I  will  not  anticipate  the  provisions  of  these  various  propositions, 
except  so  far  as  to  say  that  I  will  cheerfully  support  any  measure  of 
wise  economy,  proposed  to  strengthen  the  public  Treasury  ;  that  I  will 
cheerfully  vote  for  a  moderate  tax  on  tea  and  coffee,  because  this  will 
increase  our  revenue  without  adding  to  the  cost  of  the  articles,  and 
will  enable  us  to  repeal  other  taxes  that  are  both  a  burden  and  an  in- 
convenience, and  will  also  strengthen  the  Treasury  ;  that  I  will  gladly 
vote  for  the  voluntary  conversion  of  a  limited  amount  of  United  States 
notes  into  bonds,  as  each  of  those  measures  will  tend  to  "  prepare  "  us 
for  a  specie  standard.  But,  sii",  each  of  these  measures,  and  others  that 
may  be  proj)er,  are  not,  in  my  judgment,  indispensable  to  the  full  and 
complete  execution  of  the  law  of  1875  on  or  before  the  1st  day  of 
January,  1879. 

Indeed  it  may  well  be  questioned  whether  all  of,  them  may  not  be 
properly  postponed  until  the  next  session,  when  the  deliberate  judg- 
ment of  Congress,  guided  by  the  sense  of  the  people,  can  be  rendered. 
I  would  gladly  vote  for  them  now ;  but  we  have  acted  together  thus 
far,  and  I  will  not  unduly  press  ujDon  my  associates  measures  they  do 
not  fully  approve. 

Sir,  I  have  a  confident  belief  that  if  Congress  will  now  hold  fast  to 
the  law  as  it  stands,  the  drift  of  events  and  the  practical  operation  of 
the  law  will  not  only  vindicate  its  wisdom,  but  will  secure  in  due  time 
every  proper  auxiliary  legislation  to  cany  it  into  full  execution.  The 
duty  of  the  hour  demands  firmness  and  faith.  There  are  times  in  the 
lives  of  nations  and  individuals  when  the  temptation  is  strong  to  turn 
from  the  path  of  honor,  to  shrink  from  and  evade  the  performance  of 
obligation.  Then  it  is  more  than  ever  that  the  old  adage  should  be  re- 
membered that  "  honesty  is  the  best  policy,"  For  one  I  feel  that  my 
course  is  as  clear  as  the  sunlight  of  heaven ;  and  I  trust  that  the  great 
party  to  which  I  belong  may  now,  as  in  sterner  times  and  under  greater 
difficulties,  stand  fast  to  the  national  honor  pledged  by  it  in  the  act  of 
1875  ;  and  when  the  difficulties  insejDarable  from  a  great  duty  have 
passed  away,  we  will  be  as  proud  of  our  position  now,  as  we  are  of  the 
firmness  and  faith  with  which  we  prosecuted  a  great  war,  and  secured 
to  the  people  of  our  day  and  of  future  generations  the  blessings  of 
national  union  and  universal  liberty. 

I  move  that  the  memorial  of  the  New  York  Chamber  of  Commerce 
be  referred  to  the  Committee  on  Finance. 
The  motion  was  agreed  to. 


FRACTIONAL   CURRENCY— SILVER   COINAGE.  517 


FEACTIONAL  CUEKENCY— SILYEE  COINAGE. 

ly  TEE  SENATE,   'APRIL   11,  1876. 

TnE  bill  to  provide  for  a  deficiency  in  the  Printing  and  Engraving  Bureau  of  the 
Treasury  Department,  and  for  the  issue  of  silver  coin  of  the  United  States  in  place 
of  fractional  currency,  being  before  the  Senate,  Mr.  Sherman  said  : 

Mr.  President  :  I  was  in  hopes  that  the  Senate  would  be  willing  to 
act  upon  this  bill  without  much  discussion ;  but,  as  Senators  desire  it, 
it  is  due  to  the  Senate  that  I  should  state  in  behalf  of  the  Finance  Com- 
mittee the  reasons  for  the  passage  of  the  bill  and  for  the  amendments 
proposed  by  the  Committee. 

The  first  section  of  the  bill  contains  simply  an  appropriation  of 
$163,000  to  j^rovide  for  engraving  and  printing  and  other  expenses  of 
making  and  issuing  United  States  notes  ;  and  it  is  plainly  unobjection- 
able, unless  the  Committee  on  Appropriations  desire  to  change  the 
amount. 

The  second  section  directs  the  Secretary  of  the  Treasury  to  issue 
silver  coins  of  the  United  States  of  certain  denominations  in  redemp- 
tion of  an  equal  amount  of  fractional  currency,  and  is,  in  substance,  the 
provision  of  the  existing  law,  but  is  inserted  by  the  House  of  Eepresen- 
tatives  for  the  purpose  of  making  the  law  mandatory. 

The  third  section  of  the  bill,  however,  presents  the  most  difficult 
question  in  political  science.  This  section,  as  sent  to  us  by  the  House 
of  Eepresentatives,  provides : 

That  the  silver  coins  of  the  United  States  of  the  denomination  of  $1  shall  be  a 
legal  tender  at  their  nominal  value  for  any  amount  not  exceeding  $50  in  any  one 
payment,  and  silver  coins  of  the  United  States  of  denominations  of  less  than  $1 
shall  be  a  legal  tender  at  their  nominal  value  for  any  amount  not  exceeding  $25  in 
any  one  payment. 

This  presents  the  question  of  the  single  or  double  standard,  which 
has  probably  been  the  occasion  of  more  pamphlets,  books,  and  docu- 
ments than  any  other  question  whatever  in  political  science.  As  a 
general  rule,  the  English  authors  have  favored  a  single  standard  of 
gold ;  the  French  writers  have  generally  favored  a  double  standard  of 
gold  and  silver ;  while  there  are  writers  without  number  who  have  ad- 
vocated, some  the  single  gold  standard,  some  the  single  silver  standard, 
and  very  many  the  double  standard.  I  might  state  the  argument 
briefly,  without  going  into  details,  in  the  language  of  a  recent  author, 
in  which  the  arguments  in  favor  of  the  single  gold  standard  are  concen- 
trated into  three  : 

The  advocates  of  the  gold  valuation  say:  "  There  is  a  constant  liability  to  fluctu- 
ations in  the  standards  of  value.  It  is  better  therefore  that,  in  order  to  secure  unity, 
there  should  be  but  one  standard,  and  this  standard  should  be  gold."  ... 

The  second  argument  brought  forward  bytbe  advocates  of  gold  valuation  is,  that 
silver  is  too  heavy  for  the  present  purposes  of  commerce ;  that  its  carriage  and 
handling  are  inconvenient,  and  that  gold,  being  so  much  lighter,  is  more  suitable.  .  . 
The  third  argument  or  allegation  is  that  all  civilized  nations  either  have  adopted, 
or  show  the  disposition  to  adojit,  the  gold  valuation. — (Seyd,  "  Metallic  Currencv  of 
the  United  States,"  page  39.) 


518  SPEECHES  AND  EEPOETS  OF  JOHN  SHERMAN. 

Eacli  of  these  positions  has  been  answered,  as  it  is  thought,  by 
those  who  advocate  the  double  standard,  or  the  single  silver  standard. 
To  the  first  objection  in  regard  to  the  fluctuation  of  the  value  of  gold 
and  silver,  it  has  been  answered  that  sometimes  gold  has  declined  in 
value  as  compared  with  silver;  sometimes  silver  has  declined  below 
gold  value;  sometimes  the  variation  is  one  way  and  sometimes  the 
other,  and  therefore  the  mere  fact  of  variation  is  not  an  objection  to 
either  silver  or  gold  as  a  standard,  and  ought  to  have  no  weight  in  the 
argument.  The  two  metals  have  kept  together  with  remarkable  near- 
ness ;  and  it  is  said  with  great  force,  it  seems  to  me,  that  to  adopt  the 
gold  standard  alone  and  demonetize  silver  would  be  to  deprive  the 
poor  people  of  the  world  of  the  money  which  alone  measures  the 
value  of  their  productions  and  of  their  labor.  The  gold,  from  its 
nature,  is  not  divisible  into  a  coin  of  convenient  form  of  less  than 
$2.50.  The  dollar  gold  coin  in  this  country  and  the  five-franc  piece  in 
France  never  attained  any  considerable  circulation.  Therefore  gold 
alone  is  not  suitable  for  a  currency  because  it  will  not  measure  the  daily 
wants  of  the  great  mass  of  mankind. 

To  the  second  objection,  that  silver  is  too  heavy  to  export,  it  is 
answered  that  it  costs  no  more  to  transport  $100,000  of  silver  from 
one  port  or  place  to  another  than  it  does  $100,000  of  gold.  This  is 
true.  By  any  form  of  conveyance  the  price  of  transporting  $100,000 
of  silver  is  j^recisely  the  same  as  of  transporting  $100,000  of  gold, 
being  based  on  value  and  not  on  weight,  because  the  risk  of  loss  is  the 
chief  element  of  cost. 

The  third  allegation,  that  all  civilized  nations  either  have  adopted 
or  show  a  general  disposition  to  adopt  the  gold  valuation,  is  denied  as 
a  matter  of  fact.  England  alone  of  all  the  great  powers  has  adopted 
the  single  gold  standard.  Half  a  dozen  other  countries  of  minor  im- 
portance have  adopted  it.  Most  nations  have  adoj)ted  either  the  dou- 
ble standard  or  the  silver  standard.  The  great  mass  of  mankind  (two 
thirds  of  the  human  race)  still  use  and  do  all  their  business  upon  the 
silver  standard  alone ;  so  that  there  is  no  such  weight  of  example  as 
gives  to  either  standard  a  decisive  advantage  over  the  other. 

Mr.  President,  I  shall  dismiss  this  controversy  of  the  schools  with- 
out going  further  into  it,  although  it  is  a  very  interesting  subject  of 
study,  and  I  could  give  Senators  references  to  about  a  hundred  vol- 
umes about  it.  I  will  dismiss  it  so  far  as  the  theory  of  the  question 
has  been  discussed  among  political  economists,  but  I  wish  to  call  the 
attention  of  the  Senate  in  some  detail  to  the  existing  law  of  the 
United  States  and  also  to  the  laws  of  Great  Britain,  France,  and  Ger- 
many, so  that  we  may  know  precisely  the  condition  of  the  coinage  of 
those  countries,  in  order  to  test  by  law  and  experience  whether  the 
amendments  proposed  by  the  Committee  on  Finance  are  wise  or  not. 

The  first  United  States  statute  on  the  subject,  which  established  the 
Mint,  was  passed  in  1792,  and  is  contained  in  volume  i.  of  the  Statutes 
of  the  United  States,  page  218.  I  have  it  before  me.  This  act  estab- 
lishes the  proportional  value  between  silver  and  gold  by  declaring  that 
one  ounce  of  gold  shall  be  equivalent  to  fifteen  ounces  of  silver,  and 
the   weight   of   the  coins  is  based  on  that   proportion.      The  conse- 


FRACTIONAL   CURREXOY— SILVER   COINAGE.  619 

quences  of  this  error  will  be  perceived  in  a  moment.  Our  gold  coin 
was  made  one  twelfth  part  of  alloj  and  eleven  twelfths  of  line  gold, 
in  accordance  with  the  English  standard.  Our  silver  coin  contained 
one  hundred  and  seventy-nine  parts  alloy  to  fourteen  hundred  and 
eighty-nine  of  silver,  or  about  one  ninth  alloy.  The  weight  of  the 
gold  coin  was  twenty-seven  grains  to  a  dollar,  and  that  of  the  silver 
coin  four  hundred  and  sixteen  grains,  and  either  gold  or  silver  was 
made  a  legal  tender  for  all  purposes.  Thus  the  double  standard  was 
adopted  by  the  people  of  the  United  States  at  the  beginning  of  the 
Government  to  the  fullest  extent.  The  only  debate  on  this  bill,  show- 
ing that  it  excited  no  attention,  was  as  to  whether  the  head  of  the 
President  of  the  United  States  for  the  time  being  or  the  head  of  the 
Goddess  of  Liberty  should  be  put  upon  the  coin.  That  was  the  only 
thing  they  cared  about.  All  the  philosophical  questions  involved  in 
the  proposition,  the  relations  of  silver  to  gold,  and  whether  they  should 
both  be  made  legal  tender,  do  not  seem  to  have  been  deemed  worthy 
of  consideration  in  that  early  Congress  of  the  United  States. 

The  result  of  this  act  was  to  demonetize  gold,  because  one  ounce  of 
gold  was  worth  more  than  fifteen  ounces  of  silver ;  and  then  the  law 
of  currency  comes  in,  that  if  a  coin  or  currency  is  undervalued  it  dis- 
appears from  circulation.  The  result  was  that  in  the  early  period  of 
our  history  gold  entirely  disappeared.  It  is  a  part  of  the  history  of 
the  time,  as  shown  by  official  reports,  that  there  was  substantially  no 
gold  in  the  United  States  from  1792  to  1834,  simply  because  the  gold, 
being  undervalued,  left  the  country,  leaving  silver  and  bank  notes  as 
the  basis  of  all  transactions.  In  order  to  counteract  this  effect  of  onr 
coinage  law,  Congress,  in  1831:,  by  an  act  to  be  found  in  the  fourth 
volume  of  the  Statutes  at  Large,  reduced  the  weight  of  gold  coin 
from  twenty-seven  grains  to  the  dollar  to  twenty-hve  and  eight  tenths 
grains  of  standard  gold,  nine  tenths  fine.  That  is,  they  made  one  ounce 
of  gold  equal  to  sixteen  ounces  of  silver.  That  was  the  substance  of 
the  change.  They  changed  the  relative  value  of  gold  and  silver  to 
each  other;  and  subsequently,  by  the  act  of  1837,  they  changed  the 
silver  coins  so  as  to  conform  to  this  standard.  By  the  act  of  1837 
gold  and  silver  coin  contained  one  tenth  part  of  alloy.  The  weight  of 
the  silver  dollar  was  fixed  at  four  hundred  and  twelve  and  one  half 
grains.  It  was  of  less  weight  than  the  old  silver  dollar,  but  of  the 
same  value,  because  it  was  finer,  having  less  alloy.  By  these  two  acts 
both  silver  and  gold  coins  were  of  the  same  fineness  and  bore  the  rela- 
tion to  each  other  of  one  to  sixteen.  The  weight  and  fineness  of  gold 
coins  thus  fixed  has  never  been  changed.  All  coins,  both  silver  and 
gold,  were  made  a  legal  tender  for  all  sums. 

Here  again  a  mistake  was  made  that  would  appear  to  be  very  trivial 
in  ordinary  legislation,  but  it  was  great  enough  to  revolutionize  our 
metallic  currency.  In  1831  and  1837  Congress  underestimated  the 
value  of  silver ;  that  is,  one  ounce  of  gold  was  not  worth  sixteen  ounces 
of  silver ;  but  by  law  they  made  it  so,  and  this  was  the  result :  Gold 
commenced  coming  into  the  country,  and  silver  flowing  out ;  so  that 
from  1831  or  1837  until  1853  silver  had  entirely  disappeared  from  the 
currency  of  the  United  States  by  reason  of  our  laws  undervaluing  silver 


520      SPEECHES  AND  KEPORTS  OF  JOHN  SHERMAK 

as  they  had  previously  undervalued  gold,  the  true  ratio  of  silver  to  gold 
being  between  one  to  fifteen  and  one  to  sixteen,  or  one  to  fifteen  and  a 
half.  The  effect  of  this  is  stated  very  strikingly  by  Mr.  Seyd,  from 
whose  book  I  will  read  an  extract : 

The  disappearance  and  exportation  of  the  American  silver  coinage  were  caused 
by  quite  a  different  matter.  The  American  silver  coinage  was  always  liable  to 
exportation  for  the  simple  reason  that  it  contained  an  undue  proportion  of  silver. 
In  all  countries  where  the  double  valuation  prevails  the  relative  proportion  of  value 
between  gold  and  silver  stands  at  one  to  fifteen  and  one  half,  and  the  market  value 
of  silver  in  countries  where  it  is  not  a  standard  gives  on  the  average  the  same  re- 
sult. In  the  United  States  alone  the  rate  taken  was  one  part  of  gold  to  sixteen  of 
silver  (15'98837),  the  proportion  resulting  from  the  eagle  at  two  hundred  and  fifty- 
eiglit  and  the  silver  dollar  at  four  hundred  and  twelve  and  one  half  grains.  The 
dollar  therefore  contained  three  and  one  third  (3'29)  per  cent,  more  silver  than  it 
ought  to  have  contained  according  to  its  nominal  value.  No  wonder,  then,  that  the 
dollar  was  rapidly  exported,  and  that  no  one  found  inducement  to  bring  silver  to 
the  mints  for  coinage.  And  let  it  be  understood  that  the  supply  of  gold  had  little 
or  nothing  to  do  with  this.  Long  before  the  discovery  of  gold  in  California,  ever 
since  1837,  has  the  effect  of  this  premium  on  the  United  States  silver  dollar  made 
itself  manifest.  In  exchange  for  it  the  foreigner  need  not  have  supplied  gold  ;  other 
commodities  served  the  purpose  of  realizing  elsewhere  the  large  profit  which  the 
United  States  gave  to  the  exporter  of  her  silver  coin.  Much  that  has  been  doubt- 
ful, peculiar,  and  unsatisfactory  in  the  history  of  the  United  States  currency  between 
1837  and  1850  owes  its  origin  to  this  astounding  mistake  on  the  part  of  the  Govern- 
ment, which  must,  as  every  one  can  see,  have  given  rise  to  general  disorganization 
of  the  currency  and  to  disappointment  in  tlie  capacity  of  the  country  to  retain 
metallic  currency.  I  go  further,  and  say  that  it  was  the  cause  why  America  was 
obliged  to  make  so  large  a  use  of  paper  money,  with  all  its  evils  of  unequal  interests, 
extravagant  habits,  and  expenditure. 

It  is  remarkable  that  by  the  adoption  of  the  first  standard  of  1Y92 
gold  at  once  left  the  country  and  silver  filled  the  channels  of  business, 
and  tliat  by  the  attempt  to  correct  this  eri-or  our  laws  overleaped  the 
market  and  true  relative  value  of  these  metals  and  established  the  rate 
of  silver  too  low,  and  this  drove  silver  out  of  the  country  and  gold 
became  the  universal  currency.  This  necessary  result  was  deepened 
and  strengthened  by  the  fact  that  in  1850,  by  the  discovery  of  gold 
mines  in  California,  gold  came  pouring  into  us  in  such  floods  that  our 
silver  currency  entirely  disappeared  and  its  relative  value  increased. 
All  the  money  we  had  was  gold  money,  not  silver  money.  AVe  had  no 
change.  In  some  parts  of  the  country  we  resorted  to  "  shinplasters." 
Thus  a  slight  error  in  fixing  the  relative  value  between  gold  and  silver 
made  two  remarkable  movements  in  these  precious  metals,  a  striking 
illustration  of  the  necessity  for  the  utmost  care  in  dealing  with  all  cpies- 
tions  affecting  metallic  money. 

In  1S53  Congress  undertook  to  correct  this  evil,  and  under  the  lead 
of  Mr.  Hunter  of  Virginia,  then  Chairman  of  the  Committee  on  Fi- 
nance, the  act  of  1853  was  passed.  I  have  before  me  a  very  learned 
report  made  by  Mr.  Hunter,  in  which  he  pointed  out  the  evils  of  the 
then  existing  system  and  prescribed,  as  he  thought,  a  remedy.  Per- 
liaps  I  had  better  read  to  the  Senate  a  brief  extract  from  Mr.  Hunter's 
report  to  show  that  he  examined  the  matter  with  great  care  ;  that  he 
appreciated  the  evil  to  be  remedied.  But  even  he  finally  fell  into  the 
error  of  largely  demonetizing  silver  by  not  reducing  the  silver  dollar 
then  undervalued.     Mr.  Hunter,  on  the  third  page  of  his  report,  says  : 


FRACTIONAL  CURREITCY— SILVER   COIN-AGE.  521 

Indeed,  it  appears  from  a  carefully  compiled  table  appended  to  Mr.  Ingham's  re- 
port (document  Xo.  117,  page  101),  that  from  1492  to  182.5  there  were  coined  from 
the  American  mines  $4,310,000,000  in  silver,  and  only  $1,890,000,000  in  gold.  But, 
in  tracing  the  effect  of  this  change  of  the  relative  value  upon  particular  countries, 
we  must  not  forget  its  operation  upon  the  rest  of  the  world.  In  thus  excluding 
one  of  these  metals  from  one  country,  if  its  property  and  trade  were  large,  and  in 
thus  forcing  more  than  its  natural  proportion  into  loanufactures,  we  should  dimin- 
ish the  volume  of  specie  currency  of  the  world  below  the  natural  supply.  How 
this  would  affect  mankind  will  be  hereafter  examined.  But  the  mischief  would  be 
great  indeed  if  all  the  world  were  to  adopt  but  one  of  the  precious  metals  as  the 
standard  of  value.  To  adopt  gold  alone  would  diminish  the  specie  currency  more 
than  one  half ;  and  the  reduction  the  other  way,  should  silver  be  taken  as  the  only 
standard,  would  be  large  enough  to  prove  highly  disastrous  to  the  human  race.  In- 
deed, a  reference  to  the  history  of  the  precious  metals  and  the  general  coui-se  of 
human  production  can  scarcely  fail  to  convince  us  that  there  has  been  a  constant 
tendency  to  appreciate  their  value  as  compared  with  the  residue  of  the  property 
of  the  world,  and  that  every  extraordinary  increase  of  the  supply  of  the  precious 
metals  of  wliich  we  have  any  account  has  exercised  a  highly  beneficial  effect  upon 
human  affairs.  When  contracts  are  nuxde  by  a  standard  wliich  is  gradually  con- 
tracting, the  advantages  are  on  the  side  of  capital  as  against  labor,  and  productive 
energy  is  cramped  by  receiving  less  than  a  fair  share  of  the  profit  of  its  enterprises. 

It  is  manifest  fiom  this  extract  from  Mr.  Hunter's  report,  which  is 
very  vohiminous,  that  the  desire  of  Mr.  Hunter  and  those  who  voted 
for  the  passage  of  the  act  of  1853  was  to  bring  back  silver  into  this 
country,  so  that  we  might  have  silver  and  gold  again  as  the  currency 
of  the  country,  and  the  measure  they  adopted  was  intended  to  produce 
that  effect.  What  was  it  ?  By  the  act  of  1853  no  change  was  made  in 
gold  coin  or  in  the  silver  dollar.  The  latter  was  left  demonetized  by 
being  rated  at  less  than  its  market  value.  The  act  provided,  however, 
for  subsidiary  silver  coin  :  the  half-dollar,  the  quarter-dollar,  the  dime, 
and  the  half -dime.  It  prescribed  the  weight  of  the  coin  at  three  hun- 
dred and  eighty -four  grains  to  the  dollar,  instead  of  four  hundred  and 
twelve  and  a  half  grains.  It  made  the  subsidiary  coin  a  legal  tender 
for  live  dollars,  and  all  other  coins  were  left  a  legal  tender  without 
limit.  This  act,  as  I  stated,  provided  for  a  subsidiary  coinage  worth 
about  six  per  cent,  less  than  par,  assuming  the  relative  value  of  silver 
and  gold  to  be  sixteen  to  one.  The  subsidiary  coin  was  made  a  legal 
tender  to  the  amount  of  five  dollars,  leaving  the  silver  dollar  legal  ten- 
der for  all  amounts. 

The  effect  of  this  act  of  1853  was  to  bring  back  to  us  silver  change 
in  abundance  as  a  token  coin.  There  were  issued  between  1853  and 
1861  about  ^48,000,000  of  silver  coin.  It  was  the  change  of  the  coun- 
try, and  to  that  extent  silver  was  monetized  again  and  in  daily  use  ; 
but  the  dollar  was  still  undervalued  and  has  never  entered  into  circula- 
tion from  1853  to  tliis  time.  Except  for  special  purjDOses,  the  silver 
dollar  of  the  United  States  disappeared  from  among  the  coins  of  the 
world  for  the  palpable  reason  that  it  was  more  valuable  for  export 
than  for  circulation.  The  silver  dollar  of  the  United  States  has  never 
been  changed  in  intrinsic  value  ;  the  change  has  been  in  the  gold  dollar. 

The  effect  of  the  law  of  1853  was  practically  to  demonetize  the 
silver  dollar,  to  provide  a  subsidiary  coin  for  circulation,  and  to  give 
emplo^nnent  to  about  $18,000,000  of  silver  for  the  change  of  the  coun- 
try.    So  the  laws  of  the  United  States  as  to  our  coins  continued  until 


522  SPEECHES   AND  EEPOETS   OF  JOHN  SHERMAN. 

February,  1873,  when  Congress  passed  an  act  to  revise  and  consolidate 
all  the  statutes  in  regard  to  coinage.  This  act  is  embodied  in  the 
Revised  Statutes.  The  changes  made  by  this  act  are  very  sliglit.  Ko 
change  was  made  in  the  gold  coin  ;  it  is  still  twenty-live  and  eight 
tenths  grains  of  standard  gold  to  the  dollar.  The  subsidiary  silver 
coins  were  to  weigh  twenty-five  grammes  to  the  dollar.  That  raised  the 
value  of  the  silver  coins  from  three  hundred  and  eighty-four  grains  to 
twenty-five  grammes  or  three  hundred  and  eighty -five  and  eighty  one- 
hundredths  grains,  so  that  it  very  slightly  raised  the  amount  of  silver 
in  the  subsidiary  coins  in  order  to  harmonize  with  the  French  coins  ; 
so  that  now  one  dollar  of  our  subsidiary  money  is  precisely  of  the  same 
weight  and  fineness  as  five  francs  of  the  French  coin,  and  our  silver 
coin  is  now  easily  convertible  into  French  or  Latin  unit  coins.  The 
old  silver  dollar  was  dropped  out  in  the  revision  ;  and  why  ?  SimjDly 
because  it  was  not  in  use.  It  could  not  circulate  because  in  1872  and 
1873  the  silver  dollar  was  worth  more  than  the  gold  dollar.  As  it  had 
not  been  coined  for  twenty  years,  it  was  dropped  out  from  among  the 
coins  of  the  United  States.  As  a  matter  of  course  this  does  not  pre- 
vent us  restoring  it  at  any  time  when  we  think  it  is  for  the  public 
interest  to  do  so. 

But  the  most  striking  change  made  by  the  act  of  1873  was  the 
introduction  of  a  new  dollar  called  the  trade  dollar.  Senators  here 
mostly  understand  the  reason  why  that  trade  dollar  was  provided  for. 
Silver  was  beginning  to  be  aft'ected  by  the  events  that  I  shall  allude  to 
presently.  There  was  a  great  demand  for  silver  in  China,  however ; 
and  the  Mexican  j)iHar  dollar  for  a  good  reason  had  gotten  into  the 
markets  of  China,  and  was  the  most  desirable  coin,  because  it  was 
worth  a  little  more  than  the  dollar  of  the  United  States  and  more  than 
the  dollar  of  any  other  country.  Therefore  in  China  they  would  not 
take  any  other  dollar.  There  they  measure  small  differences  much 
more  carefully  than  we  do.  In  order  to  induce  the  Chinese  to  take 
our  dollar  instead  of  the  Mexican  milled  dollar,  so  that  we  might  give 
to  our  people  a  chance  to  export  their  silver  in  the  form  of  coin,  we 
authorized  the  holders  of  bullion  to  present  their  bullion  at  the  mints 
of  the  United  States  to  be  coined  into  trade  dollars  containing  four 
hundred  and  twenty  grains  of  standard  silver.  The  old  dollar  con- 
tained only  four  hundred  and  twelve  and  a  half  grains ;  so  that  the 
trade  dollar  contained  seven  and  a  half  grains  more  of  silver,  and  that 
made  it  a  little  more  valuable  than  the  Mexican  dollar,  which  contained 
four  hundred  and  sixteen  grains  of  silver,  with  a  little  less  alloy  than 
ours.  The  trade  dollar  has  a  shade  more  value  than  any  other  dollar, 
and  at  once  superseded  the  Mexican  silver  dollar  in  China.  The 
result  was  that  the  Government  of  the  United  States,  by  coining  trade 
dollars  at  the  expense  of  the  holders  of  bullion,  introduced  into  the 
commerce  of  the  world  a  new  money,  which  is  now  being  absorbed 
largely  in  Japan  and  China  and  by  all  Asiatic  nations. 

I  iiave  stated,  I  believe,  all  the  laws  of  the  United  States  without 
exception  which  affect  the  value  of  either  gold  or  silver  coins.  There 
have  not  been  many  of  them.  Our  coinage  laws  have  been  very  stable  ; 
no  changes  have  been  made  except  for  an  obvious  purpose.     The  law 


FRACTI02^AL  CURRENCY— SILVER  COINAGE.  523 

of  1792  stood  on  our  statute  books  iinelianged  until  183Jt,  and  then  was 
nioditieil  only  as  far  as  the  gold  coins  were  concerned ;  and  the  law  re- 
mained unchanged  from  that  time  until  1853,  and  was  then  modified 
only  so  as  to  introduce  subsidiary  coinage  ;  and  it  remained  then  until 
1873,  when  it  was  changed  in  order  to  introduce  the  trade  dollar. 

Those  are  all  the  changes,  so  that  the  silver  dollar  of  our  Revolu- 
tionary fatliers  is  the  silver  dollar  of  to-day  if  we  choose  to  restore  it. 
The  trade  dollar  has  been  introduced  simply  as  a  connnercial  dollar. 
Here  is  the  difficulty  in  which  we  are  placed :  by  the  sudden  fall  of 
silver  the  trade  dollar,  instead  of  being  worth  more,  is  worth  less  than 
gold ;  and  yet  by  the  act  of  1873  the  trade  dollar  was  made  a  legal 
tender.  The  result  is  that  a  dollar  less  valuable  than  gold  is  made  a 
legal  tender  for  the  payment  of  gold  contracts  to  a  limited  amount. 
But  that  is  not  the  worst  of  it.  Tve  could  bear  that  very  well ;  but  the 
worst  of  it  is  that  by  the  act  of  1873  any  holder  of  silver  bullion  can 
convert  his  bullion,  which  is  worth  seven  per  cent,  less  than  par,  at  the 
mere  cost  of  minting,  into  dollars ;  and  the  law  makes  them  a  legal 
tender  to  the  extent  of  $5,  for  customs  dues  and  the  like.  Thus  the 
Government  of  the  United  States  allows  private  individuals  to  regulate 
the  amount  of  our  coinage.  It  is  perfectly  manifest  to  every  man  who 
will  examine  this  matter  that  Ave  have  got  to  do  one  of  two  things : 
either  take  away  from  the  trade  dollar  its  legal-tender  quality  or  take 
away  the  right  of  the  holder  of  bullion  to  make  the  trade  dollar. 

The  simplest  thing  to  do  is  to  repeal  the  section  authorizing  the 
issue  of  the  trade  dollar.  But  then  come  these  gentlemen  from  Cali- 
fornia and  jSTevada  and  say,  "  We  have  built  up  a  trade  on  this ;  it  is  a 
convenient  fonn  of  exporting  our  bullion ;  we  do  not  ask  you  to  pay 
the  expense,  however.  We  pay  that  ourselves.  Why  should  you  step 
in  now  and  destroy  that  which  we  have  built  up  ? "  A"nd  there  is  no 
answer  to  it.  Therefore  I  think  it  is  well  to  keep  the  trade  dollar  as  it 
stands,  to  enable  the  people  of  this  country  to  convert  their  silver  bul- 
lion into  the  best  form  for  commercial  purposes,  but  to  take  away  from 
it  its  legal-tender  quality,  and  then  no  silver  coin  can  be  issued  except 
by  the  United  States,  and  the  profit  and  the  benefit  will  inure  to  the 
United  States  ;  and,  more  than  all,  the  amount  will  be  regulated  by  the 
United  States.  It  is  manifest  that  if  the  trade  dollar  is  to  continue  and 
silver  remains  depreciated,  with  the  right  of  any  holder  of  silver  bullion 
to  convert  it  into  trade  dollars,  the  country  will  be  overwhelmed  with 
money  that  is  not  at  par  in  gold. 

I  hope,  therefore.  Senators  will  see  that,  as  far  as  the  trade  dollar  is 
concerned,  while  we  do  not  wish  to  interfere  with  its  usefulness  and  its 
value,  we  must  take  away  from  it  that  attribute  which  was  not  intended 
to  be  given  to  it  when  the  law  was  passed,  and  which  changes  its  char- 
acter from  a  commercial  dollar  to  a  legal-tender  coinage. 

Mr.  President,  I  have  now  stated  all  I  desire  to  state  about  the  laws 
of  the  United  States.  But  this  question  is  affected  by  the  laws  of  all 
other  countries  with  whom  we  have  dealings.  The  question  of  coinage 
is  an  international  question.  It  is  not  enough  for  us  to  stop  witli  seeing 
what  our  own  laws  are,  and  deciding  how  far  we  shall  change  them,  but 
we  must  see  what  the  laws  of  other  countries  are,  or  we  may  be  in  the 


524  SPEECHES  AND  EEPORTS   OF  JOHN  SHERMAN. 

position  tliat  Congress  was  in  in  1853  and  1837,  and  in  1792,  when  by 
making  a  mistake  in  the  relative  vahie  of  gold  and  silver  they  drove  out 
of  circulation,  contrary  to  their  intention,  iirst  gold  and  then  silver. 

Great  Britain  is  generally  supposed  to  be  at  the  head  of  the  nations 
that  have  adopted  what  is  called  the  single  standard  of  gold.  In  Eng- 
land anybody  may  carry  gold  bullion  of  any  kind  or  in  any  form  to  the 
mint,  and  there  have  it  coined  into  sovereigns  of  certain  weight  and 
fineness,  without  charge  at  all.  They  have  some  refining  charges,  but 
they  make  no  charge  for  coinage.  The  same  right  is  conferred  upon 
the  owner  of  silver  bullion,  with  this  qualification,  and  it  is  a  very  im- 
portant one  :  a  man  may  take  a  pound  troy,  or  what  will  make  a  pound 
troy,  of  silver  bullion  of  a  certain  standard  to  the  mint,  and  Great 
Britain  converts  it  into  sixty-six  shillings,  paying  him  sixty-two  shil- 
lings.    It  retains  the  other  four  for  its  own  use  as  a  seigniorage. 

The  shillings  issued  are  of  the  standard  fineness.  The  result  of 
that  is  that  every  English  shilling  is  worth  less  than  bullion  in  intrinsic 
value,  but  by  being  made  a  legal  tender  for  a  limited  amount  it  is  equal 
in  money  value  to  gold  coin.  It  is  used  as  what  is  called  a  "  token  " 
coinage.  The  weight  of  the  shilling  is  eighty-seven  and  one  fourth 
grains.  Four  shillings  are  equal  to  three  hundred  and  forty-nine  grains 
of  standard  silver.  The  alloy  of  standard  silver  there  is  seventy-five 
one-thousandths.  Their  silver  coin  is  finer  than  ours,  but  it  is  not  so 
valuable,  our  alloy  being  one  tenth,  but  containing  more  grains  to  the 
dollar.  The  value  of  the  English  silver  shilling  in  our  money  is  twenty- 
one  cents  and  four  mills.  The  value  of  the  gold  shilling  is  twenty-four 
and  thirty-three  one-hundredth s  cents,  or  twenty  shillings  passes  for  a 
sovereign  worth  $4,866.  The  difference  between  the  English  shilling 
and  our  quarter  dollar  is  in  favor  of  ours.  Our  coin  is  more  valuable 
than  theirs.  Our  silver  coin  has  always  been  more  valuable  than  theirs 
since  1816.  And  yet,  notwithstanding  that  Great  Britain  has  thus  de- 
based its  coinage,  four  shillings  to  sixty-six,  they  keep  in  circulation 
of  this  token  coinage  in  a  country  of  32,000,000  people  from  eleven 
to  fifteen  million  pounds  sterling  on  an  average,  over  $60,000,000. 
Though  everybody  knows  it  is  intrinsically  worth  6  or  7  per  cent,  less 
than  gold,  yet  from  the  fact  that  they  carefully  limit  the  amount  and 
regulate  its  issue  it  is  maintained  in  circulation,  and  is  the  coin  by 
wdiich  nearly  all  the  labor  of  England  is  paid.  It  is  a  legal  tender  to 
the  extent  of  forty  shillings  and  no  more.  Nor  is  it  necessary,  in  order 
to  maintain  this  large  amount  in  circulation,  to  have  a  legal  tender  for 
any  greater  sum ;  because,  the  Government  having  the  exchisive  power 
to  issue  it,  issue  only  so  much  as  the  demand  will  keep  at  par  M-ith  gold. 
Such  is  the  law  of  Great  Britain. 

In  Canada,  where  there  are  4,000,000  people,  their  twenty-five-cent 
piece  is  worth  a  little  less  than  ours.  It  is  very  much  like  the  English 
coin,  but  a  little  less  valuable  than  ours,  I  estimate  it  at  six  one- 
thousandths  of  a  grain  less  than  ours.  As  a  matter  of  course  our  silver 
coin  will  pass  between  this  country  andT'anada  when  we  get  to  specie 
payments.  Our  subsidiary  silver  coin  will  go  all  over  Canada.  It  is 
w(trth  a  little  more  than  the  Canadian  money,  and  I  have  no  doubt  it 
will  fill  the  channels  of  business  there. 


FRACTIONAL  CURRENCY— SILVER  COINAGE.  525 

This  brings  me  to  the  statement  of  the  silver  coinage  of  France, 
Belgium,  Switzerland,  and  Italy,  M'hich  have  a  population  of  72,000,000. 
Their  money  is  based  mainly  on  the  French  standard  of  1792,  and  it  is 
regulated  by  the  convention  of  December  23,  1805,  which  I  have  here 
before  me.  It  is,  probably,  the  most  important  monetary  convention 
now  in  force.  I  will  cite  some  of  the  provisions  of  it.  The  weight  of  a 
franc  is  live  granmies,  so  that  they  have  a  simple  metrical  unit  of  weight. 
For  live  francs  it  is  twenty-live  grammes,  and  that  is  precisely  the  weight 
of  our  two  half  dollars  or  four  quarters.  The  fineness  is  nine  tenths, 
precisely  like  our  own  coin.  The  limit  of  issue  is  fixed  at  six  francs, 
or  81-20,  per  inhabitant.  In  Great  Britain  there  is  no  enforced  limit, 
the  amount  issued  being  governed  entirely  by  the  demand.  But  in  this 
convention  they  have  provided  that  none  of  the  nations  shall  issue  more 
than  six  francs  per  inhabitant.  But  that  makes  an  enormous  sum.  The 
limit  of  Sl-20  per  inhabitant  would  give  to  Belgium  32,000,000  francs ; 
France,  239,000,000 ;  Italy,  141,000,000  ;  Switzerland,  17,000,000 ;  in 
all  429,000,000  francs ;  or  about  $82,000,000  or  $83,000,000.  And 
this,  remember,  is  subsidiary  coin.  Each  nation  has  its  standard  of  sil- 
ver besides,  which  it  maintains  at  the  relation  to  gold  of  fifteen  and 
one  half  to  one.  The  five-franc  piece  in  France,  just  as  our  dollar  was 
in  1853  and  up  to  1873,  is  a  legal  tender  for  all  sums.  The  same  law 
applied  to  us  would  make  a  circulation  of  about  $50,000,000,  but  our 
population  being  more  scattered  it  is  generally  supposed  by  those  who 
have  studied  the  subject  that  w'e  can  now  maintain  a  circulation  of  sub- 
sidiary coin  of  seventy  or  eighty  million  dollars. 

The  legal  tender  among  private  individuals  under  this  convention 
is  fifty  francs,  or  $10.  It  will  be  seen  that  wherever  silver  is  used  in 
modern  nations,  the  limit  of  legal  tender  is  carefully  preserved  as  the 
only  way  of  preventing  the  depreciation  and  exportation  of  one  or  the 
other  of  the  coins.  Among  private  individuals  it  is  limited  to  fifty 
francs,  or  $10;  among  the  contracting  states  to  one  hundred  francs; 
that  is,  each  of  the  contracting  states  agrees  to  receive  it  at  their  trea- 
suries for  one  hundred  francs.  The  old  coinage  is  redeemed  in  the  gold 
and  silver  of  the  convention.  Such  is  the  conventional  law  wdiich  I 
have  before  me,  which  regulates  now  the  monetary  transactions  of 
72,000,000  people.  There  is  no  doubt  whatever,  that  in  1867,  when 
the  Paris  monetary  conference  was  held,  if  Germany  had  consented, 
this  conventional  law  would  have  been  agreed  to  as  an  international 
law,  and  would  have  been  made  the  basis  of  the  entire  commerce  of 
the  world.  I  was  present  at  that  conference,  and  it  was  then  the  gen- 
eral sentiment  of  the  nations  represented  that  gold  should  be  the  unit 
of  value ;  and  that,  by  providing  for  subsidiary  silver  coinage  at  the 
relative  value  as  fixed  by  the  convention  at  fifteen  and  a  half  to  one, 
there  would  be  no  difficulty  in  maintaining  it.  What  defeated  the 
convention  was  the  pride  of  the  English  in  the  pound  sterling,  and 
the  refusal  of  the  German  nation,  then  not  united  as  now,  to  surrender 
the  silver  standard,  wdiich  M^as  then  their  sole  standard  of  value ;  and 
so  the  effort  for  an  international  money  failed.  But  the  monetary  con- 
vention of  the  Latin  states,  which  was  the  work  of  purely  scientific 
men,  has  proved  a  success.     One  of  the  provisions  of  the  convention 


526  SPEECHES   AND   EEPORTS   OF  JOHi^  SHERMAN. 

authorized  any  nation  whatever  to  join  it  with  all  the  advantages  con- 
ferred by  the  convention  ;  so  that  it  is  open  to  all  the  world.  In  this 
convention  the  relative  value  of  gold  and  silver  is  fixed  at  fifteen  and 
one  half  to  one.     . 

Now  I  come  to  what  is  called  the  German  law ;  and  I  think  there 
is  a  great  deal  of  misapjjrehension  not  only  in  the  newspapers  and 
among  intelligent  people,  but  among  the  mass  of  our  people,  in  regard 
to  the  recent  action  of  Germany.     I  have  the  German  statute  here. 

In  Germany  silver  alone  was  formerly  the  standard  of  value.  They 
had  but  httle  gold.  I  remember  very  well,  in  1867,  in  traveling  in 
Germany,  that  we  relied  entirely  uj)on  the  English  sovereign  and  the 
French  twenty-franc  piece  to  j)ay  expenses  in  Prussia  because  the  Ger- 
man coinage  was  abominable,  composed  of  a  confusing  variety  of  coin. 
They  had  the  silver  thaler,  which  was  the  standard  of  value,  but  there 
was  no  gold  in  Germany  that  I  saw  except  the  French  napoleon  and 
the  English  pound  sterling.  There  were  many  states  or  nations  in 
Germany  ;  they  could  not  agree.  But  when  Germany  became  a  great 
jDower  as  the  result  of  the  recent  war,  the  German  Reichsrath,  on  the 
4th  of  December,  1871,  provided  for  gold  coins  and  established  a  mark, 
worth  twenty-three  and  eight  tenths  cents,  as  the  unit  of  value.  That 
is  the  unit  not  only  of  silver  but  of  gold.  The  ten-mark  piece  of  gold 
is  worth  $2.38  of  our  money.  That  act  of  December  4,  1871,  related 
only  to  gold  coins  and  j)rovided  a  unit,  but  did  not  demonetize  or  affect 
in  the  slightest  degree  the  silver  coinage  of  Germany,  which  then 
amounted,  according  to  some  estimates,  to  four  or  five  hundred  million 
dollars.  ]3y  the  act  of  July  9,  1873,  which  I  have  before  me,  Ger- 
many undertook  to  change  her  standard  from  a  single  silver  standard 
to  the  double  standard  of  silver  and  gold.  The  common  impression 
now  is  that  Germany  has  adopted  the  single  gold  standard  and  demone- 
tized its  silver.  On  the  contrary,  the  change  in  Germany  is  simply 
from  the  single  silver  standard  to  the  double  standard  of  gold  and 
silver. 

Article  2  of  the  statute  of  the  Reichsrath  provides  that,  in  addition 
to  the  gold  coins  created  by  act  of  December  4,  1871,  there  shall  be 
coined  also  silver  coins. 

Article  3  provides  for  pieces  of  5  marks,  2  marks,  1  mark ;  of  50 
pfennigs,  and  of  20  pfennigs  ;  nickel  and  copper. 

The  coinage  shall  be  regulated  by  the  following  decisions : 

One  pound  of  fine  silver  shall  be  coined  into  20  pieces  of  5  marks, 
50  pieces  of  2  marks,  100  pieces  of  1  mark,  200  pieces  of  50  pfennigs, 
and  500  pieces  of  20  pfennigs. 

The  alloy  consists  of  900  parts  of  silver  and  100  parts  of  copjDcr,  90 
marks  weighing  one  pound. 

The  process  of  coinage  shall  be  decided  by  the  Bundesrath.  The 
deviation  from  the  standard  shall  not  exceed  in  single  coins  '(JOS  in 
fineness,  and  not  more  than  '001  in  weight,  with  the  exception  of  the 
20-pfennig  coins ;  the  normal  weight,  however,  must  be  preserved  in 
the  bulk. 

Article  4  provides  that  the  total  amount  of  silver  shall,  until  further 
orders,  not  exceed  10  marks  per  head  of  the  population. 


FRACTIONAL  CURRENCY— SILVEPw   COINAGE.  527 

This  is  the  important  provision  of  this  law,  by  which  a  larger  silver 
coinage  is  authorized  in  Germany  than  is  found  anywhere  else  in  En- 
rope.  While  6  francs  is  the  limit  in  France,  while  our  limit  has  prac- 
tically been  only  about  $1.25,  we  having  only  issued  $48,000,000  of  silver 
coin,  and  while  in  England  the  amount  has  been  limited  to  about  $2 
per  inhabitant,  in  Germany  the  amount  of  silver  provided  for  is  10 
marks  per  inhabitant,  or  $2.38,  making  for  40,000,000  of  people  at  least 
$100,000,000  of  silver  coin ;  and,  as  I  will  show,  they  have  already 
issued  nearly  two  thirds  of  that  amount. 

The  law  further  provides  as  follows  : 

After  every  new  issue  of  coins  an  equal  quantity  of  the  old  circulating  silver  coins 
shall  be  drawn  in,  beginning  with  the  coins  under  the  thirty-tlialer  standard.  The 
value  to  be  determined  in  the  way  explained  in  article  14,  section  2. 

Art.  7.  The  coinage  and  redemption  is  done  at  Government  expense. 

Art.  9.  Nobody  is  obliged  to  receive  more  than  20  marks  in  silver  or  more 
than  1  mark  in  copper. 

The  Reichs-  and  the  Landescassen  (Government  banks)  shall  receive  silver  to 
any  amount  as  legal  tender. 

That  is,  all  the  Government  banks  are  bound  to  take  silver  as  legal 
tender  for  all  transactions. 

The  Bundesrath  will  designate  the  banks  which  shall  exchange  amounts  of  not 
less  than  two  hundred  silver  marks  for  gold  coin. 

The  government  undertakes  to  supply  the  banks  with  the  necessary 
money  to  redeem  and  tlie  banks  undertake  to  redeem  all  this  money 
at  par,  so  that  it  is  practically  a  legal  tender. 

Art.  10.  Silver  coins  which  have  lost  considerable  weight  by  circulation  shall 
be  received  in  Reichs-  and  Landescassen  ;  they  must  be,  however,  drawn  in  at  the 
cost  of  the  empire. 

Art.  14,  Sec.  2.  In  reducing  the  value  of  other  coin,  not  gold,  the  value  of  tlie 
thaler  is  three  marks,  the  gulden,  silddeutsche  Wiihrung,  one  and  five  sevenths  marks, 
the  mark  of  Hamburg  one  and  one  fifth  marks. 

The  important  bearing  of  these  provisions  of  the  law  will  be  seen 
when  I  come  to  look  at  wliat  has  actually  been  done  in  Germany  and 
has  so  disturbed  the  monetary  values  of  the  whole  world.  The  amount 
of  silver  coin  outstanding  in  Germany  has  been  estimated  by  various 
authorities,  and  was  estimated  by  the  Government  of  Germany  at  $340,- 
000,000 ;  but  it  is  shown  now  while  they  are  changing  currency  from 
one  form  to  another  that  the  amount  was  underestimated,  so  that  the 
amount  of  silver  in  circulation  in  Germany  alone  in  1873  when  this  act 
passed  was  probably  $400,000,000.  The  one-  and  two-thaler  pieces 
which  were  the  common  circulation  of  Germany  are  still  a  legal  tender 
for  all  amounts,  and  are  received  by  the  Government  at  par  in  gold. 
The  great  body  of  them  is  still  outstanding.  A  recent  writer  in  the 
London  "  Economist "  says : 

As  regards  the  hearing  of  this  arrangement  on  the  requirements  for  gold  in  our 
market,  the  leading  facts  are,  first,  that  the  one-  and  two-thaler  pieces  coined  w^ere 
estimated  by  the  German  Government,  in  introducing  the  coinage  law  of  1873,  to 
amount  to  459,000,000  thalers,  equal  to  about  $340,000,000,  or  £('.8,000,000,  of  which 
the  two-thaler  pieces  represent  05,000,000  thalers,  or  £9,750,000,  and  the  one-thaler 
pieces.  394,000.000  thalers,  or  £59,000,000;  second,  that  according  to  the  estimates 
of  writers  like  llerr  Soetbeer  and  others,  at  least  three  fifths  of  this  silver  coinage  is 


528  SPEECHES  AND   EEPORTS   OF  JOHN"   SHERMAN. 

still  in  circulation— that  is,  $180,000,000,  about  £36,000,000  in  all,  of  which  £5,850,- 
000  would  be  in  two-tlialer  pieces,  and  the  remainder,  or  about  £30,000,000,  in  one- 
thaler  pieces. 

That  is,  tliere  is  still  outstanding  $180,000,000  of  the  old  silver  coins 
of  Germany,  besides  the  amount  that  has  been  issued  of  new  coin.  I 
have  here  also  a  statement  taken  from  the  London  "  Economist "  of  a 
late  date,  March  25,  1876,  of  the  amount  of  new  coins  issued  by  Ger- 
many : 

On  the  11th  of  March  all  the  newly  coined  money  in  Germany  amounted  to: 
In  gold  pieces,  1,356,141,220  marks — 

Or  about  $300,000,000  in  gold  coin. 

In  silver  pieces,  193,118,226— 

Or  about  $50,000,000  of  new  silver  coins.  Besides,  there  is  outstand- 
ing, as  I  have  shown,  $180,000,000  of  old  silver  coins  which  are  now  a  legal 
tender  for  all  purposes.  The  enormous  eifect  of  this  law  in  Germany, 
and  as  a  consequence  the  ]3artial  demonetizing  of  silver  coins,  I  suppose 
is  felt  by  every  man,  woman,  and  child  who  buys  or  sells  anything.  I 
suppose  there  is  no  act  of  any  j^arliament  that  has  had  so  wide-reaching 
effects  as  this  act  of  the  German  Parliament.  The  amount  of  coin  in 
the  world  is  estimated  by  Mr.  Seyd  and  other  technical  wi'iters  at 
$3,200,000,000  silver  and  $3,500,000,000  in  gold.  So  the  effect  of  the 
act  of  Germany,  aided  no  doubt  somewhat  by  the  large  supply  of  silver 
by  our  mines,  has  been  to  reduce  the  purchasing  power  of  the  whole 
of  this  enormous  sum  of  thirty-two  hundred  millions  of  silver  fully  10 
per  cent.  The  fall  of  the  silver  trade  dollar  in  this  country  has  been 
from  103  to  91.  This  effect  extended  itself  to  what  is  called  the  Latin 
League,  who  feared  that  German  silver  would  be  carried  rapidly  into 
Italy,  France,  and  the  nations  of  the  league,  for  coinage  purposes,  and 
they  interfered  at  once  and  stopped  the  coinage  of  silver.  It  also  cre- 
ated an  impression  in  India ;  so  that,  for  the  iirst  time  for  two  hundred 
years,  the  current  flow  of  silver  into  China  and  India  was  arrested,  but 
only  for  a  short  time,  however.  It  is  oue  of  the  remarkable  currents 
of  trade  in  the  history  of  mankind  that  with  the  silver  that  has  been 
coined  in  the  world  the  greater  part  flows  in  a  continuous  stream  into 
these  Oriental  countries ;  and  for  three  or  four  months  a  feeling  of 
alarm  was  created  there  lest  that  which  they  cherish  as  the  measure  of 
all  their  values  should  become  valueless  to  them.  It  created  a  joartial 
panic,  but  that  panic  has  passed,  and  now  the  stream  goes  on ;  silver 
flows  into  India  and  China  and  all  the  Asiatic  countries  as  heretofore. 

That  was  not  the  worst  of  it.  A  struggle  for  the  possession  of  gold 
at  once  arose  between  all  the  great  nations,  because  everybody  could 
see  that  if  $3,200,000,000  of  silver  coin  were  demonetized  and  $3,500,- 
000,000  of  gold  coin  made  the  sole  standard  it  would  enormously  add 
to  the  value  of  gold,  and  the  Bank  of  France,  the  Bank  of  England, 
and  the  Imperial  Bank  of  Germany  at  once  commenced  grasping  for 
gold  in  whatever  form.  Therefore  what  we  have  observed  recently  is 
not  so  much  a  fall  of  silver  as  it  is  a  rise  of  gold,  the  inevitable  effect 
of  a  fear  of  the  demonetization  of  silver ;  and  now  the  Bank  of  France 
has  in  its  vaults  the  enormous  amount  of  $300,000,000  of  gold  in  coin 


FRACTIONAL  CURRENCY— SILVER   COINAGE.  529 

and  bullion ;  tlie  Bank  of  England  has  $1Y0,000.000,  and  the  Imperial 
Bank  of  G-ermany  has  $125,000,000.  So  in  these  three  depositories 
there  is  over  $600,000,000  of  gold,  or  nearly  one  tifth  of  the  supply  of 
the  world. 

Mr.  President,  the  effect  of  the  movement  in  Germany  has  already 
reacted  in  a  wonderful  manner.  A  recent  order  in  Germany  has  sus- 
pended the  conversion  of  the  thaler  and  monetized  it.  I  have  not  that 
order,  but  I  have  here  a  recent  French  pamphlet,  a  very  incisive  and 
well-written  one,  which  speaks  of  the  recent  action  of  Germany  thus : 

It  is  scarcely  necessary  to  point  out  the  gigantic  losses  Germany  would,  before 
causing  this  disastrous  crisis,  entail  upon  herself  should  she  continue  to  ofter  heavy 
sums  of  silver  and  to  demand  heavy  sums  of  gold.  The  silver  so  offered  would  be 
more  and  more  depreciated,  and  the  price  of  gold  would  rise  in  a  converse  ratio, 
entailing  a  loss  of  millions  to  the  German  treasury. 

The  ministry  of  the  Empire  have  foreseen  these  difficulties.  To  meet  them  they 
inserted  in  the  decree  ruling  that  from  January  1,  1876,  all  payments  shall  be  made 
neither  in  florins  nor  thalers,  but  exclusively  in  marks,  a  restrictive  clause  to  main- 
tain in  circulation  the  thalers,  which  are  to  be  counted  as  gold  and  to  be  each  held 
as  equivalent  to  three  marks. 

Since  demonetization  has  begun,  silver  which  is  constantly  oifered  to  foreign 
markets  goes  on  falling  in  price,  while  at  home  the  value  of  tlie  thaler,  this  coin 
being  a  legal  tender  under  the  restrictive  clause  above  mentioned  and  appraised  at 
three  golden  marks,  is  not  depreciated.  Bankers,  therefore,  when  they  have  pay- 
ments to  make  abroad,  are  careful  not  to  transmit  thalers.  They  send  gold  marks, 
reserving  their  thalers  for  home  payments.  Government  buys  back  the  gold  in  for- 
eign markets  and  the  bankers  go  on  exporting  it.  The  treasury  thus  undertakes  to 
weave  a  Penelope's  web  without  any  Ulysses  in  the  distance.  Already  20,000,000 
marks  have  been  sent  abroad,  the  sixth  part  of  all  that  has  been  coined.  To  sum 
up,  Germany  has  judged  it  prudent  not  to  demonetize  rapidly,  while  the  success  of 
a  slow  demonetization  appears  highly  doubtful. 

I  do  not  believe  that  this  process  will  go  any  further  than  it  has 
already  gone.  It  is  now  arrested.  Besides  that,  an  agitation  in  Great 
Britain  and  France  has  already  arisen  for  the  establishment  of  a  bi- 
metallic currency.  Even  Great  Britain,  that  since  1816  has  maintained 
the  system  of  a  single  standard  and  a  token  coinage,  is  now  jdiscussing 
the  question  whether  it  will  not  be  necessary  in  self-defense,  especially 
for  the  India  commerce,  to  restore,  to  some  degree  at  least,  the  double 
standard.  In  France  they  have  already  j^rovided  that  when  specie  pay- 
ments are  resumed  they  shall  be  resumed  upon  the  double  standard  of 
fifteen  and  a  half  to  one,  which  is  now  the  relative  value  of  gold  to  silver 
in  France ;  and  when  specie  payments  are  fully  entered  into,  as  they  very 
soon  will  be,  and  probably  can  be  now,  the  old  law  of  the  monetary 
conference  will  be  enforced  in  France  and  all  the  Latin  countries.  Be- 
sides that,  Asia  again  is  rapidly  absorbing  silver,  and  the  forced  de- 
monetization of  silver  will  be  counteracted.  It  is  used  now  by  two 
thirds  of  mankind  as  the  sole  standard  of  value.  It  is  used  by  all 
nations  as  a  token  coinage  to  a  very  large  extent,  as  I  have  already 
shown.  It  will  soon  be  used  to  the  extent  of  forty  or  fifty  million 
dollars  in  the  United  States  of  America.  We  now  have  nearly  $20,- 
000,000  to  pay  out,  and  can  coin  it  at  the  rate  of  $2,000,000  a  month ; 
so  that  we  shall  ourselves,  in  the  execution  of  our  law  and  of  this  law 
among  others,  use  a  large  amount  of  silver,  probably  not  less  than, sixty 
or  seventy  million  dollars.  The  absolute  necessity  of  smaller  coins  will 
34 


530  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

always  maintain  more  or  less  of  silver  and  make  it  absolutely  necessary. 
The  utter  ruin  that  would  come  to  mankind,  especially  to  the  poorer 
nations,  by  the  entire  demonetization  of  silver  can  not  be  estimated  by 
us.  Take  one  half  of  the  solid  money  of  the  world  out  of  existence  ;- 
take  the  sole  standard  of  more  than  two  thirds  of  the  human  race,  re- 
duce it  to  a  base  metal,  and  the  effect  upon  the  commerce  of  the  world 
would  be  incalculable.  It  can  not  be  done  ;  it  will  not  be  done.  There 
is  no  danger  of  it.  These  two  metals,  gold  and  silver,  have  traveled 
side  by  side  from  the  beginning  of  time ;  the  records  of  human  his- 
tory do  not  go  back  to  a  time  when  they  did  not  move  together.  They 
have  varied  in  value,  sometimes  one  and  sometimes  the  other  being 
higher ;  but  they  have  gone  on,  gold  the  money  of  the  rich,  silver  the 
money  of  the  poor,  the  one  to  measure  acquired  wealth,  the  other  to 
measure  the  daily  necessities  of  life ;  and,  sir,  no  act  of  parliament, 
although  it  may  disturb  for  a  moment  the  relation  of  these  two  metals 
to  each  other,  nothing  but  an  act  of  God,  can  destroy  the  use  of  both 
of  them  by  mankind.  I  will  add  some  statistics  from  Dr.  Soetbeer,  pub- 
lished in  Germany,  of  the  proportionate  values  of  gold  and  silver  at 
different  dates  and  epochs  : 

Some  interesting  notes  have  been  published  lately  in  Germany  by  Dr.  Soetbeer 
on  the  variations  in  the  proportionate  values  of  gold  and  silver  at  different  dates 
and  epochs.  In  ancient  times  the  relative  value  of  gold  to  silver  was  about  one  to 
thirteen  and  one  third,  and  toward  the  end  of  the  old  Roman  Empire  of  the  West 
it  rose  to  about  one  to  fourteen  and  one  half.  In  the  Middle  Ages  and  down  to  the 
fifteenth  century  the  standard  was  about  sixteen  of  silver  to  one  of  gold ;  but  after 
the  discovery  of  America  the  value  of  gold  fell  rapidly,  until  the  proportion  stood 
at  ten  and  one  half  to  eleven  of  silver  to  one  of  gold,  which  relation  was  main- 
tained with  but  little  fluctuation  during  the  sixteenth  and  beginning  of  the  seven- 
teenth century.  After  that  date  gold  began  to  rise  again  in  value,  and  by  the  end 
of  the  seventeenth  century  the  proportion  had  become  one  to  fifteen.  The  stan- 
dard of  comparative  value  fluctuated  backward  and  forward  at  about  that  figure 
during  the  eighteenth  century,  and  at  the  close  silver  was  about  fifteen  a:ad  one 
half. 

Up  to  1850  silver  had  never  fallen  so  low  as  sixteen,  while  from  1850  to  1852, 
owing  chiefly  to  French  coinage  operations  and  the  absorption  of  silver  for  the 
double  standard  in  that  country,  the  price  of  that  metal  tended  to  advance  slightly. 
It  was  never  higher  than  fifteen,  but  still  it  was  considerably  less  than  fifteen  and 
one  half.  After  1859  tlie  course  of  the  price  of  silver  tended  downward  by  almost 
imperceptible  steps;  but  it  was  not  until  1873  that  the  price  began  to  be  decidedly 
low ;  it  then  fell  to  sixteen  and  eight  one-hundredths  in  relation  to  gold,  and  by  the 
end  of  1875  had  touched  in  London  sixteen  and  eighty  one-hundredths,  or  fifty- 
seven  and  eleven  sixteenths  pence  in  London. 

Perhaps  I  am  wearying  the  Senate  by  these  details  ;  but  it  seems 
to  be  necessary  in  the  condition  of  the  information  on  the  subject  that 
I  should  state  them.  There  are  certain  general  conclusions  which  I 
draw  from  a  reference  to  these  statutes  in  various  countries  which  I 
will  briefly  state. 

First.  It  is  impossible  in  the  nature  of  things  to  fix  the  precise 
value  of  silver  and  gold.     We  have  tried  it  three  times  and  failed. 

Second.  Whenever  either  coin  is  worth  more  in  the  market  than 
the  rate  fixed  by  the  law,  it  leaves  the  country.  That  we  have  twice 
proved.  That  is  in  accordance  with  the  Gresham  law :  a  law  of  cur- 
rency named  from  the  name  of  its  discoverer.     He  wrote  a  book  to 


FRACTIONAL  CUERENCY— SILVER   COINAGE.  531 

sliow  that  always  tlie  poorer  currency  would  drive  out  of  circulation  a 
superior  currency ;  and  his  book  gave  name  to  the  theory  that  is  called 
the  law  of  Gresliam.  It  is  the  universal  law  of  political  economy  that, 
whenever  two  metals  or  two  moneys  are  in  circulation,  the  least  valu- 
able will  drive  out  the  most  valuable ;  the  latter  will  be  exported. 

Third.  The  great  European  nations  as  well  as  the  United  States, 
in  order  to  prevent  the  depreciation  of  silver,  issue  it  as  a  token  coin- 
age somewhat  less  in  intrinsic  value  than  gold,  and  maintain  its  value 
by  issuing  it  only  as  needed,  at  par  with  the  prevailing  currency,  and 
by  making  it  a  limited  legal  tender.  I  may  say  that  that  has  been  the 
plan  adopted  by  every  great  Christian  nation.  Russia  and  Austria  have 
not  yet  had  gold  coinage  at  all,- but  still  they  have  their  values  based 
upon  gold. 

Fourth.  The  demonetizing  of  silver  tends  to  add  to  the  value  of 
gold,  and  though  its  relativevalue  changes  it  is  more  stable  compared 
to  gold  than  any  other  metal  or  production.  Its  limit  of  variation  for 
a  century  is  between  fifteen  to  seventeen  for  one  in  gold. 

Fifth.  Both  coins  are  indispensable,  one  for  small  and  the  other  for 
large  transactions. 

"Sixth.  The  causes  of  the  decline  of  silver  are  temporary.  It  is 
still  used  by  a  great  majority  of  mankind  as  the  standard  of  value.  Its 
use  in  France  and  the  United  States  will  on  resumption  more  than 
counteract  its  decline  in  Germany. 

Seventh.  The  general  monetizing  of  silver  now,  when  it  is  unnat- 
urally depreciated,  would  be  to  invite  to  our  country,  in  exchange  for 
gold  or  bonds,  all  the  silver  of  Europe,  and  at  last  it  would  leave  us 
with  a  depreciated  currency. 

Eighth.  The  decline  of  silver  enables  us  now  to  exchange  silver 
coin  of  the  old  standard  for  fractional  currency,  leaving  the  exchange 
optional  with  the  holder,  until  we  have  the  courage,  as  we  now  have 
the  ability,  to  redeem  our  currency  in  coin. 

Ninth.  More  silver  can  be  maintained  at  par  than  we  have  now  of 
fractional  currency. 

Tenth.  The  redemption  of  a  part  of  our  currency  would  advance 
its  purchasing  power,  while  the  silver  in  circulation  will  counteract  the 
contraction  of  the  currency. 

Whenever  we  have  heretofore  proposed  any  measure  that  looks  to 
the  redemption  of  our  United  States  notes — and  I  can  not  but  regard 
our  failure  to  provide  for  them  now,  twelve  years  after  the  war,  as  a 
disgrace  to  American  civilization — when  we  seek  to  advance  United 
Stages  notes,  it  is  said  that  we  contract  the  currency  and  affect  prices 
and  cause  a  derangement  of  values.  Here  we  can  jjay  out  solid  money, 
good  money,  money  unchanged  in  value  from  the  time  of  the  Revolu- 
tion to  this  hour,  for  the  redemption  of  our  United  States  notes  with- 
out loss,  without  contraction  ;  and  surely  we  can  not  refuse  to  do  it.  If 
we  pay  out  the  silver  it  enters  into  circulation  and  takes  the  place  of 
United  States  notes ;  and  why  should  we  refuse  to  the  holder  of  the 
United  States  notes  the  right  to  demand  that  of  us  which  is  now  no 
more  valuable  than  the  note  itself  ?  It  is  sometimes  said  that  nobody 
wants  the  silver  dollar.     Try  the  people  and  see  if  they  do  not  want 


532  SPEECHES  AND   REPORTS   OF  JOHJ^   SHERMAN. 

it.  If  tliej  do  not  want  it,  then  no  harm  is  done.  I  would  not  make 
any  man  take  it.  I  would  not  make  any  man  who  holds  a  greenback 
note  payable  in  gold  take  the  dollar  in  silver,  because  I  would  tell  him 
beforehand  the  greenback  some  time  probably  in  the  future  will  be 
much  more  valuable  than  the  dollar  he  gets ;  but  that  is  no  reason  why 
we  should  not  give  him  the  dollar  if  he  wants  it. 

'Now,  Mr.  President,  that  brings  me,  and  very  briefly,  to  the  ^^ro- 
visions  of  this  bill.  It  will  be  perceived  that  the  Committee  on  Fi- 
nance took  the  House  bill  without  alteration  as  far  as  possible.  With 
deference  to  the  House  we  made  no  change  in  the  first  and  second  sec- 
tions, and  if  the  House  had  not  put  in  the  third  section,  I  for  one  would 
not  liave  desired  to  change  the  bill  as  it  was  sent  to  us  at  all.  But  they 
presented  to  us  this  difficult  question  of  the  double  and  single  standard, 
and  we  were  forced  to  consider  it.  I  betray  no  secret  when  I  say  that 
the  Committee  on  Finance  would  have  been  glad  to  lay  this  question 
aside  and  consider  it  more  fully ;  but  it  was  presented  to  us  in  the  bill, 
and  therefore  we  had  to  deal  with  it,  I  may  say  forcibly,  against  our 
will.  As  it  was  before  us,  we  could  not  get  rid  of  it  in  any  other  way, 
and  we  can  not  now  unless  the  Senate  should  see  proper  to  strike  out  the 
third  section  and  risk  a  controversy  with  the  House,  which  would  prob- 
ably produce  longer  delay.  Therefore  we  undertook  to  amend  the  thii'd 
section  so  as  to  avoid  the  objections  to  it. 

The  first  thing  I  wish  to  call  the  attention  of  the  Senate  to  is  that 
our  amendments  make  no  enlargement  of  the  legal-tender  Cjuality  of 
subsidiary  coin.  We  have  left  the  subsidiary  coin  precisely  where  it 
was  under  the  old  law,  unchanged,  and  it  is  clear  that  it  should  be  un- 
changed. To  make  the  subsidiary  coin  a  legal  tender  for  $25  would 
utterly  destroy  our  customs  revenue,  would  raise  the  question  of  the 
payment  of  the  interest  on  the  public  debt  in  the  subsidiary  coin,  would 
evidently  impair  the  public  credit,  and  would  be  wrong  in  every  sense 
of  the  word.  Besides  that,  it  would  be  a  departure  from  the  example 
given  to  us  by  other  intelligent  nations  that  have  acted  uj^on  every  one 
of  these  questions. 

The  House  of  Eepresentatives  proposed  a  legal  tender  of  $25.  We 
left  it  where  it  was,  at  $5,  and  I  have  here  a  letter  from  the  Secretary 
of  the  Treasury  showing  in  the  most  conclusive  manner  the  evil  results 
that  would  flow  from  the  enlargement  of  the  legal  tender  of  subsidiary 
coins  and  its  eflfect  on  the  revenue.  I  will  not  have  it  read,  but  may 
hand  it  to  the  reporter  to  be  embodied  in  my  remarks,  so  that  Senators 
may  have  the  benefit  of  reading  it  if  they  desire.  I  have  already  stated 
that,  in  my  judgment,  from  fifty  to  sixty  or  seventy  millions  can  be 
kept  at  par. 

But  the  vital  question  presented  by  the  amendments  of  the  Commit- 
tee is  the  restoration  of  the  silver  dollar.  Why  restore  the  silver  dol- 
lar when  it  is  now  so  depreciated  by  the  events  that  I  have  named  ? 
Well,  sir,  the  answer  is  that  we  have  a  large  amount,  some  $400,000,000 
of  United  States  notes,  which  now  are  a  legal  tender  for  all  purposes, 
and  the  time  has  arrived  when  we  can  redeem  them  all  with  the  old 
dollar  of  the  United  States.  We  do  not  create  a  dollar ;  we  simply 
provide  for  its  issue.     The  law  was,  as  I  have  shown  you,  up  to  1873, 


FRACTIONAL  CURRENCY— SILVER  COINAGE.  533 

tliat  this  old  dollar  could  be  tendered  for  the  payment  of  all  debts  ;  but 
it  was  simply  not  coined  because  the  silver  dollar  was  worth  more  than 
the  gold  dollar.  .  Does  that  prevent  us  from  coining  it  ?  ]^ot  in  the 
least.  I  will  read  you  a  short  extract  from  Seyd  on  the  very  subject  I 
am  now  speaking  of,  the  importance  of  the  American  dollar  in  the  com- 
merce of  the  world ;  and,  as  he  expresses  it  much  better  than  I  can,  I 
think  Senators  will  be  better  pleased  to  hear  his  statement : 

What,  indeed,  could  America  risk  in  adopting  silver  again  as  a  coadjutor  to  gold? 
What,  considering  the  actual  state  of  the  question  in  the  world,  namely,  that  the 
majority  of  the  nations  adhere  to  the  double  or  the  silver  valuation,  does  she  not 
lose  now  in  endeavoring  to  follow  the  footsteps  of  England?  Would  America  do 
wrong  in  following  the  example  of  France,  which  maintains  the  five-francs  silver 
piece?  Grermany  is  obliged  to  adopt  the  double  valuation;  is  the  example  a  perni- 
cious one  ? 

I  think  not ;  I  think  that  America,  by  deciding  in  favor  of  the  double  valuation, 
would  not  only  save  the  world  at  large  from  an  abyss,  and  prevent  the  accomplish- 
ment of  a  stupid  general  crime,  whose  authors  humanity  would  some  day  learn  to 
curse,  but  that  she  would  advance  her  own  material  interests  more  than  may  be 
supposed  possible,  and  that  she  may  perchance  take  the  lead  in  tlie  intelligent  and 
prudent  organization  of  firm  monetary  systems. 

The  state  of  the  whole  question  in  the  United  States  favors  the  reintroduotion 
of  the  silver  dollar.  It  has  not  been  abolished  by  law,  consequently  no  legal  enact- 
ment for  its  reestablishment  and  legal-tender  rights  is  required.  AH  that  is  neces- 
sary is  an  act  of  Congress  fixing  the  weight  of  the  silver  dollar  at  four  hundred 
grains  (399-9)  of  nine  hundred  fine,  reducing  its  present  weight  by  twelve  and  one 
half  grains. — Seyd's  "MetalUc  Currency  of  the  United  States,"  pages  56,  57. 

This  is  the  opinion  of  Mr.  Seyd,  an  English  writer,  who  is  perfectly 
familiar  with  the  whole  subject,  and  who  has  lived  in  this  country  the 
most  of  his  life. 

There  was  one  question  of  detail  that  came  before  the  Committee 
on  Finance,  upon  which  tliere  was  some  difference  of  opinion :  what 
should  be  the  weight  of  the  dollar  ?  Should  we  take  the  gold  value 
now  of  silver  and  make  a  new  relative  standaitl ;  or  should  we  take  the 
French  ratio  of  fifteen  and  a  half  to  one ;  or  should  we  take  the  old 
ratio  of  fifteen  to  one  ;  or  should  we  take  the  American  dollar  as  it  has 
stood  from  the  foundation  of  the  Government  to  this  time  ?  It  seems 
there  was  a  mistake  ;  I  do  not  know  how  to  explain  it.  The  old  dollar 
was  intended  to  be  sixteen  to  one  ;  but  we  know  very  well,  if  our  arith- 
metics do  not  deceive  us,  that  twenty-five  and  eight  tenth  grains  mul- 
tiplied by  sixteen  will  make  four  hundred  and  twelve  and  eight  tenths ; 
and  therefore  it  was  an  error  to  make  the  old  dollar  weigh  only  four 
hundred  and  twelve  and  a  half  grains.  It  was  not  very  material,  be- 
cause it  was  a  very  small  fraction ;  but  still  the  Committee  thought  it 
better  to  take  the  exact  standard  fixed  by  law,  sixteen  to  one,  and  make 
the  new  silver  dollar  weigh  exactly  sixteen  times  the  weight  of  one 
dollar  of  gold.  The  gold  dollar  is  twenty-five  and  eight  tenths  grains, 
and  the  silver  coin  we  have  provided  for  is  four  hundred  and  twelve 
and  eight  tenths  instead  of  four  hundred  and  twelve  and  a  half  grains. 
I  make  this  explanation  because  a  New  York  paper  says  the  Committee 
on  Finance  did  not  know  what  the  old  doUar  was ;  that  the  old  dollar 
was  four  hundred  and  twelve  and  a  half  grains,  and  we  have  made  it 
four  hundred  and  twelve  and  eight  tentlis,  because  we  did  not  know 


534  SPEECHES   AND   REPOETS   OF  JOHN  SHERMAN. 

better.  I  give  the  editor  my  respects,  and  state  that  we  did  it  for  a 
reason.  The  author,  Mr.  Seyd,  that  I  have  read,  recommends,  on  the 
contrary,  that  we  should  adopt  the  French  standard.  I  am  not  sure 
but  that  it  would  be  a  good  thing  to  do  if  we  were  treating  the  ques- 
tion apart  from  old  customs  and  habits.  If  it  were  a  new  question  I 
should  say  at  once  adopt  the  French  standard,  and  make  the  dollar  four 
hundred  grains.  That  would  be  exactly  fifteen  and  a  half  to  one.  But 
I  would  not  do  that.  I  would  not  debase  the  dollar  below  its  old  stand- 
ard merely  for  the  purpose  of  assimilating  it  with  the  metric  system  of 
the  French.     I  think,  therefore,  the  old  dollar  is  the  best. 

It  has  been  also  proposed  to  make  the  dollar  to  be  issued  equal  to 
two  half  dollars  of  the  subsidiary  coin.  It  would  then  be  only  three 
hundred  eighty-five  and  eight  tenths  grains ;  that  would  be  to  debase 
the  coin.  If  this  dollar  is  now  restored  to  its  old  standard  it  may 
come  to  par  in  gold.  It  has  so  happened  in  the  past.  Whether  that 
be  so  or  not,  I  would  not  force  anybody  to  take  this  silver  dollar  who 
does  not  desire  to  take  it.  If  anybody  desires  to  surrender  a  note  of 
ours  past  due,  payable  in  gold,  for  a  silver  dollar,  because  he  is  tired  of 
waiting  for  payment,  give  him  the  silver  dollar ;  but  I  would  not  force 
him  to  take  it,  because  the  time  will  come  when  these  notes  of  ours  I 
think  will  be  worth  dollar  for  dollar  in  gold.  If  a  man  prefers  to  take 
a  dollar  in  silver,  give  him  the  opportunity  to  do  so. 

The  question  is  to  what  extent  should  the  silver  dollar  be  made  a 
legal  tender.  The  House  provided  that  it  should  be  for  $50.  There  are 
senous  objections  to  making  it  a  legal  tender  for  that  amount.  I  would 
prefer  to  leave  it  at  $10 ;  but  the  House  proposition  made  it  a  legal 
tender  for  customs  duties  and  interest  on  the  public  debt.  That  would 
plainly  be  a  bad  proposition.  It  would  drive  gold  out  of  the  country. 
If  the  silver  dollar  now,  with  its  depreciated  value,  is  made  a  legal 
tender  for  $50,  you  will  have  no.  gold  whatever  except  in  the  mints 
and  sub-treasuries  of  tl'e  United  States.  Our  experience  has  shown 
that  fully ;  and  therefore  the  only  way  to  maintain  our  silver  coin  at 
par  in  currency  is  to  limit  the  amount  by  the  law  of  demand  and  sup- 
ply. That  will  at  least  keep  United  States  notes  and  fractional  cur- 
rency always  at  par  in  silver,  and  will  not  prevent  the  notes  from  rising 
above  it  when  the  people  become  satisfied  that  we  are  about  to  redeem 
or  are  preparing  to  redeem  them  in  gold.  Therefore  the  Committee 
fixed  on  the  amount  of  $20  as  a  fair  compromise.  I  would  greatly 
prefer  to  reduce  it  to  $10  ;  but  I  am  willing  to  vote  for  $20.  It  is 
manifest  that  to  make  it  $50  would  entirely  destroy  our  gold  revenue, 
and  probably  cause  the  exportation  of  gold  and  reduce  the  volume  of 
gold  in  the  country. 

It  is  objected  that  this  measure  is  the  entering  wedge  for  the  double 
standard ;  and  very  good  men,  specie-paying  men,  have  made  this  ob- 
jection, and  it  is  therefore  proper  to  answer  it.  I  reply  that  we  have 
always  had  a  double  standard,  and  generally  to  a  greater  extent  than 
this  bill  allows.  Until  three  years  ago  the  dollar  was  a  full  legal  tender. 
Since  that  time  the  United  States  have  contracted  no  debt,  and  every 
existing  debt  could  have  been  paid  in  dollars  of  that  standard.  Does  it 
injure  any  man  to  restore  it  now  and  limit  its  legal-tender  quality  to  $20  ? 


FRACTIONAL    CURRENCY- SILVEE   COINAGE.  535 

We  are  asked,  then,  why  was  the  old  dollar  omitted  in  the  act  of 
1873  ?  I  answer  that  it  was  omitted  practically  by  the  act  of  1S53  by 
being  undervalued.  It  was  formally  omitted  from  the  silver  coinage 
by  the  act  of  1873  because  it  was  then  too  valuable  for  circulating  coin, 
and  the  Spanish  milled  dollar  was  replaced  with  a  commercial  coin.  Is 
there  any  reason  why  it  should  not  be  restored  now  when  we  can  use  it 
as  an  agency  for  the  redemption  of  United  States  notes  ? 

It  is  said  that  a  silver  coinage  is  in  the  interest  of  silver  bullion  and 
those  who  produce  it.  Certain  Senators  have  even  been  designated  in 
the  House  of  Representatives  as  owners  of  bullion  in  the  West;  ''sil- 
ver-clad Senators,"  I  believe,  has  been  the  expression.  I  hope  it  will 
be  a  benefit,  not  only  to  the  producer  of  the  silver,  but  to  the  people 
who  use  it  as  money.  I  have  always  supported  the  policy  of  encour- 
aging the  production  of  iron,  wool,  and  fabrics.  Why  not  also  of  sil- 
ver? The  most  common  and  the  meanest  of  arguments  against  a 
measure  is  that  it  will  help  somebody.  I  am  quite  sure  that  this  will 
help  the  body  of  the  people ;  and  that  is  the  only  interest  I  have  in  it, 
certainly. 

But,  sir,  the  House  of  Representatives  has  also  made  the  silver  coin 
a  tender  for  duties  and  interest  on  the  public  debt.     I  do  not  think  it 
•  is  necessary  to  waste  much  time  about  that.     Our  duties  are  by  law 
made  payable  in  gold  and  are  set  aside  as  a  sacred  fund  to  pay  the  in- 
terest on  the  public  debt  and  to  provide  for  a  sinking  fund. 

The  House  of  Representatives  did  not  intend  to  interfere  with  our 
general  law  by  which  the  customs  duties  are  collected  in  gold  to  be 
used  in  redeeming  our  promises,  the  change  only  being  paid  in  silver. 
And,  sir,  any  intimation  by  Congress,  any  effort  by  Congress  to  impair 
the  public  debt,  or  to  prevent  its  full  payment  in  gold  coin,  would,  in 
my  judgment,  do  more  harm  than  all  the  silver  that  can  be  issued 
under  this  or  under  any  other  law  can  do  good.  Anything  that  tends 
to  destroy  the  public  credit  or  the  confidence  of  the  creditors  in  our 
willingness  and  ability  to  pay,  depreciates  the  value  of  our  bonds,  and 
brings  them  back  to  us  for  payment  or  for  sale,  and  will  prevent  us 
from  funding  our  debt  at  a  lower  rate  of  interest  and  availing  ourselves 
of  our  present  excellent  credit.  Therefore  I  hope  in  this  debate  there 
will  be  no  suggestion  which  in  the  mind  of  the  most  timid  man  can 
induce  a  fear  that  we  shall  avail  ourselves  of  the  present  circumstances 
to  pay  his  bond  in  anything  but  gold  coin.  Therefore  we  except  cus- 
toms duties  from  the  operation  of  even  the  limited  legal-tender  quality 
of  the  silver  dollar  here  provided.  The  same  reason  applies  also  to  the 
interest  on  the  public  debt,  with  this  additional  reason,  that  the  bill  as 
it  stands  now  discriminates  against  holders  of  bonds  in  small  amounts. 
For  instance,  a  man  owns  a  thousand-dollar  bond  ;  he  could  be  paid  his 
interest  in  silver  dollars,  for  it  is  less  than  $50  in  one  payment ;  while 
the  capitalist  abroad  who  collects  his  coupons  through  a  l)ank  presents 
them  in  hundreds  and  thousands,  and  must  be  paid  in  gold.  I  take  it, 
therefore,  and  I  have  no  doubt,  that  it  was  not  the  intention  of  the 
House  to  interfere  with  the  law  in  this  respect. 

As  to  the  legal-tender  quality  of  the  trade  dollar,  I  have  already 
pointed  out  the  necessity  of  changing  it  or  of  abolishing  the  trade  dollar 


536  SPEECHES  AND  REPORTS  OF  J0H2T  SHERMAN. 

entirely.  I  was  rather  disposed  for  one  to  abolisli  it,  because  we  liave 
two  dollars  so  nearly  like  each  other.  But  as  a  matter  of  course  the 
people  who  have  built  up  a  trade  on  the  trade  dollar  ought  not  to  be 
deprived  of  it,  except  for  some  good  reason ;  and  we  have  required,  in 
our  amendments,  that  the  trade  dollar  shall  be  so  different  in  its  devices 
and  emblems  that  it  can  be  readily  distinguished  from  the  other  dollar. 

The  trade  dollar  was  only  intended  as  a  commercial  dollar,  as  a  con- 
venient mode  of  coining  silver  bullion  for  the  benefit  of  depositors.  It 
was  a  legal  tender  to  a  certain  extent,  but  it  is  no  harm  to  the  holders 
to  change  that ;  and  it  is  entirely  within  our  power  to  do  so.  These 
trade  dollars  are  worth  more  in  China  than  they  are  in  the  United 
States  to-day ;  so  that  as  a  matter  of  course  the  holders  will  have  the 
benefit  of  the  China  market,  and,  as  they  are  worth  more  than  the 
legal-tender  dollar  here,  everybody  will  take  the  trade  dollars  for  the 
other  dollars.  The  trade  dollar  is  worth  three  or  four  per  cent,  more 
than  the  silver  dollar. 

Mr.  President,  some  objection  might  have  been  made  to  this  bill  if 
we  had  authorized  the  Secretary  of  tlie  Treasury  to  issue  bonds  to  buy 
the  bullion  to  make  these  dollars,  but  we  did  not.  On  the  contrary, 
we  simply  carry  into  effect  the  spirit  of  the  law  of  1S62,  which  author- 
ized the  sinking  fund  to  be  used  in  payment  of  any  portion  of  the 
public  debt ;  and,  to  the  extent  that  the  sinking  fmid  can  be  used  to 
buy  bullion  and  coin  silver  dollars  with  which  to  redeem  fractional 
currency  and  redeem  United  States  notes,  it  may  be  used.  That  is  a 
wise  provision  at  all  events,  because  now  our  bonds  are  so  exceptionally 
high  that  under  the  sinking-fund  law  the  Secretary,  in  buying  bonds, 
must  pay  eighteen  per  cent,  premium,  when  there  is  a  debt  which  must 
some  time  be  paid  in  coin,  which  he  will  be  at  liberty  under  this  bill 
to  buy  in  silver,  extinguishing  it  and  adding  it  to  the  sinking  fund. 

Now,  Mr.  President,  I  am  afraid  I  have  wearied  the  Senate,  but  I 
have  gone  through  this  matter  simply  as  a  business  matter.  The  ex- 
change of  silver  coin  for  silver  bullion  is  a  profit  to  the  Government 
of  the  United  States.  On  the  issuing  of  silver  dollars  the  profit  is 
several  per  cent. ;  on  the  issuing  of  subsidiary  coin  it  is  six  per  cent, 
more ;  and  this  profit  more  than  pays  all  the  expenses  of  the  mints  and 
saves  all  the  expense  of  printing  fractional  currency.  The  actual  profit 
under  this  law  will  carry  into  the  Treasury  a  surplus  over  all  the  ex- 
penses of  the  mints. 

There  are  but  two  things  more  that  are  needed  to  make  this  bill,  in 
my  judgment,  a  complete  financial  measure.  They  are,  first,  to  author- 
ize any  holder  of  greenbacks  to  convert  them  at  will  into  a  United 
States  bond.  Would  to  God  that  we  had  the  courage  now,  without 
regard  to  party,  to  do  this  and  give  to  every  holder  of  these  notes  of 
ours  the  right  at  his  pleasure  to  convert  them  into  a  four  per  cent, 
bond  running  forty  years  !  No  considerable  amount  would  be  convert- 
ed, in  the  present  state  of  the  market.  Some  would  be.  Those  per- 
sons desiring  a  perfectly  safe  and  long  investment  might  convert  their 
notes  into  four  per  cent,  bonds  in  small  sums ;  but  as  credit  rises,  and 
it  is  rising  every  day,  these  four  per  cent,  bonds  will  advance  to  par  in 
gold.     What  I  would  desire  next  is  to  authorize  the  Secretary  of  the 


FRACTIONAL  CURRENCY— SILVER   COINAGE.  537 

Treasuiy  to  convert  our  six  per  cent,  bonds  into  four  and  a  haK  per 
cent,  thirtj-year  bonds.  A  bill  has  passed  the  Senate  for  that  purpose, 
but  yet  sleeps  in  the  House.  Then  authorize  the  holder  of  the  notes 
to  convert  them  at  will  into  a  four  per  cent,  forty-year  bond  and 
there  stop,  and  you  will  reach  specie  payments  without  a  ripple  on  the 
current.  These  two  bonds  would  approach  each  other  in  value ;  the 
notes  would  gradually  be  retired ;  silver  would  take  their  place — ^its 
natural  place  in  the  currency  of  the  country.  We  are  producing  the 
silver,  and  our  own  products  would  be  converted  into  our  currency. 
Then  our  notes  would  gradually  rise  to  par  in  gold.  Then  the  circle 
of  the  rebellion,  or  the  revolution,  as  our  Southern  friends  may  caJl  it 
— I  prefer  to  call  it  by  the  old-fashioned  name — would  be  finished. 

As  soon  as  greenbacks  were  at  par  with  gold  I  would  keep  them 
afloat ;  but  that  is  not  in  this  bill.     I  merely  allude  to  it  in  passing. 

There  is  another  object  that  could  be  desired,  and  I  think  if  the 
United  States  would  now  lead  off  in  it,  it  would  undoubtedly  be  accom- 
plished ;  that  is  to  establish  by  international  convention  a  unit  of  money 
of  accounts,  both  of  gold  and  silver.  Advances  have  already  been 
made  to  this  Government  by  Great  Britain,  and  a  proposition  is  now 
pending  looking  to  that  end ;  and  there  is  no  doubt  whatever  tliat  Ger- 
many would  be  glad  to  enter  into  the  international  relation  that  was 
proposed  in  1867,  and  which  she  then  defeated  and  rejected.  The 
difficulties  and  embarrassments  in  which  Germany  is  now  involved  from 
the  unforeseen  effect  of  her  own  measures  would  make  her  eager  to 
enter  into  a  general  monetary  union  or  the  extension  of  the  Paris  con- 
ference so  as  to  make  everywhere  fifteen  and  a  half  ounces  of  silver 
equal  to  one  of  gold  among  all  the  nations  of  the  world ;  to  limit  silver 
coinage  to  the  token  coinage  or  small  change  of  the  people,  and  to 
make  gold  the  standard  of  value.  By  a  convention  between  the  lead- 
ing nations,  including  Great  Britain,  France,  Germany,  Kussia,  and  the 
United  States,  which  must  find  the  gold  and  silver  to  carry  this  arrange- 
ment into  effect,  you  would  have  a  monetary  unit,  and  would  then  be 
free  from  the  oscillations  that  we  have  met  in  our  whole  history,  in 
which  gold  and  silver  disappear  by  turns,  destroying  the  value  of  con- 
tracts and  deranging  monetary  affairs. 

Sir,  I  do  not  hope  to  accomplish  these  things  now  ;  but  I  see  in  this 
bill  an  opportunity  to  accomplish  some  good ;  and  I  believe  that  true 
statesmanship  consists  in  doing  the  good  you  can,  without  seeking  the 
unattainable,  and  thereby  doing  no  good  at  all.  Here  we  have  an 
oj)portunity  to  monetize  a  portion  of  our  silver  product ;  to  redeem  a 
portion  of  our  United  States  notes ;  to  come  back  toward  specie  pay- 
ments— all  in  the  right  direction.  And  the  fact  that  this  bill  does  not 
accomplish  all  I  desire  is  no  reason  why  I  should  delay,  oppose,  or 
anta2:onize  it. 


538  SPEECHES    AND   REPOETS   OF  JOHN   SHERMAN. 

LEGAL  TENDEK   OF  SILVER  COIK 

m  THE  SE^LiTB,  JUNE  8,  1876. 

The  bill  to  amend  the  laws  relating  to  legal  tender  of  silver  coin  being  undei 
consideration,  Mr.  Sherman  said  : 

Mr.  PKEsroENT :  I  wish  very  briefly  to  call  the  attention  of  the 
Senate  from  all  the  various  topics  that  have  been  discussed  since  this 
bill  was  introduced,  to  the  consideration  of  a  small  measure,  intended 
to  meet  a  temporary  necessity,  and  which  has  given  rise  to  a  very  ex- 
traordinary debate. 

This  bill  proposes  to  restore  the  old  silver  dollar,  and  with  that  dol- 
lar, and  the  subsidiary  coins  of  the  Ignited  States,  to  redeem  the  United 
States  notes  and  fractional  currency.  The  dollar  to  be  restored  is  the 
same  that  had  existed  from  1792  to  18Y3  ;  and  the  subsidiary  coins  to 
be  issued  are  the  same  in  form  and  value  as  have  been  issued  since 
1853.  I  have,  in  my  remarks  made  on  the  11th  of  April  last,  already 
given  the  history  of  these  silver  coins  and  stated  the  relation  of  silver 
and  gold  to  each  other,  not  only  in  the  United  States,  but  in  the  coun- 
tries with  which  we  have  the  most  extensive  commercial  intercourse. 
The  Senator  from  Nevada  [Mr.  Jones]  has  also,  in  more  detail,  and 
with  greater  fullness  of  illnstration  and  anthority,  presented  the  impor- 
tant questions  of  the  double  standard,  with  the  reasons  why,  in  the 
United  States  especially,  silver  and  gold  must  both  be  standards  of 
value.  I  will  not  therefore  repeat  those  arguments,  but  confine  my- 
self to  the  two  main  propositions  contained  in  this  bill,  and  then  show, 
if  I  can,  that  it  is  not  wise  public  policy  to  adopt  the  full  silver  stand- 
ard proposed  by  the  Senators  from  Nevada  and  Missouri,  nor  to  go 
further  than  is  proposed  by  the  Committee  on  Finance. 

The  two  main  questions  are  : 

First.  Shall  silver  coin  be  exchanged  for  United  States  notes  as 
well  as  for  fractional  currency  ?     And, 

Second.  Is  it  wise  to  recoin  the  old  silver  dollar  with  a  view  to  ex- 
change it  for  United  States  notes  ? 

The  bill  as  reported  embodies  both  propositions.  It  is  purely  a 
voluntary  process.  No  one  need  surrender  his  notes  for  coin  unless 
he  wishes  to  do  so.  We  do  not  take  advantage  of  a  public  creditor, 
to  force  upon  him  silver  coin,  for  we  have  given  him  the  assurance  of 
positive  law  that  we  will,  on  the  1st  day  of  January,  1879,  pay  all 
notes  or  demands  against  the  United  States  in  coin.  AVe  cannot,  or 
i-ather  public  sentiment  will  not  allow  us  to,  pay  in  gold  coin  sooner 
than  this.  By  this  bill  we  authorize  the  Secretary  of  the  Treasury,  to 
the  extent  of  the  sinking  fund,  to  pay  silver  coin  to  the  holder  of  our 
notes,  in  exchange  for  them  if  he  demands  it.  In  spite  of  all  that  has 
been  said  about  the  depreciation  of  silver,  and  of  our  coin  being  worth 
less  than  United  States  notes,  we  know  there  is  an  eager  demand  for 
silver  coin.  The  long  lines  of  people  awaiting  their  turn  at  the  doors 
of  your  custom-houses  show  an  anxious  desire  to  surrender  your 
promises  for  bright,  shining  coin.     The  instinct  of  the  j^eople,  more 


LEGAL  TENDER   OF   SILVER   COIN.  539 

wise  than  the  calculations  of  the  broker,  assures  them  that  hard  money, 
real  money,  the  result  and  the  representative  of  labor,  is  more  desir- 
able than  a  promise  to  pay  money,  and  especially  a  promise  that  may 
be  broken,  changed,  evaded,  or  postponed. 

By  the  law  as  it  stands,  only  one  kind  of  jDaper  money — fractional 
currency — is  redeemable  in  silver  coin.  United  States  notes,  although 
based  upon  the  same  promise — and  of  the  same  or  more  intrinsic  value 
than  fractional  currency  because  they  are  a  legal  tender  for  all  sums — 
are  not  redeemable  iu  silver  coin.  Therefore  fractional  currency  is 
this  day  more  valuable  than  United  States  notes.  The  first  effect  of 
the  issue  of  silver  coin  is  to  advance  the  value  of  fractional  currency. 
In  like  manner  will  this  bill,  if  it  passes,  advance  the  value  of  United 
States  notes.  It  will  be  resumption  of  specie  payments  in  silver.  It 
will  tie  our  promises  to  pay  to  the  solid  basis  of  a  metal  which  has 
always  been  a  standard  of  value,  is  now,  and  ever  will  be  ;  and  which 
can  vary  only  in  a  comparatively  slight  degree  from  the  more  precious 
metal,  which  is  now  and  ever  will  be  the  highest  standard  of  value. 

Now,  sir,  it  is  admitted  that  we  are  able  to  pay  a  portion  of  our 
indebteduess.  Indeed,  a  specific  fund,  termed  the  sinking  fund,  to- 
gether with  the  accumulation  of  interest  thereon,  has,  by  a  law  of  the 
highest  sanction,  been  set  aside,  to  pay,  annually,  one  per  cent,  of  our 
entire  debt ;  and  this  annual  sum  is  to  be  taken  from  our  customs  du- 
ties. What  class  of  our  debt  ought  to  be  annually  paid  is  purely  a 
question  of  public  policy  and  interest.  We  have  heretofore  ap- 
plied the  sinking  fund  to  the  reduction  of  our  bonded  debt ;  but  this 
debt  is  now  so  valuable  that  it  is  worth  eighteen  per  cent,  more  than 
United  States  notes  and  five  per  cent,  more  than  gold.  It  is  there- 
fore manifestly  our  interest  to  apply  this  fund  to  the  payment  of 
United  States  notes,  and  this  we  can  now  do,  not  only  with  the  assent 
but  upon  the  demands  of  the  holders  of  these  notes.  Why  upon  this 
demand  ?  I  answer,  upon  what  ground  of  honor  or  interest  can  we 
refuse  to  pay  notes  now  due,  while  we  are  using  large  sums  to  pay 
bonds  not  due  ?  They  pay  a  large  premium  for  our  bonds,  which  are 
worth  more  than  gold,  while  we  refuse  to  pay  our  notes  now  due,  and 
which  are  daily  quoted  at  a  depreciation  of  twelve  to  fourteen  per 
cent.  Whatever  other  reasons  are  given  for  this  anomaly,  we  can  not 
pretend  that  we  are  not  able  to  pay  these  notes,  while  we  are  paying 
out  thirty  millions  a  year  in  gold  to  buy  bonds  not  yet  due. 

i^or  can  we  refuse  to  pay  silver  coin  for  our  notes  on  the  ground 
that  silver  is  depreciated  as  compared  with  gold.  That  is  a  question 
for  every  holder  of  our  notes  to  determine  for  himself.  When  he 
demands  silver,  it  is  idle,  yes,  dishonorable,  to  say  :  "  O,  we  will  not 
pay  you  silver,  because  it  is  not  worth  as  much  as  our  notes.  Wait 
until  1879  and  we  will  then  pay  you  gold."  Every  market-woman  in 
the  land  knows  that  the  reason  for  your  refusal  is  false.  She  may  well 
say  she  will  not  trust  in  your  promise  to  pay  gold  three  years  hence 
if  you  will  not  pay  silver  now  when  you  can.  All  objections  to  this 
bill,  based  upon  the  pretension  that  payment  in  silver  is  luijust  to  the 
note-holder,  are  the  merest  sham,  unless  you  are  now  prepared  to  pay 
him  in  gold.     He  is  the  best  judge  of  what  he  will  take  in  payment, 


540  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAHT. 

and  he  wants  and  demands  tlie  silver  now.  And  this  is  a  snfficient 
answer  to  all  arguments  about  the  note-holder.  When  you  redeem  the 
note  you  can  do  with  it  what  you  please.  You  may  burn  it,  or  replace 
it,  or  reissue  it,  or  whatever  else  you  have  the  power  to  do  with  it. 
But  the  man  who  holds  it  now  has  your  promise  to  pay  ;  and  if  you 
refuse  to  pay  him  gold  it  is  for  him  to  say  whether  or  no  he  will 
take  silver.  Will  jou  give  him  the  option  ?  If  this  question  were 
to  be  decided  by  considerations  of  public  honor  or  public  faith,  no 
one  could  doubt  what  the  decision  would  be.  But  I  propose  now  to 
discuss  it  upon  the  basis  of  interest,  upon  the  narrowest  basis  of  com- 
mercial trafhc  ;  and  by  this  sordid  view,  as  well  as  by  the  more  exalted 
one  of  public  honor  and  public  faith,  it  is  manifest  that  it  is  for  the 
interest  of  the  United  States  now  to  redeem  with  silver  coin  such  por- 
tion of  the  notes  of  the  United  States  as  the  holders  thereof  may  choose 
to  exchange  for  them. 

And,  first,  it  is  the  cheapest  mode  in  which  we  can  pay  our  notes. 
One  dollar  of  the  subsidiary  silver  coin  of  the  United  States  contains 
385 "8  grains  of  standard  silver,  worth  to-day  about  eighty-four  cents 
in  gold,  or  ninety-five  cents  in  United  States  notes.  It  needs  no  logic 
to  show  that  the  Government  makes  money  by  the  exchange  of  this 
doUar  for  a  United  States  note.  And  yet  no  injury  is  done  to  the 
holder,  for  the  exclusive  power  of  the  United  States  to  coin  money  has 
imjDarted  to  the  silver  in  the  coined  dollar  additional  value,  which 
makes  the  holder  eager  to  accept  it  for  his  promise-dollar.  The  mar- 
ket value  of  the  silver  in  the  dollar  provided  for  in  this  bill  is  now  not 
only  equal  to  that  of  the  United  States  note,  but  it  is  of  intrinsic  value  ; 
and,  even  though  the  note  may  rise  in  value,  the  silver  dollar  will  keep 
pace  with  it.  The  Government  pays  its  debt,  and  yet  replaces  its  note 
with  a  real  dollar,  which  takes  the  place  in  circulation  of  the  paper 
dollar,  and  does  not  have  to  be  paid  when  resumption  comes. 

]!*}^ot  only  is  payment  in  silver  coin  the  cheapest  mode  of  redeeming 
our  notes,  but  it  strengthens  us  for  full  resumption  in  gold.  It  not 
only  lessens  the  amount  of  notes  to  be  maintained  at  par  with  gold, 
but  it  scatters  among  the  people  a  large  amount  of  silver  coin,  which, 
without  reserve  or  aid  from  the  Government,  will,  from  its  intrinsic 
value,  maintain  itself  at  par  with  gold.  And  this  quality  of  silver  coin 
does  not  depend  upon  its  being  a  legal  tender,  but  upon  its  intrinsic 
value,  and  its  indis23ensable  use  among  all  classes  of  peojDle  for  change, 
and  for  the  payment  of  labor  and  the  purchase  of  family  supplies.  As 
I  showed  the  other  day,  not  less  than  $2.50  per  inhabitant,  of  silver 
coin  of  less  intrinsic  value  than  ours,  is  maintained  at  par  with  gold  by 
Great  Britain,  France,  and  Germany.  The  United  States,  before  the 
war,  maintained  at  par  with  gold  more  than  fifty  millions  of  the  very 
silver  coin  this  bill  provides  for.  No  one  inquired  how  much  this  coin 
cost  the  United  States,  but  they  knew  it  passed  everywhere,  and  was 
as  good  anywhere  as  gold  coin.  So  now,  with  onr  increased  population 
and  business,  it  is  manifest  that  seventy-five  millions  or  more  of  this 
coin  can  be  maintained  at  par  with  gold  after  we  shall  have  reached 
the  full  gold  standard ;  and  this  amount  is  about  as  much  as  can  be 
issued  under  this  bill.     The  obvious  eiiect  of  substituting  silver  for 


LEGAL  TENDER  OF  SILVER  COIK  541 

2)aper  money  will  be  to  appreciate  tlie  purcliasing  power  of  the  remain- 
in<^  mass  of  j^aper  money.  Wlio  does  not  see  that  the  reduction  of  the 
aggregate  of  paper  money  to  tliree  hundred  millions  strengthens  us 
for  the  duty  of  maintaining  it  at  par  with  gold  ? 

Sir,  silver  resumption  is  better  now  than  gold  resumption  ;  for 
silver  money  will  now  circulate  with  paper  money,  while  gold  will  not. 
Silver  money,  in  intrinsic  value,  is  so  near  paper  money  that  it  will 
freely  circulate,  while  gold  would  at  once  be  hoarded.  Even  if  silver 
money  were  of  the  same  intrinsic  value  as  gold,  it  ought  to  be  put 
freely  into  circulation  before  gold.  It  must  always  be  the  specie  of 
the  people,  wliich  gold  is  not.  Silver  resumption  must  precede  gold 
resumption.  We  now  but  avail  ourselves  of  the  present  depreciation 
of  silver  bullion  to  prepare  the  way  for  gold  resumption.  It  appears 
almost  as  a  providential  dispensation  to  enable  us  to  follow  the  path 
of  safety  and  honor.  If  we  do  not  avail  ourselves  of  this  oj^portu- 
nity,  we  shall  be  blind  to  every  instinct  of  a  statesman  and  a  patriot. 

Again,  sir,  there  is  a  popular  instinct  which  we  may  call  the  "  in- 
stinct of  hoarding,"  which  impels  the  provident  classes  of  every  na- 
tion and  tribe  of  men  to  hoard  the  precious  metals  as  the  safest  form 
of  wealth,  either  to  gratify  avarice  or  to  prepare  for  immediate  or 
aiDproaching  wants.  This  instinct  is  as  well  gratified  by  hoarding 
silver  as  gold.  For  this  reason,  and  for  this  reason  mainly,  a  larger 
amount  of  silver  coin  will  be  hoarded  than  of  fractional  currency. 
The  currency  is  perishable  ;  it  is  subject  to  loss  by  lire  and  water. 
But  silver  coin  can  neither  be  burned  by  fire  nor  perish  by  water, 
and  the  common  instinct  of  humanity  will  cause  it  to  be  held,  while 
the  fractional  currency  will  be  paid  out.  The  silver  is  the  jDeople's 
resource,  and  will  be  paid  out  and  circulated  when  the  necessity  for 
it  arises.  For  these  reasons  we  must  provide  for  a  much  larger  amount 
of  this  coin  than  experience  has  proved  to  be  sufficient  for  fractional 
currency. 

Again,  sir,  this  bill  will  relieve  us  from  the  possibility  of  a  dearth 
of  change,  by  authorizing  the  exchange  of  silver  coin  for  United  States 
notes.  It  is  manifest  that,  by  limiting  this  exchange  to  fractional  cur- 
rency, we  have  given  an  artificial  value  to  such  currency.  The  hoard- 
ing of  this  currency  for  the  purpose  of  obtaining  silver  coin  may  create 
a  serious  want  of  small  change.  It  is  this  anticipated  scarcity  that  the 
House  of  Representatives  has  attempted  to  guard  against  by  a  bill  now 
pending  in  that  body.  This  difiiculty  is  at  once  obviated  in  the  present 
.bill,  by  placing  both  notes  and  currency  on  an  equal  footing  with  silver 
coin,  and  thus  lifting  all  gradually  to  the  gold  standard.  The  object  of 
the  law  now  in  force  is  to  put  silver  coin  in  circulation  as  a  substitute 
for  fractional  currency.  If,  however,  the  coin  can  be  exchanged  direct- 
ly for  the  fractional  currency  only,  one  or  the  other  species  of  change 
will  be  demonetized  or  held  for  a  premium  during  the  process  ;  but  if 
silver  coin  can  be  had  at  will  for  either  greenbacks  or  fractional  cur- 
rency, the  purpose  of  the  law  can  easily  be  effected.  Things  that  are 
equal  to  the  same  thing  are  equal  to  each  other.  The  difficulty  of  a 
direct  exchange  of  commodities  first  caused  the  use  of  money.  AYhile 
we  have  paper  money  we  can  only  circulate  that  of  the  lowest  market 


542  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

value.  Even  a  temporary  demand  for  fractional  cnrrencj  causes  it  to 
be  hoarded.  Brokers  all  over  the  country  are  offering  a  premium  for 
fractional  currency,  in  order  to  obtain  silver  coin.  Even  in  this  city, 
where  fractional  currency  was  most  abundant,  it  is  advertised  for  at  a 
premium.  Besides,  we  must  provide  more  silver  money  than  we  now 
have  fractional  currency,  for  the  reasons  already  stated,  and  we  must 
therefore  exchange  it  for  United  States  notes  as  well  as  for  such  cur- 
rency. 

And,  sir,  the  substitution  of  silver  coin  for  United  States  notes 
meets  and  allays  the  fear  of  "contraction"  that  has  been  the  direful 
cause  of  our  long  delay  in  approaching  the  specie  standard.  Reason 
about  it  as  you  will,  you  can  not  persuade  the  people  long  to  endure  the 
process  of  contraction,  even  to  secure  the  acknowledged  good  of  a 
specie  standard.  How  often  do  we  hear  people  say  they  desire  specie 
payments,  but  not  through  contraction !  They  wish  to  get  well,  but  do 
not  like  the  medicine  offered.  They  are  in  favor  of  the  Maine  liquor 
law,  but  are  opposed  to  its  execution.  They  want  to  get  well  by  natu- 
ral processes.  Well,  now,  the  silver  opportunity  offers ;  silver  can  be 
substituted  for  paper  without  contraction.  Both  will  circulate  together, 
because  their  market  value  is  near  each  other ;  and  we  have  the  silver 
bifllion  and  the  sinking  fund,  amply  sufficient  to  sustain  the  process  of 
exchange.  By  providing  a  market  for  silver  we  advance  a  domestic 
product,  and  by  reducing  the  amount  of  paper  money  we  approach  and 
prepare  for  full  resumption.  The  silver  will  circulate  equally  with  the 
paper.  To  the  extent  that  it  is  hoarded  or  exported  there  may  be  some 
contraction ;  but  it  will  not  be  hoarded  or  exported  largely  when  issued 
in  sufficient  quantities  to  meet  the  demand  for  it,  and  this  bill  provides 
for  either  hoarding  or  exporting,  by  authorizing  the  issue  of  silver  coin 
in  exchange  for  silver  bullion.  If,  then,  there  is  a  demand  for  silver 
coin  greater  than  can  be  met  by  the  surplus  fund  at  our  disposal,  it  can 
be  had  for  the  silver  bullion  of  private  persons,  which  can  be  promptly 
converted  into  coin. 

The  bill  reported  by  the  Committee  on  Finance  thus  provides  for 
an  immediate  resumption  of  specie  payments  in  silver  coin,  and  thus 
completes  the  first  and  most  difficult  step  of  the  problem.  It  neither 
disturbs  nor  deranges  business,  nor  stirs  up  the  phantom  of  contraction. 
It  is  in  exact  accordance  with  existing- law,  and  leaves  the  silver  coin, 
as  now,  a  subsidiary  coin,  a  legal  tender  only  in  limited  amounts. 

The  next  question  presented  by  this  bill  is,  shall  we  restore  to  our 
silver  coinage  the  old  silver  dollar  ?  And  here  I  am  met  by  the  objec-. 
tions  of  the  Senator  from  Vermont ;  but  his  objections  are  rather  to 
the  amendments  proposed  by  the  Senator  from  Missouri  than  to  the 
report  of  the  Committee.  The  Committee  propose  the  silver  dollar,  not 
as  a  legal  tender  for  gold  contracts,  but  only  as  a  tender  for  currency 
contracts  not  exceeding  twenty  dollars  in  any  one  payment.  I  would 
prefer  to  leave  the  silver  dollar  to  stand  upon  its  intrinsic  value  as  a 
legal  tender,  the  same  as  the  smaller  coin.  But  there  is  no  injustice  in 
enlarging  the  limit  to  twenty  dollars,  and,  but  for  the  reasons  I  will 
state  hereafter,  there  is  no  injustice  in  making  it  a  legal  tender  for  all 
currency  contracts.     The  silver  dollar  has  that  intrinsic  value  which,  in 


LEGAL  TENDER   OF  SILVER  COIN.  543 

all  periods  of  our  history,  has  made  it  a  favorite  coin,  not  only  for  do- 
mestic uses  but  for  exportation.  It  furnishes  silver  bullion  in  a  shape 
and  form  more  convenient  for  handling  than  any  other  form  of  coin. 
I  fell  into  a  common  error  in  the  debate,  a  few  days  since,  in  saying 
that  this  dollar  had  not  been  issued  since  1853.  Official  reports  show 
that  it  was  issued  in  considerable  quantities  until  it  was  demonetized 
by  the  coinage  act  of  1873.  From  1870  to  1873  there  was  issued  in 
silver  dollars^  by  the  United  States,  $3,336,348,  at  par  with  gold,  and 
at  a  time  when  specie  payments  were  suspended  and  silver  circulated 
only  in  the  Pacific  States  and  Territories ;  and,  since  the  trade  dollar 
was  substituted  for  the  old  silver  dollar,  there  had  been  issued  up  to 
April  30,  1876,  of  trade  dollars,  the  large  sum  of  $14,912,350.  These 
are  mainly  for  export,  but  many  were  and  are  held  for  circulation  in 
this  country.  When  the  old  silver  dollars  are  issued  at  par  with  United 
States  notes,  a  large  amount  of  them  will  be  taken  as  a  reserve  by  the 
people,  to  meet  future  needs,  with  or  without  a  legal-tender  quality. 
As  their  issue  is  not  peremptory,  and  the  aggregate  amount  can  not 
exceed  the  surplus  revenue  or  sinking  fund,  there  is  no  danger  of  an 
over-issue,  while  their  existence  among  the  people  will  constitute  the 
best  reserve  when  gold  alone  becomes  the  full  standard  of  value. 

Every  argument  already  mentioned  in  favor  of  subsidiary  silver 
coin  is  equally  potent  in  favor  of  the  silver  dollar.  It  will  be  eagerly 
taken  in  payment  of  United  States  notes.  It  is  purely  a  voluntary  ex- 
change. It  is  the  cheapest  mode  in  Avhich  we  can  redeem  these  notes. 
It  is  specie  resumption  in  the  old,  time-honored  standard  of  silver  dol- 
lars of  full  weight  and  fineness.  It  will  accustom  our  people  to  distin- 
guish between  the  real  dollar  that  pays  where  it  goes  and  a  paper  dollar 
which  only  promises  to  pay.  It  will  prepare  the  way  for  full  resump- 
tion in  gold.  To  the  extent  proposed  by  the  Comfnittee,  and  to  be  used 
as  a  purely  voluntary  approach  to  a  full  specie  standard,  it  is  open  to  no 
objection  or  criticism,  and  should  be  assented  to  by  gentlemen  who 
have  differed  with  each  other  on  the  present  resumption  law,  or  on  the 
merits  and  dangers  of  contraction  and  expansion.  Why  is  it,  therefore, 
that  we  can  not  pass  this  bill  without  introducing  controverted  proposi- 
tions, which,  if  they  do  nothing  else,  will  delay  and  endanger  the 
measure  ?  This  bill,  as  reported,  would  by  this  time  have  become  the 
law  of  the  land,  but  for  these  amendments  ;  and  as  we  can  not  act  upon 
the  amendments  without  a  long  debate — now  a  sufficient  cause  to  defeat 
almost  any  bill — it  is  in  the  power  of  any  Senator,  under  our  rules,  to 
defeat  this  desired  legislation  by  urging  controverted  amendments.  It 
is  sufficient  now  to  justify  voting  against  these  amendments  to  say  that 
they  endanger,  even  by  delay,  the  passage  of  the  bill. 

I  must  appeal  to  the  good  sense  of  the  Senators  from  Missouri  and 
Nevada  not  to  embarrass  this  bill,  the  purpose  of  which  they  approve, 
by  urging  amendments  that  raise  new  and  antagonistic  difficulties  likely 
to  defeat  its  passage,  or  which,  if  adopted,  will  demonetize  gold,  not 
only  in  private  transactions,  but  in  the  payment  of  customs  duties  and 
the  public  d%bt.  They  present  the  most  difficult  problem  of  political 
economy  and  raise  the  most  delicate  questions  affecting  the  public 
credit,  and  at  a  time,  too,  when,  above  all  others,  we  ought  not  to  at- 


544  SPEECHES  AND  REPORTS  OF  JOHIT  SHERMAN. 

tempt  to  decide  them.  At  this  time,  when  we  can  not  pay  our  debt  in 
gold  or  silver,  and  when  the  relations  between  gold  and  silver  are  un- 
naturally affected  by  the  recent  movements  in  Europe,  and  when  it  is 
impossible  to  fix  their  precise  relations  to  each  other,  it  is  exceedingly 
inopportune  to  consider  or  decide  any  radical  changes  in  the  existing 
law.  Ever  since  1853  silver  coin  has  been  practically  a  legal  tender 
in  payments  amounting  to  live  dollars  only,  and  yet  it  has  been  main- 
tained, in  very  large  sums,  at  par  with  gold.  Why  disturb  this  law  ? 
Ever  since  the  present  debt  of  the  United  States  was  contracted,  we 
have  scrupulously  paid  its  interest  in  gold  coin.  To  enable  us  to  do  so, 
we  have  collected  our  revenues  in  gold  coin,  and  we  have  ample  means 
to  continue  to  so  pay  the  interest.  To  now  claim,  on  any  pretense 
whatever,  the  right  and  propriety  of  paying  this  interest  in  silver  coin, 
when  the  whole  amount  of  silver  coin  that  could  be  issued  in  three 
years  would  not  be  sufficient  to  pay  the  interest  for  a  single  year,  would 
create  a  revolution  in  our  public  credit,  without  any  benefit  whatever. 
The  serious  effect  of  such  a  proposition  upon  our  national  character  or 
credit  can  not  be  measured  in  dollars  and  cents. 

Again,  sir,  if  you  undei-take  to  pay  your  interest  with  silver  coin, 
you  must  pay  the  whole  of  it  with  such  coin.  You  can  not  di  crimi- 
nate. You  can  not  pay  the  large  holders  of  your  securities  with  gold 
and  the  small  holders  with  silver.  The  great  body  of  your  interest  is 
paid  to  banks  and  bankers,  even  when  the  bonds  are  the  property  of 
private  individuals.  You  have  gold  to  pay  with,  but  you  have  no 
coined  silver,  and  can  not  have  enough  in  three  years ;  and  the  same 
objection  applies  to  customs  duties.  For  small  sums,  and  as  change, 
the  duties  may  be  received  in  silver ;  but  the  supply  of  such  coin  is 
not,  and  can  not  be,  sufficient  for  some  years  to  come,  to  pay  the  duties 
collected.  The  ultimate  effect  of  such  a  proposition  would  be  to  give 
an  artificial  value  to  silver  bullion  and  silver  coin  with  which  to  pay 
duties ;  while  its  immediate  effect  will  be  to  demonetize  both  gold  and 
silver  coin,  and  to  segregate  it  from  our  current  money,  as  gold  is  now 
segregated  for  the  purpose  of  paying  duties.  It  is  manifest,  theref oi*e, 
that  if  we  mean  to  collect  our  customs  duties  and  pay  our  interest  in 
silver  coin,  we  must  postpone  the  ojDcration  of  such  a  law  until  we  have 
such  coin  in  quantities  sufficient  to  conduct  the  business,  and  by  no 
possibility  could  this  be  done  in  less  than  four  years.  The  amendment, 
then,  as  it  is  proposed,  would  have  no  effect  whatever,  except  to  take 
from  the  people  the  silver  coin  they  now  have  and  hojDC  to  receive,  and 
to  cause  it  to  be  held  like  gold  in  iiew  York,  to  pay  duties.  The  Gov- 
ernment would  not  and  could  not  pay  it  out  for  fractional  currency 
and  United  States  notes,  when  it  would  be  at  once  bought  up  by  bro- 
kers for  its  peculiar  property  in  paying  customs  duties.  This  objection 
is  clearly  fatal,  for  years  at  least,  to  the  amendment  proposed  by  the 
Senator  from  Missouri ;  but  there  are  other  reasons  why  such  a  proposi- 
tion ought  not  to  be  entertained. 

The  public  debt  was  contracted,  and  the  interest  to  be  paid  was 
agreed  upon,  with  the  universal  understanding  that  the  c(3in  stipulated 
for  was  gold  coin.  At  that  time  all  the  silver  in  circulation  was  limited 
in  its  legal-tender  quality  to  five  dollars  in  any  one  pa}mient.     And 


LEGAL  TENDER  OF  SILVER   COIN".  545 

although,  by  the  act  of  1853,  the  old  silver  dollar  was  not  demonetized  * 
in  terms,  it  was  not  issued,  and  no  human  being  then  contemplated  the 
payment  of  principal  or  interest  of  the  debt  in  silver  coin.  In  fact, 
during  the  whole  period,  from  the  contraction  of  the  debt  up  to  and 
after  the  year  1873,  when  the  silver  dollar  was  demonetized,  it  was 
worth  more  than  the  gold  dollar.  No  one  then  foresaw  or  had  reason 
to  believe  that  it  would  become  less  valuable  than  gold.  Its  great  de- 
preciation grows  mainly,  if  not  exclusively,  out  of  the  action  of  for- 
eign governments  in  dealing  with  their  coin.  To  now  make  the  silver 
dollar  a  legal  tender  in  payment  of  the  interest  of  our  debt  would  not 
only  be  impracticable,  as  I  have  already  shown,  but  it  would  be  uni- 
versally regarded  as  a  violation  of  good  faith,  and  would  destroy  the 
confidence  with  which  the  commercial  world  now  regarded  our  public 
securities.  The  silver  dollar  was,  it  is  true,  a  legal  tender  until  1873,' 
and,  in  strict  law,  might  be  restored  to  its  former  position  as  a  standard 
of  value,  Avithout  a  violation  of  the  legal  contract  between  the  United 
States  and  the  bond-holder.  But,  sir,  the  evil  effect  of  such  a  measure 
upon  the  value  of  our  public  securities  would  far  outweigh  any  advan- 
tage to  be  gained  by  the  difference  between  the  payment  of  the  inter- 
est on  our  public  debt  for  two  or  three  years  in  silver  rather  than  in 
gold.  For  over  forty  years,  since  1834,  the  silver  dollar,  though  in  law 
a  money  of  account,  was,  in  fact,  demonetized,  because  it  was  more 
valuable  than  the  gold  dollar.  It  was  for  this  reason  alone  that  the  sil- 
ver dollar  was  dropped  from  our  coinage  system.  This  is  clearly  stated 
in  a  report  to  the  Senate  by  Mr.  Knox,  Comptroller  of  the  Currency, 
dated  April  25,  1870. 

I  read  from  his  report  as  follows : 

TLe  coinage  of  the  silver  dollar  piece,  the  history  of  which  is  here  given,  is  dis- 
continued in  the  proposed  bill.  It  is  by  law  the  dollar  unit,  and,  assuming  the 
value  of  gold  to  be  fifteen  and  one  half  times  that  of  silver,  being  about  the  mean 
ratio  for  the  past  six  years,  is  worth  in  gold  a  premium  of  about  three  per  cent,  (its 
value  being  |l-0312),  and  intrinsically  more  than  seven  per  cent,  premium  in  our 
other  silver  coins,  its  value  thus  being  $1-0742.  The  present  laws  consequently 
authorize  both  a  gold-dollar  unit  and  a  silver-dollar  unit,  differing  from  each  other 
in  intrinsic  value.  The  present  gold  dollar  piece  is  made  the  dollar  imit  in  the  pro- 
posed bill,  and  the  silver  dollar  piece  is  discontinued.  If,  however,  such  a  coin  is 
authorized,  it  should  be  issued  only  as  a  commercial  dollar^  not  as  a  standard  unit 
of  account,  and  of  the  exact  value  of  the  Mexican  dollar,*  which  is  the  favorite 
for  circulation  in  China  and  Japan  and  other  Oriental  countries. 

This  report  was  the  beginning  of  the  voluminous  documents  which 
led  to  the  revision  of  the  mintlaws  of  1873.  The  proposed  act  was 
subjected  to  the  greatest  scrutiny.  I  have  here  a  document  of  one 
hundred  pages,  containing  suggestions  and  criticisms  of  experts,  several 
of  whom  suggest  a  substitution  of  the  Mexican  pillar  dollar,  or  a  trade 
dollar,  for  the  old  dollar,  and  one  of  whom  only,  Mr.  Patterson,  of 
Philadelphia,  objected  to  demonetizing  tlie  silver  dollar,  and  this  for 
the  reason  that,  though  "  too  valuable  to  be  used  as  a  circulating  medi- 

*  Assuming  the  value  of  gold  to  ])e  fifteen  and  one  half  times  that  of  silver,  the  French 
five-franc  piece  is  worth  about  ninety-six  and  cue  half  cents  (96-4784),  the  standard  Mexican 
dollar  $1-0490  our  silver  dollor  piece  $1-0312.  and  two  of  our  half-dollar  pieces  ninety-six 
cents. 

35 


546  SPEECHES  AND  EEPORTS  OF  JOHN  SHEPvMAN. 

'mn,  yet  it  could  be  used  for  cabinets,  or  perhaps  to  supply  some  oc- 
casional or  local  demand."  (Executive  Document  No.  307,  page 
38.)  Ko  one  was  then  wise  enough  to  foresee  or  suggest  that  the 
time  would  soon  come  when  the  old  silver  dollar  would  be  less  valuable 
than  gold. 

The  great  revolution  in  the  precious  metals  has  occurred  since  ;  and 
now  the  practical  question  is,  Shall  we  avail  ourselves  of  the  extraor- 
dinary fall  in  silver  to  make  the  old  silver  dollar  a  full  legal  tender, 
and  thus  reduce  the  market  value  of  our  bonds,  which  we  are  not 
bound  to  pay,  which  are  not  due,  and  which  we  have  not  the  ability 
to  pay ;  or  shall  we  improve  the  opportunity  now  offered  us  by  an  un- 
foreseen event,  to  redeem  our  depreciated  notes  without  loss,  and  with 
the  free  and  voluntary  consent  of  the  holders  of  them  ?  Sir,  this  is  the 
choice  presented  to  us.  I  say  that  not  only  public  honor,  but  public 
policy,  our  interest,  in  the  narrowest  as  well  as  in  the  broadest  sense  of 
that  word,  points  to  the  redemption  of  the  United  States  notes. 

To  the  extent  that  any  of  our  creditors  choose  to  take  our  silver  coin, 
we  are  at  liberty  to  offer  it ;  but  a  compulsory  payment  in  silver  coin 
is  a  very  different  proj)ositiou.  Any  attempt  to  enforce  such  payment 
would  fail.  AVe  have  not,  and  can  not  have,  the  silver  coin  to  make  it. 
The  attem2)t  would  only  bring  upon  us  the  discarded  silver  coin  of 
other  countries,  to  be  recoined  with  a  view  to  pay  it  to  the  United 
States  in  liquidation  of  customs  duties,  thus  reducing  the  real  value  of 
our  customs  revenue.  Gold,  being  rejected  by  us,  would  be  at  once 
demonetized,  and  the  silver  standard  would  alone  prevail.  I  therefore 
reject  as  inadmissible  the  amendment  proposed,  to  make  silver  coin  a 
legal  tender  for  customs  duties  or  for  interest  on  the  public  debt,  and 
regret  exceedingly  that  it  has  been  offered. 

As  to  making  the  silver  dollar  a  full  legal  tender  for  contracts  be- 
tween private  individuals,  very  different  considerations  arise.  All  debts 
contracted  prior  to  1 873  are  payable,  by  the  law  then  in  force,  either  in 
gold  or  silver  dollars,  or  in  United  States  notes.  If  contracts  were 
specifically  payable  in  gold  coin,  they  can  be  enforced  in  coin,  what- 
ever the  legal  tender  may  now  be.  The  terms  x)i  the  contract  between 
individuals  must  be  the  law  between  the  parties,  and  the  general  law 
only  applies  to  contracts  when  the  specific  medium  of  payment  is  not 
stipulated  for.  If  a  contract  made  before  1873  was  stipulated  to  be 
paid  in  coin,  it  may  undoubtedly  be  paid  in  either  silver  or  gold  coin. 
At  that  time,  and  for  near  forty  years  j^reviously,  payment  would  not  be 
tendered  in  silver  dollars  because  silver  dollars  were  worth  more  in  the 
market  than  gold ;  but  the  legal  option  to  tender  silver  coin  existed 
until  1873,  and  until  the  revised  code  was  adopted,  which  excluded  the 
old  dollar  from  among  the  silver  coins  of  the  United  States. 

It  is  thus  apparent  that  all  contracts  payable  in  coin,  made  prior  to 
1873,  are  im/pliedly  payable  in  gold  coin,  and  that  all  coin  contracts 
made  since  1873  are  legally  payable  in  gold  coin  only.  I  am  not  aware 
that  any  considerable  number  of  such  contracts  exists,  but  when  they  do 
exist  they  should  be  governed  by  the  precise  law  in  force  when  made. 
The  contracts  now  existing  in  this  country  are  mainly  either  currency 
contracts  or  those  made  specifically  payable  in  gold  coin.     The  latter 


LEGAL  TENDER  OF  SILVER  COIN.  547 

can  not  and  ouglit  not  to  be  changed  by  law.  Those  payable  in  coin 
should  be  payable  in  such  coin  as  was  a  legal  tender  when  the  contract 
was  made,  and  ought  not  to  be  affected  by  subsequent  law.  Such  con- 
tracts should  be  left  to  the  agreement  of  the  parties  or  the  action  of 
the  courts.  Our  laws  ought  to  have  effect  upon  the  future  only,  and 
not  upon  the  past.  Congress  can  coin  money  and  regulate  the  value 
thereof,  but  this  great  power  should  not  be  made  the  pretext  for  im- 
pairing the  obligation  of  existing  contracts.  It  is  no  answer  to  say  that 
this  was  done  when  our  present  legal-tender  act  was  passed.  The  con- 
dition of  the  country  then  authorized,  yea,  demanded,  the  most  extreme 
measures,  even  to  the  confiscation  of  debts  and  property,  in  the  form  of 
taxes.  We  know  with  what  doubt  and  hesitation,  and  under  what  cir- 
cumstances, the  Supreme  Court  finally  sanctioned  the  constitutionality  of 
the  legal-tender  act,  as  it  affected  preexisting  contracts.  No  one  believes  . 
it  would  sustain  the*  exercise  of  such  a  power  except  as  a  measure  of 
war,  over  which  Congress  is  invested  by  the  Constitution  with  extraor- 
dinary powers.  As  one  of  those  who,  in  this  Senate,  asserted  and  voted 
for  the  legal-tender  act,  I  now  say  that  I  did  it  only  under  the  shadow 
of  a  supreme  necessity,  involving  the  national  life ;  and  that  it  ought 
not  to  be  made  the  precedent  for  a  retroactive  legal-tender  law,  passed 
in  a  time  of  profound  peace,  to  change  or  affect  existing  contracts. 
Our  power  should  deal  with  "the  future ;  and  in  passing  laws  for  future 
contracts,  we  are  not  embarrassed  by  questions  of  public  faith  or  private 
obligations,  but  by  those  of  public  policy. 

Is  it  wise,  then,  at  this  time,  as  a  question  of  public  policy,  to  at- 
tempt by  law  to  fix  the  precise  relation  of  gold  and  silver  to  each  other, 
and  to  make  both  metals  a  legal  tender  for  all  sums  ?  Or  will  it  be 
better  to  adhere  for  the  present  to  the  policy  of  a  gold  unit,  with  sub- 
sidiary silver  coins,  limited  in  amount  of  issue,  or  in  its  legal-tender 
quality,  or  in  both  ? 

These  two  opposing  policies  have  been  debated  here,  but  far  more 
extensively  in  every  European  country,  and  especially  in  the  writings  ^ 
of  political  economists.  But,  wherever  debated,  the  action  of  modem  ' 
governments  has,  in  all  the  great  commercial  nations,  settled  down 
upon  a  composite  policy — a  coinage  consisting  of  gold,  as  a  unit,  with 
silver  coins  of  somewhat  less  intrinsic  value  than  gold,  but  kept  at  par 
with  gold,  by  a  limit  of  the  amount  issued,  or  a  limit  of  its  legal-tender 
quality,  or  by  both.  This  policy  was  adopted  by  Great  Britain  in  1815, 
by  the  United  States  in  1853,  by  the  Latin  nations  in  1865,  and  by 
Germany  in  1873.  Such  policy  is  neither  monometallic  nor  bimetallic. 
The  former  demands  a  single  standard  of  gold,  and  demonetizes  silver ; 
the  latter  makes  both  metals  a  legal  tender^'for  all  sums.  The  objection 
to  the  monometallic  system  is  that  it  adds  enonnously  to  the  value  of 
gold,  by  making  it  alone  the  metal  in  which  all  debts  must  be  paid. 
The  objection  to  the  bimetallic  system  is  tliat,  from  the  nature  of 
things,  it  is  impossible  to  fix  the  time  relation  of  silver  and  gold  to  each 
otlier,  and  that,  whenever  either  metal  advances  in  value,  however 
slightly,  such  metal  becomes  demonetized,  and  flees  the  country.  _  These 
primary  reasons  have  led  to  the  composite  system,  which  combines  the 
two  metals — gold  for  large  transactions  and  silver  for  small — ^the  silver 


548  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

purposely  reduced  in  value,  but  kept  at  par  with  gold  by  limiting  its 
amount,  or  otherwise. 

Now,  sir,  it  is  perfectly  obvious  that,  if  we  could  in  some  way  pre- 
vent gold  and  silver  from  fluctuating  in  value  in  their  relations  to  each 
other,  the  double  standard  is  the  best,  as  giving  the  largest  store  of  the 
precious  metals  to  draw  upon ;  and  it  is  now  proposed,  by  international 
treaties,  to  agree  upon  the  relative  value  of  these  metals.  In  the  absence 
of  such  treaties,  it  is  far  wiser  for  us  to  stand  by  the  composite  system, 
in  force  in  the  United  States  since  1853 ;  and  such  is  the  basis  of  the 
report  of  the  Committee  on  Finance.  We  propose  to  retain,  as  now, 
the  ultimate  unit  of  gold,  in  connection  with  a  subsidiary  silver  coinage, 
including  the  silver  dollar ;  to  limit  the  legal-tender  quality  of  such 
subsidiary  coinage ;  and  to  provide  that  the  amount  to  be  issued  shall 
not  exceed  that  of  the  sinking  fund.  The  amendments  offered  propose 
the  adoption  of  the  bimetallic  system,  with  all  its  uncertainties,  at  a 
time  when  it  has  been  rejected,  or  is  being  rejected,  by  all  commercial 
nations ;  and  especially  at  a  time  when  the  difference  between  silver 
and  gold  is  greater  than  it  has  been  for  two  hundred  years.  The  quan- 
tity of  silver  required  under  the  propositions  of  the  Committee  will  be 
amply  supplied  through  our  domestic  production  and  the  sinking  fund  ; 
while  the  amendments  offered  will  bring  to  us  for  a  market  the  rejected 
silver  of  Germany  and  Europe,  and  will  demonetize  gold,  not  only 
between  individuals,  but  in  payments  made  to  the  custom-house  and  to 
the  public  creditors. 

The  time  for  this  proposed  radical  change  in  our  coinage  is  a  truly 
unfortunate  one.  The  margin  between  gold  and  silver  is  now  about 
ten  per  cent,  greater  than  the  rate  of  16  to  1  fixed  by  law.  ]^othing 
is  clearer  than  that,  under  the  bimetallic  system,  the  legal  relation  be- 
tween the  two  metals  should  be  as  nearly  as  practicable  the  market  rela- 
tion. This  is  the  theory  of  the  system.  The  first  step,  therefore,  in 
adopting  the  new  system  should  be  to  fix  the  legal  relation  of  silver  to 
gold  at  17-|-  to  1.  But  this  step  would  defeat  the  j)rimary  object  of 
•making  the  present  depreciation  of  silver  the  means  of  a  voluntary 
resumption  of  the  specie  standard.  By  the  composite  system  this  object 
can  be  easily  accomj)lished,  and  may  be  heartily  accepted  by  all  classes, 
without  contraction  or  expansion  of  our  currency. 

Sir,  without  going  further  into  this  argument,  already  too  greatly 
protracted,  I  apjDcal  to  Senators  charged  with  high  duties  at  a  critical 
period  of  our  financial  history,  not  to  press  upon  us  extreme  oj^inions, 
but  to  hold  fast  to  the  progress  we  have  made,  and  let  us  seize  the  op- 
portunity offered  us  to  make  easy  and  straight  the  path  now  opened  for 
a  specie  standard,  when  gold  and  silver  and  notes — all  alike  of  equal 
value — will  circulate  side  by  side,  and  revive  again  the  flagging  industry 
and  enterprise  of  our  people.  To  the  one  side  I  say  that,  if  this  bill 
does  not  give  you  all  the  silver  you  want,  it  will  in  three  years'  time 
give  you  all  that  will  circulate  at  par  with  gold.  To  the  other  side  I 
say  that,  if  this  bill  does  not  assure  resumption  in  gold,  it  does  provide 
for  resumption  in  silver,  which  the  present  law  does  not,  and  that  it 
moreover  prepares  the  way  for  resumption  in  gold  by  laying  a  founda- 
tion of  silver  coin,  without  which  gold  coin  will  never  circulate,  and 


DAXG-ERS  OF  EESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     549 

never  has  circulated,  in  any  country  of  the  world.  Let  us  lay  the  foun- 
dation first,  and  the  superstructure  will  come  in  due  time.  Both  metals 
are  indispensable,  but  silver  first.  It  is  the  granite  rock  of  the  money 
superstructure.  Let  us  lay  well  this  foundation,  and  in  due  time  the 
golden  dome  will  crown  our  work,  and  United  States  notes,  redeemable 
in  gold  and  silver  at  the  choice  and  demand  of  the  holder,  will  be  the 
winged  Mercury  to  do  the  business,  and  promote  the  exchange  of  the 
jiroducts  of  human  industry.  Though  the  work  is  a  great  one,  and  the 
difficulties  in  the  way  greater  than  Bunyan's  pilgrim  encountered,  I  will 
not  surrender  my  hope  to  see  it  accompHshed. 


DANGERS   OF  THE  EESTOEATION  OF    THE  DEMO- 
CRATIC PARTY   TO   POWER. 

AT  MARIETTA,   OHIO,  AUGUST  12,  1876. 

Fellow  Citizens  :  We  are  engaged  in  a  political  canvass  that  will 
determine  not  only  who  shall  be  President  of  the  United  States  for  the 
next  four  years,  but  the  policy  and  j)i'iiiciples  that  will  guide  his  ad- 
ministration. The  contest  will  affect  in  a  greater  or  less  degree  every 
citizen  of  the  LTnited  States.  The  choice  is  between  the  Republican 
and  the  Democratic  parties.  The  real  question  is.  Shall  the  Demo- 
cratic party  be  restored  to  power  again,  not  with  new  principles  and 
leaders,  but  the  Democratic  party  composed  of  the  same  elements  as 
before  the  war  ?  Sixteen  years  have  passed  away,  and  yet  that  party, 
in  soul,  purpose,  and  policy,  is  the  same  as  when  at  the  close  of*  Bu- 
chanan's term  it  left  the  country  cnimbling  into  anarchy — a  part  war- 
ring against  it,  and  a  part  voting  against  it,  and  both  factions  teaching 
that  it  was  a  mere  confederation  of  States,  too  weak  to  enforce  its  own 
laws,  without  power  to  protect  its  life,  and  subject  to  the  veto  of  any 
State  that  chose  to  withdraw  from  its  power. 

Its  only  hope  for  success  now,  as  then,  is  in  a  united  Soutli  com- 
bined with  factional  and  discordant  elements  in  the  North,  including 
the  war-rioters  of  New  York,  the  Sons  of  Liberty  of  Indiana,  and  the 
thousands  of  men  who  follow  its  name  without  reason  or  principle.  It 
is  a  union  of  the  men  in  the  North  who,  in  1864,  declared  the  war  a 
failure,  and  the  rebels  in  the  South  who  were  then  fighting  to  destroy 
the  Union.  The  South  is  to  bring  to  the  alliance  increased  political 
power.  Formerly  its  slaves  were  counted  at  three  fifths  of  their  num- 
ber ;  now,  as  freemen,  they  are  counted  as  other  citizens ;  but,  unlike 
other  citizens,  though  invested  by  the  Constitution  with  the  rights  of 
freemen,  they  are  to  be  overawed  and  held  down  by  violence  and  mur- 
der, and  their  political  power  is  to  be  wielded  against  their  known  will. 
In  the  North  the  disloyal  elements  are  to  be  reenforced  by  malcontents, 
produced  by  the  inevitable  discontents  of  political  strife.     Men  disap- 


550  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

pointed  in  aspirations  for  office  or  ambition,  or  who  exaggerate  the 
faults  and  failings  of  a  Eepnblican  administration,  will  unite  with  the 
Democratic  party,  and  thus  endanger  all  that  we  have  won  in  our  long 
struggle  for  national  liberty  and  miity.  I  do  not  underrate  the  severity 
of  the  contest  before  us,  but  I  come  to  you  fully  impressed  with  its 
dangers  and  invoke  you  to  consider  them. 

What  will  be  the  result  pf  the  restoration  of  the  Democratic  party 
to  power  ?  The  first  result  will  be  a  severe  check  to  the  growth  of 
Union  sentiment — love  of  the  Union.  Since  the  Eepublican  party 
came  into  power  our  country  has  made  great  advances  in  strength  and 
unity  as  a  nation.  It  was  the  fierce,  patriotic  fervor  of  the  people  of 
the  ^Northern  States,  the  love  of  the  Union,  the  love  of  country,  that, 
organized  under  the  name  of  the  EejJubHcan  party,  overcame  in  war 
and  at  the  ballot-box  the  Democratic  party  and  secured  us  union,  lib- 
erty, and  country.  But  for  this  the  Democratic  party  would  have  com- 
pleted its  work  ;  it  would  have  divided  our  country  into  two  confedera- 
cies, and  planted  the  seeds  of  fmiher  division  and  anarchy.  "We  would 
have  had  no  broad  country  to  love.  Millions  of  men,  women,  and  chil- 
dren would  still  be  bought  and  sold  as  slaves.  Our  rivers  and  moun- 
tains and  plains  would  nave  been  divided  by  hostile  lines.  Hundreds 
of  thousands  of  brave  men  gave  their  lives  to  defeat  this  policy  ;  and, 
thank  God,  the  Democratic  party,  I^orth  and  South,  both  on  the  field 
of  battle  and  at  the  ballot-box,  was  defeated,  and  as  a  result  our  coun- 
try is  one  and  indivisible.  The  Mississippi  flows  through  its  whole 
course,  from  its  remotest  source  to  the  Gulf,  under  the  flag  of  one  coun- 
try, and  that  our  own.  Thu'ty-eight  States  and  eight  Ten-itories  are 
united  in  one  nation,  and  its  authority  to  make  and  enforce  the  laws 
can  no  longer  be  denied.  And  now  the  very  men  who  fought  and 
voted  to  break  up  this  Union,  under  the  same  name  and  organization, 
still  calling  itself  Democratic,  appeal  to  your  generosity  to  intrust  to 
them  all  the  great  powers  of  the  Government.  They  ask  to  administer 
its  laws,  control  its  revenues,  and  mold  its  policy  at  home  and  abroad. 
Both  of  their  candidates,  though  living  in  the  North,  opposed  every 
measure  of  the  war,  all  the  movements  to  organize  the  army  that  beat 
down  the  rebellion,  and  all  the  safeguards  adopted  to  secure  the  results 
of  our  victory.  The  men  they  would  bring  into  the  chief  places  of  the 
Government  are  those  who  led  the  rebel  armies  or  who  frowned  and 
complained  in  the  North.  The  same  States  that  passed  and  supported 
ordinances  of  secession  are  the  main  strength  of  this  coalition. 

If  they  succeed  they  will  have  accomplished  by  a  restoration  what 
they  sought  to  accomplish  by  a  revolution.  How  w^ill  it  read  in  history 
if  it  is  recorded  that  the  American  people  took  up  arms  and  overcame 
the  Democratic  party  in  order  to  save  their  Union,  and  when  it  was 
saved  restored  the  same  party  and  the  same  men  to  power  again  ?  Even 
the  spectacle  of  such  a  contest  is  a  reproach  to  our  patriotism  and  civil- 
ization. Its  success  would  have  only  one  parallel  in  history,  the  res- 
toration of  Charles  the  Second  in  England  after  the  people  of  England 
had  beheaded  his  father  and  won  their  liberties  under  Cromwell.  The 
people  of  England  could  get  rid  of  their  restoration  only  by  another 
revolution ;  and  we,  by  following  their  example,  wiU  involve  our  coun- 


DANGERS  OF  RESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     551 

try  in  a  struggle  as  dangerous  as  the  reigns  of  Charles  the  Second  and 
James  the  Second  were  to  the  people  of  England.  When  the  rebels 
begin  to  make  laws  for  us  we  shall  learn  how  dangerous  it  is  to  intrust 
our  Union,  our  institutions,  the  liberty  now  enjoyed  by  all,  to  the  cus- 
tody and  care  of  the  very  men  who  waged  war  against  the  Union,  who 
sought  to  overthrow  our  institutions,  and  who  held  in  slavery  four  mil- 
lions of  our  countrymen  made  free  by  our  policy. 

But  it  may  be  said  that  these  rebels  are  not  the  Democratic  party, 
and  it  is  the  Democratic  party  that  seeks  to  be  restored  to  power.  The 
answer  is  that  they  would  be  the  controlling  element  of  the  Democratic 
party — the  majority  of  it — who  would  furnish  the  majority  of  the 
electoral  votes  for  its  success.  Who  controlled  the  Democratic  party 
before  the  war  ?  The  very  men  who  control  it  now.  Why  was  it  that 
tens  of  thousands  of  Northern  Democrats  swelled  the  ranks  of  the 
Eepublican  party  in  1860  ?  Because  they  would  not  submit  to  the 
domination  of  the  same  elements  that  control  that  party  now.  But 
who  in  .the  North  will  be  their  allies  in  this  contest  ?  Who  are  Tilden 
and  Hendricks,  and  whom  do  they  represent  ?  The  very  men  who 
held  us  in  check  and  prolonged  the  war.  The  men  who  doubted,  hesi- 
tated, wavered,  and  finally  proposed  to  surrender  in  1864,  when  our 
national  life  hung  suspended  by  a  thread. 

But  it  is  said  there  are  brave  men,  patriotic  men,  and  Union  sol- 
diers in  the  Democratic  paVty.  So  there  are ;  and  to  them  I  would 
appeal ;  to  their  memory  of  our  danger  and  victory.  How  few  are 
they  in  number ;  how  feeble  in  influence  in  the  Democratic  party 
compared  to  the  number  and  influence  of  those  who  during  the  war 
were  open  enemies  or  left-handed  friends  !  Where  is  their  place  on 
the  J^ational  Democratic  ticket  ?  What  voice  of  inspiration  comes  to 
them  from  Tilden  or  Hendricks  ?  Do  they  tell  us  that  the  Demo- 
cratic party  has  reformed  or  repents  ?  Where  is  the  evidence  of  it  '^ 
What  principle  does  the  Democratic  party  advocate  now  that  it  did 
not  then  ?  What  has  it  done  since  1860  to  inspire  confidence  ?  We 
shall  see  after  a  while.  No,  fellow  citizens,  we  have  the  self-same 
enemy  to  encounter,  the  same  in  heart,  in  purpose,  and  in  principle, 
under  the  same  name  and  organization,  but  they  have  dropped  the 
rebel  gray  and  assumed  the  Union  blue. 

As  a  foretaste  of  what  is  meant  by  a  Democratic  restoration,  we 
have  now  a  Democratic  House  of  Bepresentatives,  where  sixty  men 
who  served  in  the  rebel  army  or  rebel  Congress  are  making  laws  for 
you.  They  are  arraigning  General  Grant  and  other  conspicuous  lead- 
ers of  the  Union  army.  They  have  turned  out  Union  soldiers  who 
bear  honorable  wounds  from  petty  offices  to  make  room  for  rebel 
oflicers.  They  have  passed  a  bill  to  make  Confederate  officers  eligible 
for  service  in  the  army  of  the  United  States.  The  whole  tone,  con- 
duct, and  policy  of  these  men  are  the  same  as  when  I  was  a  member  of 
the  House  sixteen  years  ago.  They  talk  about  the  "  revolution,"  but 
neither  acknowledge  its  results  nor  respect  the  great  changes  in  the 
Constitution  which  we  hoped  had  been  secured  by  the  war.  Let  us 
see  what  will  be  the  result  if  their  power  in  the  House  is  extended  to 
the  Senate  and  the  Presidential  office.     When  the  war  closed,  innumer- 


552  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

able  claims  against  the  United  States  were  made  from  the  lately  rebel 
States,  and  Congress  in  the  most  liberal  spirit  made  provision  for  the 
payment  of  all  that  by  the  well-settled  rules  of  civilized  war  could  be 
properly  made  against  the  United  States.  The  officers  of  the  Depart- 
ments, the  Supreme  Court,  the  Court  of  Claims,  and  the  Southern 
Claims  Commission  were  authorized  to  adjust  and  pay. different  classes 
of  claims,  and  Congress  passed  many  acts  for  equitable  relief ;  so  that 
it  may  with  safety  be  said  that  more  than  $100,(>00,000  was  paid  after 
the  war  was  over  to  citizens  of  the  South  for  losses  caused  by  the  re- 
bellion. But  this  extreme  liberality  only  gave  impetus  to  the  presen- 
tation of  claims  against  the  United  States  which  if  allowed  would 
double  the  national  debt.  These  claims  now  endanger  om'  whole  finan- 
cial system.  I  have  here  in  my  hand  a  list  of  one  hundred  and  forty 
separate  claims  now  pending  in  the  Democratic  House  of  Represen- 
tatives, amounting  to  $1,582,269,  every  one  of  which  is  for  injuries 
caused  by  our  army  in  rebel  States  during  the  war.  Here  is  another 
bill  introduced  in  the  Senate  by  Mr.  Merrimon,  of  !North  Carolina,  to 
revive  the  claims  which  existed  in  the  South  prior  to  April  13,  1861, 
in  favor  of  persons  "  who  promoted,  encom^aged,  or  in  any  manner 
sustained  the  late  rebellion.''  These  include  postmasters,  custom-house 
officers,  and  other  agents  of  the  Government,  who  at  the  beginning  of 
the  war  paid  over  to  the  Confederate  States  the  balances  due  from 
them  to  the  United  States. 

At  the  close  of  the  war,  when  every  industry,  employment,  trade, 
and  production  of  the  loyal  States  was  heavily  taxed  to  meet  the  enor- 
mous cost  of  the  war.  Congress  placed  upon  cotton  a  tax  of  three  cents 
a  pound.  This  produced  from  1863  to  1868  the  sum  of  $68,072,088, 
and  was  then  repealed.  It  was  substantially  the  only  war  tax  paid  by 
the  South,  when  the  aggregate  taxes  collected  in  the  loyal  States  was 
still  $-1:00,000,000  a  year.  This  tax  was  charged  by  the  producer  to  the 
consumer  wdien  the  cotton  was  sold,  and  was  scarcely  felt  by  the  planter 
who  raised  the  cotton.  And  yet  every  year  since  there  has  been  a 
persistent  demand  for  the  refunding  of  this  cotton  tax,  not  to  the  men 
who  paid  it,  but  to  the  States  in  which  it  was  paid ;  and  as  sure  as  fate 
this  tax  will  be  refunded  by  the  first  Congress  after  the  Democratic 
party  is  restored  to  power.  As  our  troops  penetrated  into  the  South, 
cotton  was  seized  on  behalf  of  the  United  States  as  the  property  of  the 
enemy  and  much  of  it  as  the  property  of  the  Confederate  States,  and 
the  proceeds  were  covered  into  the  Treasury.  Over  $21,000,000  was 
thus  covered  into  the  Treasury,  and  of  this  fund  the  sum  of  $11,348,- 
2-17  has  been  awarded  and  paid  l)y  the  Court  of  Claims  to  every  claim- 
ant who  had  either  legal  or  equitable  title  to  the  cotton,  and  the 
remainder  is  now  eagerly  demanded  by  those  who  were  open  rebels, 
but  who  now,  as  leading  Democrats,  hope  to  reclaim  what  they  lost  by 
the  war.  I  have  in  my  hand  fifteen  different  bills,  now  pending  in  the 
Democratic  House  of  Representatives,  to  refund  this  cotton  tax  and 
the  proceeds  of  captured  and  abandoned  property,  and  to  make  easy 
this  wholesale  raid  on  the  Treasury  of  the  United  States. 

And,  fellow  citizens,  I  have  here  bills  pending  in  that  Democratic 
House  more  wide-reaching  still.     Here  is  a  bill  introduced  by  Mr. 


DANGERS  OF  RESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     553 

Wilshire,  of  Arkansas,  now  pending  before  tlie  Committee  on  "War 
Claims  in  the  House  of  Representatives.     This  bill  provides : 

Tliat  all  citizens  of  the  United  States  h;xvin<?  claims  against  the  United  States 
for  stores  or  supplies  taken  or  furnished  during  the  rebellion  for  the  use  of  the  array 
of  the  United  States,  including  the  use  and  loss  of  vessels  or  boats  while  employed 
in  the  military  service  of  the  United  States,  may  institute  suit  against  tlie  United 
States  for  the  adjustment  and  recovery  of  such  claims  in  the  District  Court  of  the 
United  States  for  the  district  in  which  such  stores  or  supplies  may  have  been  taken 
or  furnished,  or  such  vessels  or  boats  may  have  been  used  or  lost. 

Reflect  a  moment.  All  citizens  of  the  United  States,  rebels  as 
well  as  loyal  citizens,  having  claims  for  stores  or  supplies  taken  or  fur- 
nished during  the  rebellion  for  the  use  of  the  army,  including  the  use 
and  loss  of  boats,  may  sue  the  United  States,  and  recover  the  value 
thereof.  The  loyal  people  must  pay  all  the  war  taxes,  submit  to  the 
loss  inflicted  by  rebel  raiders,  and  then  pay  for  all  the  forage  taken  by 
our  trooj)s  when  within  the  rebel  lines,  for  all  the  rails  burned^  all  the 
corn,  sweet  potatoes,  and  turkeys  consumed.  Who  that  reflects  upon 
the  supplies  consumed  by  an  army  in  an  enemy's  country  during  a 
four  years'  war  will  not  shrink  from  such  a  claim — a  claim  that  could 
be  paid  only  by  an  acknowledgment  that  the  war  on  our  part  was 
unjust  ? 

But,  fellow  citizens,  to  complete  our  liability,  I  have  here  another 
bill  introduced  by  Mr.  Riddle,  of  Tennessee,  and  now  pending  before 
the  Judiciary  Committee  of  the  House,  which,  as  it  contains  but  a 
single  section,  I  will  read  in  full,  title  and  all : 
Mr.  Riddle,  on  leave,  introduced  the  following  bill : 

A  bill  directing  compensation  to  be  allowed  for  the  use  and  occupation  of  prop- 
erty by  the  United  States  army  during  the  late  war. 

Be  it  enacted  hy  the  Senate  and  House  of  Representatives  of  the  United  States  of 
America  in  Congress  assembled,  That  the  Secretary  of  War  be,  and  he  is  hereby  au- 
thorized to  allow  reasonable  compensation  to  all  citizens  of  the  United  States  for 
the  use  and  occupation  of  their  property  by  the  United  States  army,  or  any  part 
thereof,  during  the  late  civil  war,  in  the  same  manner  and  under  the  same  regula- 
tions as  compensation  is  now  allowed  for  quartermaster  stores  used  by  said  army: 
Provided,  hoicever,  That  the  affidavit  of  the  claimant,  supported  by  the  competent 
testimony  of  any  reputable  citizen,  shall  be  sufficient  proof  to  establish  the  fact  of 
the  use  and  occupation  of  such  property  by  said  army.  But  it  is  not  the  intention 
of  this  act  to  limit  the  parties  to  the  amount  of  proof  herein  specified ;  but  other 
and  additional  testimony  may  be  taken  to  establish  the  fact  of  the  use  and  occupa- 
tion and  the  rental  value  of  the  property  occupied. 

Now,  this  bill  directs  the  Secretary  of  War  to  allow  and  pay  to  all 
citizens  of  the  United  States,  rebel  as  well  as  loyal,  a  reasonable  com- 
pensation for  the  use  of  their  property  by  the  United  States  army  or 
any  part  thereof  during  the  late  civil  war.  Every  camping-ground ; 
every  field  of  battle ;  every  march  or  retreat ;  every  tree  cut  down ; 
every  grain-field  injured  by  any  ofiicer  or  soldier  in  our  army— for  each 
and  all  of  those  are  a  part  of  the  army — must  be  paid  for  at  a  reason- 
able rate.  Suppose  a  rebel  Secretary  of  AVar,  such  as  Tilden  would 
naturally  select,  should  be  armed  with  this  authority,  what  countless 
claims  would  be  fastened  upon  the  Treasury !  An  intelligent  writer 
has  estimated  the  amount  covered  by  these  two  bills  at  $2,410,000,000. 
Whether  this  be  exaggerated  or  not,  it  is  apparent  that  under  such 


554  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAN. 

legislation  the  Treasury  would  be  utterly  bankrupt.  We  know  from 
the  experience  of  the  Southern  Claims  Commission  the  tendency  to 
swell  such  claims  by  perjury  and  fraud.  The  number  of  claims  decided 
by  that  commission  was  9,222.  The  amount  claimed  was  $19,263,- 
43T.51 ;  the  amount  allowed  was  $3,057,894.09  ;  the  amount  disallowed 
was  $16,205,542,  and  we  now  have  proof  that  some  of  the  claims 
allowed  were  fraudulent  and  grossly  exaggerated.  How  will  it  be 
when  all  the  guards  thrown  about  this  tribunal  and  other  officers  and 
courts  authorized  to  pass  upon  claims  shall  be  broken  down  and  they 
are  filled  by  men  in  sympathy  with  the  rebellion  ?  But  you  may  say 
there  is  no  danger  of  the  passage  of  these  bills.  I  beg  you  not  to  be 
deceived.  A  Democratic  Congress  and  President  would  in  all  proba- 
biUty  pass  many  of  them,  and  extend  widely  and  dangerously  the  jurisdic- 
tion of  all  the  courts  and  all  the  officers  who  pass  upon  Southern  claims. 
They  would  in  my  judgment  refund  the  whole  cotton  tax.  They  would 
extend  to  rebels  the  right  now  confined  to  loyal  people  to  recover  com- 
pensation for  provisions  and  quartermasters'  stores.  No  one  can  mea- 
sure the  multitude  and  magnitude  of  such  claims. 

Remember,  fellow  citizens,  that  the  late  slave  States  have  now  106 
members  of  the  House  of  Representatives.  The  Northern  States  have 
but  186  members.  Every  member  from  the  South  would  be  impelled 
by  the  demand  of  his  constituents  to  go  to  the  utmost  verge  in  reim- 
bursing their  losses  from  the  Treasury  of  the  United  States,  although 
they  brought  these  losses  on  themselves  by  their  rebellion,  as  well  as 
inflicted  upon  us  the  loss  of  300,000  lives  and  many  thousands  of  mil- 
lions of  dollars.  It  requires  only  41  Democratic  votes  from  the  North 
by  men  who  will  be  bound  by  party  ties  and  influenced  by  party  cau- 
cuses to  saddle  upon  the  North  the  very  damages  we  were  compelled 
to  inflict  upon  open  enemies  who  for  four  years  waged  an  unrelenting 
war  against  the  national  life.  I  could  show  you  many  votes  where  the 
Democratic  members  and  Senators  almost  in  a  body  voted  for  the 
very  principles  involved  in  these  bills,  and  in  some  cases  where  bills 
equally  dangerous  in  principle  were  saved  from  passage  only  by  the 
veto  of  President  Grant.  I  warn  you,  with  all  the  sincerity  of  truth 
and  honest  conviction,  against  this  palpable  danger  that  will  come  from 
the  restoration  of  the  Democratic  party  to  power.  The  Republican 
party  and  General  Grant  especially  have  guarded  you  thus  far.  We 
secured  a  constitutional  amendment  to  protect  you  from  the  assump- 
tion by  the  United  States  of  the  debts  incurred  in  aid  of  insurrection 
or  rebellion  against  the  United  States,  and  from  the  payment  of  any 
claim  for  the  loss  or  emancipation  of  any  slave.  But  Congress  alone, 
and,  as  I  verily  believe,  the  Republican  party  alone,  can  protect  you 
from  the  untold  multitude  and  magnitude  of  claims  for  losses  to  per- 
sons and  property  in  the  rebel  States  sustained  by  the  rebels  themselves. 

And,  fellow  citizens,  there  is  another  danger  that  will  come  from 
the  restoration  of  the  Democratic  party  to  power  which  does  not 
appeal  to  your  pocket,  but  to  a  higher  sense  of  duty  and  obligation, 
and  that  is  our  duty  and  obligations  to  the  freedmen  of  the  South.  At 
best  their  position  in  the  midst  of  a  large  number  of  our  race  who  can 
not  forget  that  these  freedmen  were  lately  their  slaves  is  one  of  danger. 


DANGERS  OF  RESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     555 

The  whites  of  the  South  were  as  a  rule  disloyal ;  the  blacks  almost 
without  exception  were  tnie  and  lojal.  They  liave  been  emancipated 
by  our  policy.  We  have  promised  them  freedom  and  citizenship  and 
ail  the  rights  that  freedom  and  citizenship  imply.  Even  under  a  Ee- 
publiean  administration,  animated  with  the  strongest  desire  to  protect 
them,  they  have  been  the  objects  of  murder,  outrage,  and  wrong-.  ]^o 
language  can  describe  the  atrocities  to  wliich  they  have  been  subjected. 
The  story  of  the  "  Ku-Klux  "  and  "  White  League  "  is  an  infamous 
chapter  in  the  history  of  our  civilization  that  can  not  be  excelled  in 
craelty  and  horror  by  the  worst  barbarism  of  any  nation  or  age.  I  had 
hoped^  that  the  firm  suppression  of  these  secret  oath-bound  conspiracies 
of  hell  by  General  Grant,  and  the  universal  execration  they  excited, 
would  end  forever  their  existence  and  influence.  But  it  is  not  so. 
The-  clans  may  have  disbanded,  but  the  spirit  that  gave  birth  to  them 
still  exists  all  over  the  South,  and  eveiy  little  while  breaks  out  into 
such  outrages  as  those  at  CUnton,  Mississippi,  and  Hamburg,  South 
Carolina.  The  murder  of  the  six  poor  negroes  at  Hamburg,  after  they 
had  surrendered  to  a  lawless  force,  was  as  cniel  as  the  suffocation  of 
the  prisoners  in  the  Black  Hole  at  Calcutta,  as  barbarous  as  the  burning 
of  Crawford  by  the  Indians,  and  more  base  and  cowardly  than  midnight 
murder  and  burglary.  "We  must  protect  these  people  from  such 
atrocities.  We  must  punish  such  murderers,  by  law  if  we  can,  but  at 
all  events  we  must  punish  them,  or  the  torch  and  the  knife  will  eventu- 
ally bring  that  retaliation  which  such  crimes  always  produce.  This 
Southern  question  has  been  and  is  now  the  most  difficult  in  the  whole 
range  of  our  political  problems.  It  is  difficult  to  say  what  ought  to  be 
done.  AVhat  we  know  is  that  the  blacks  have  the  rights  of  freemen, 
and  it  is  our  duty  to  protect  them  in  those  rights.  A  Republican 
administration,  and  especially  General  Grant,  has  sought  to  do  this. 
He  has  in  a  great  measure  succeeded.  He  has  only  failed  by  reason  of 
the  superior  numbers  and  intelligence  of  the  white  Democrats  on  the 
ground,  who  have  committed  every  atrocity  that  has  been  committed 
on  the  freedmen  of  the  South.  Every  one  of  these  whites  will  vote  for 
the  Democratic  ticket.  It  was  their  general  support  that  secured  so 
promptly  the  nomination  of  Tilden.  With  far  different  motives  than 
will  influence  the  Democrats  of  Ohio,  they  will  vote  tlie  same  ticket, 
and  by  their  joint  success  the  freedmen  will  be  handed  over  to  the  ten- 
der mercies  of  their  rebel  masters.  Who  among  you  believes  that  a 
Democratic  administration  will  ever  attempt  to  protect  them  in  their 
political  rights  ?  Tilden  may  promise,  but,  like  Buchanan,  he  mil 
creep  behind  his  construction  of  the  Constitution.  If  the  freedmen 
quietly  relapse  into  their  former  state,  content  to  live  and  labor,  this 
may  be  granted  them  for  the  interest  of  their  employei*s  ;  but,  if  they 
indulge  in  the  aspirations  of  freemen,  if  they  exhibit  intelligence  and 
foresight,  if  they  even  become  leaders  of  a  few  ignorant  men,  or 
drink  at  the  fountains  of  knowledge,  this  will  be  the  occasion  of  their 
murder.  And  this,  fellow  citizens,  will. be  one  of  the  dangei-s  of  a 
Democratic  restoration. 

If  there  is  one  principle  to  which  the  Republican  party  has  been 
true  it  is  the  education  of  all  classes  and  conditions  of  men.     In  every 


556  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

State  and  community  where  its  influence  has  been  felt  the  schools  have 
been  advanced  and  improved.  We  freely  vote  millions  for  their  sup- 
port. JRelying  upon  the  intelligence  of  our  people  we  have  sought  to 
convey  that  intelligence  at  the  fountain-head.  And  so  in  this  South- 
ern question  we  have  sought  to  develop  a  solution  by  the  introduction 
of  schools.  Give  to  the  whole  population  of  the  South,  white  and 
black,  a  thorough  system  of  schools,  and  the  light  of  intelligence  will 
rapidly  dawn  upon  the  black  race,  and  the  flerce  prejudices  of  the 
white  race  will  be  lifted  like  a  cloud.  It  is  not  the  educated  whites 
that  murder  negroes  and  burn  down  cabins  and  school-houses.  Such 
men  as  Lamar  and  Gibson  deplore  as  much  as  we  can  the  atrocities  they 
can  not  deny.  It  is  the  young  men,  ignorant  because  they  have  no 
schools ;  idle  because  they  think  it  below  caste  for  a  white  man  to 
work ;  cruel  from  the  spectacle  of  slavery,  which  was  cruelty  intensi- 
fied ;  narrow-minded  because  they  really  think  a  feeble,  sparsely  popu- 
lated State  is  the  center  of  civilization  ;  unpatriotic  because  they  entered 
life  when  to  fight  their  country  was  patriotism ;  proud  because  their 
fathers  were  planters  and  owned  slaves.  These  men  may  be  sobered 
by  the  responsibilities  of  a  family  and  the  lapse  of  time.  Our  hope 
must  be  in  their  children  ;  in  a  policy  of  kindness  and  firmness  ;  of  ed- 
ucation and  development.  We  must  convince  them  that  to  enjoy  their 
own  rights  they  nmst  respect  the  rights  of  others  ;  and  I  believe  no 
gi-eater  injury  could  be  done  to  them  than,  by  the  restoration  of  the 
Democratic  party  to  power,  to  restore  them  to  their  former  control  and 
domination.  That  means  the  barbarism  of  an  uncontrolled  nile  over 
the  f  reedmen  ;  the  burning  of  school-houses ;  the  setting  back  in  their 
advance  to  new  ideas ;  the  arrest  of  all  emigration  ;  the  discouragement 
of  capital,  and  a  renewal  of  the  old  contests  between  the  Republican 
and  Democratic  parties  upon  the  color  line,  and  all  that  the  difference 
between  a  nation  and  a  confederacy  implies.  But  we  can  not  reason 
with  the  men  who  will  gain  power  by  the  success  of  the  Democratic 
party.  It  is  the  Northern  Democrat,  who  was  patriotic  during  the  war, 
whose  judgment  I  invoke  when  I  point  out  to  him  the  dangers  of  the 
restoration  of  the  Democrats  to  power  in  the  National  Government. 

And  who  would  be  willing  to  tnist  the  Democratic  party  to  protect 
the  public  schools  from  the  sure  and  dangerous  attack  upon  them  by  a 
great  and  growing  church  which  now  openly,  boldly,  demands  sectarian 
schools  and  a  division  of  the  school  fund  for  tlieii'  support  ?  This  cloud, 
no  larger  than  a  man's  hand,  is  sure  to  enlarge  and  extend  until  the 
whole  heavens  shall  be  darkened  with  its  wrath.  The  Catholic  people 
are  taught  to  believe  that  our  schools  are  godless  because  we  can  not 
allow  any  particular  form  of  worship  to  be  used  in  them.  They  are 
public  schools,  maintained  by  taxation,  to  which  all  children  are  in- 
vited, and  where  no  favor  is  shown  to  Catholic  or  Protestant,  poor  or 
rich,  white  or  black.  The  pupils  are  the  children  of  the  country,  soon 
to  be  its  masters,  and  their  education  is  the  safety  of  the  State.  But 
the  Catholic  priesthood  insists  upon  a  separate,  sectarian  education  of 
Catholic  children.  We  can  not  deny  their  right  to  maintain  such 
schools  as  they  will,  though  such  a  policy  is  a  violation  of  the  spirit  of 
our  fundamental  law  which  requires  the   separation  of   Church  and 


DANGERS  OF  EESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     557 

State.  Education  is  the  process  of  molding  citizens,  and  all  experi- 
ence proves  that  it  should  be  free  from  sectarian  influence.  Still,  if 
they  will  insist  on  an  anti-Republican  policy,  we  demand  that  it  shall 
be  conducted  at  their  expense  and  not  at  ours.  Upon  this  question  the 
Republic^an  party  does  now,  and  ever  will,  speak  with  no  uncertain 
sound.  I  appeal  to  your  judgment  whether  the  Democratic  party  can 
be  trusted  on  this  question.  Read  its  history  in  New  York.  Mark  the 
hesitation  of  its  leaders.  The  proposed  amendment  to  the  Constitution 
to  secure  our  schools  from  sectarian  influence  was  clogged  by  the  Dem- 
ocratic House  with  provisions  that  utterly  nullify  it,  and  when  this 
great  issue  comes  squarely  before  you  the  Republican  party  will  occupy 
the  most  advanced  position  in  favor  of  free  schools  for  all — secular  ed- 
ucation by  the  State  and  religious  instruction  by  the  family ;  and  the 
Democratic  party  will  be  lagging  behind,  afraid  to  oppose  us,  but  with 
one  eye  on  the  Catholic  vote  and  one  hand  extended  to  the  Catholic 
priesthood. 

And  now,  fellow  citizens,  let  us  inquire  upon  what  principle  or 
policy  it  is  proposed  to  restore  the  Democratic  party  to  power.  I  have 
said  in  the  Senate,  and  I  now  repeat  it  to  you,  that  the  Democratic 
party  does  not  now  dare  to  present  a  single  issue  upon  which  it  has 
stood  since  the  foundation  of  the  Republican  party ;  not  one.  These 
issues  have  been  as  numerous  as  the  years  that  have  passed.  They 
have  been  by  far  the  most  important  issues  that  have  arisen  since  the 
framing  of  the  Constitution.  However  trifling  may  be  the  ordinary 
run  of  political  contests,  no  one  can  question  that  the  contests  between 
the  Republican  and  Democratic  parties  have  involved  the  fate  of  our 
country  ;  they  have  tested  the  very  foundations  of  our  institutions,  and 
have  spread  their  influence  over  the  whole  world,  and  will  influence 
future  ages.  ,We  have  been  engaged  in  no  holiday  work.  The  war 
still  looms  up  behind  us,  like  a  mountain  in  the  skies.  Our  right  to 
wage  it,  our  measures  of  finance,  our  organization  of  the  annies,  the 
abolition  of  slavery,  and  the  reconstruction  of  revolted  States,  with  the 
infinite  number  of  collateral  questions,  once  fiercely  disputed  but  now 
almost  forgotten — all  are  settled,  and  by  the  Republican  party.  At 
every  step  in  this  history  we  met  and  overcame  the  opposition  of  the 
Democratic  party,  and  now  we  can  proudly  appeal  to  our  old  adver- 
saries to  say  if  what  has  been  done  has  not  been  wisely  done.  You 
must  all  admit  that  there  must  be  something  great  in  a  political  organi- 
zation that  has  been  able  to  achieve  what  Webster  hoped  for ;  that  did 
what  all  the  world  thought  could  not  be  done,  and  newsstands  before 
you  justified  by  the  acquiescence  of  its  old  adversaries.  The  Demo- 
cratic National  Convention,  in  the  second  and  chief  j)lank  of  its  plat- 
form, ratifies  and  approves  what  we  have  done  against  Democratic  op- 
position, and  now  formally  enters  its  confession  of  approval  of  the  dis- 
tinctive element  of  our  faith. 

For  the  Democracy  of  the  whole  country,  we  do  here  reaffirm  our  faith  in  the 
permarftnce  of  the  Federal  Union,  our  devotion  to  the  Constitution  of  the  United 
States,  with  its  amendments  universally  accepted  as  a  final  settlement  of  the  con- 
troversies that  engendered  civil  war,  and  do  record  our  steadfast  confidence  in  the 
perpetuity  of  republican  self-government. 


558  SPEECHES  AND  EEPORTS  OF  JOHN"  SHERMAN. 

In  the  absolute  acquiescence  in  the  will  of  the  majority — the  vital  principle  of 
republics ;  in  the  supremacy  of  the  civil  over  the  military  authority ;  in  the  totaj 
separation  of  Church  and  State  for  the  sake  alike  of  civil  and  religious  freedom  ;  in 
the  equality  of  all  citizens  before  just  laws  of  their  own  enactment;  in  the  liberty 
of  individual  conduct  unvexed  by  sumptuary  laws;  in  the  faithful  education  of  the 
rising  generation,  that  they  may  preserve,  enjoy,  and  transmit  these  best  conditions 
of  human  happiness  and  hope,  we  behold  the  noblest  products  of  a  hundred  years 
of  changeful  history. 

This  is  a  RepiTblican  resolution.  How  strangely  it  sounds  in  a 
Democratic  platform  !  It  covers  the  vital  questions  of  the  war ;  it 
acknowledges  the  integrity  of  the  Union  so  fiercely  assailed  ;  it  acqui- 
esces in  the  will  of  the  majority ;  the  abolition  of  slavery ;  the  consti- 
tutional amendments  ;  the  equality  of  all  citizens  ;  the  separation  of 
Church  and  State.  These  principles  are  those  which  we  have  main- 
tained in  bloody  war,  and  now  they  acquiesce  in  them.  But  will  they 
enforce  them  ?  We  know  they  will  not.  The  only  danger  that  threat- 
ens these  great  safeguards  is  in  and  from  the  Democratic  party.  It 
can  not  be  trusted  to  enforce  one  of  them.  There  are  some  more  re- 
cent questions,  which  have  not  been  embraced  in  this  confession  of 
acquiescence,  and  these  are  the  election  laws,  the  enforcement  laws, 
and  the  resumption  law,  each  of  which  provoked  its  violent  opposition, 
but  is  quietly  ignored  cv  evaded,  and  will  come  again  before  us. 

The  election  law  grew  out  of  the  wholesale  fraud  in  the  presiden- 
tial election  of  1868,  by  which  the  vote  of  the  great  State  of  New 
York  was  counted  for  Horatio  Seymour  for  President  instead  of  for 
General  Grant.  That  election  was  made  the  subject  of  a  Congressional 
investigation,  and  the  fraud  was  established  by  overwhelming  proof. 
In  the  single  month  of  October,  1868,  more  than  41,000  naturalization 
certificates  were  issued  in  the  city  of  New  York,  or  more  than  four 
times  the  average  number  of  previous  years,  and  nearly  three  times 
the  largest  number  in  any  previous  year.  This  was  mainly  the  work 
of  two  corrupt  and  infamous  Democratic  judges,  McCunn  and  Bar- 
nard. In  a  single  day  McCunn  issued  955  certificates.  These  certifi- 
cates were  distributed  in  several  counties,  but  mainly  in  New  York. 
They  were  procured  from  the  Supreme  Court  for  fictitious  names  and 
delivered  without  cost  to  aliens  and  citizens  to  enable  them  to  register 
and  vote  as  "  repeaters."  The  evidence  conclusively  shows  that  on  the 
days  of  registration  and  election  bands  of  men  ranged  over  the  city  of 
New  York,  registering  and  voting  on  assumed  and  fictitious  names. 
These  gangs  of  repeaters  were  protected  by  the  police  force  of  the 
city.  But  the  special  feature  of  this  infamous  conspiracy  against  the 
elective  franchise  to  which  I  wish  now  to  call  your  attention  is  the  plan 
adopted  by  the  great  leaders  of  the  Democratic  party  in  New  York  to 
cheat  the  jieople  of  that  State,  so  that,  if  repeating  and  fraudulent  vot- 
ing did  not  suffice,  the  deficiency  could  be  made  up  by  stuffing  the  bal- 
lot-boxes with  tickets  never  voted  and  by  falsifying  the  returns. 

Immediately  preceding  the  election  in  November,  1868,  A.  Oakey 
Hall,  the  Secretary  of  the  Democratic  State  Committee,  and  shortly 
after  Mayor  of  New  York,  issued  a  secret  circular  and  sent  it  to  the 
chairman  of  every  county  Democratic  organization  in  the  State. 


DANGEKS  OF  EESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     559 

private  and  strictly  confidential. 

Rooms  of  the  Democratic  State  Committee, 
Odob&r  27,  1868. 

My  Dear  Sir  :  Please  at  once  to  communicate  with  some  reliable  person  in 
three  or  four  principal  towns  and  in  each  city  of  your  county,  and  request  him  (ex- 
penses duly  arranged  for  this  end)  to  telegraph  to  William  M.  Tweed,  Tammany 
Hall,  at  the  minute  of  closing  the  polls,  not  waiting  for  the  count,  such  person's 
estimate  of  the  vote. 

Let  the  telegraph  be  as  follows  : 

''  This  town  will  show  a  Democratic  gain  (or  loss)  over  last  year  of  (number)." 
Or  this  one  is  sufficiently  certain:  "  This  town  will  give  a  Republican  (or  Demo- 
cratic) majority  of ." 

There  is,  of  course,  an  important  object  to  be  obtained  by  a  simultaneous  trans- 
mission at  the  hour  of  the  closing  of  the  polls,  but  no  longer  waiting.  Opportunity 
can  be  taken  of  the  usual  half-hour  lull  in  telegraphic  communications  over  lines 
before  actual  results  begin  to  be  declared,  and  before  the  Associated  Press  absorb 
the  telegraph  with  returns  and  interfere  with  individual  messages ;  and  give  orders 
to  watch  carefully  the  count. 

Samuel  J.  Tilden,  Chairman. 

Governor  Tilden  denies  that  lie  signed  or  authorized  this  circular. 
If  so,  Hall  and  Tweed,  of  Tammany  Hall,  forged  his  signature  and  as- 
sumed his  acquiescence ;  but  if  he  denounced  this  forgery  and  the  re- 
sults of  it,  I  have  never  heard  of  it.  Horace  Greeley  declared  him 
responsible  for  it  before  God  and  man.  This  secret  circular  was  re- 
sponded to  by  more  than  two  hundred  telegrams.  But,  while  there  was 
this  haste  to  get  the  country  vote,  that  in  the  city  was  purposely  de- 
laj^ed,  while  a  conspiracy  was  arranged  to  enable  the  canvassers  at  each 
polling  place  to  change  Republican  tickets  for  Democratic  tickets  or  to 
stuiF  the  ballot-boxes,  adding  Democratic  tickets,  and  having  them 
counted  accordingly ;  and  this  after  they  had  secured,  on  Governor 
Tilden's  name  and  secret  circular,  information  as  to  how  many  fraudulent 
votes  were  needed  to  rob  the  peo]3le  of  New  York  of  their  choice  for 
President  and  Governor.  The  disgusting  details  of  this  conspiracy 
and  of  its  complete  success  are  given  in  the  testimony  taken  before  the 
Congressional  Committee,  and  are  stated  in  the  report  of  its  chairman, 
Judge  Lawrence,  of  Ohio.     He  saj^s  : 

When  all  these  tests  unite  in  proving  the  same  result,  corroborated  by  undis- 
puted facts,  showing  great  frauds,  the  conclusion  becomes  irresistible  that  at  least 
25,000  fraudulent  votes  were  cast  in  New  York  City  at  the  election  in  November. 

Every  one  of  these  fraudulent  votes  was  a  Democratic  vote,  cast  for 
Horatio  Seymour  for  President  and  for  John  T,  Hoffman  for  Gover- 
nor ;  and  with  all  these  frauds  the  majority  counted  in  their  favor  in 
the  State  was  only  10,000  in  a  vote  of  850,000. 

This  now  undisputed  crime  gave  rise  to  the  election  laws  passed  by 
Congress.  These  laws  were  resisted  at  every  stage  by  the  Democratic 
party.  Many  a  weary  night  session  we  held  to  pass  them.  Their  re- 
sistance to  these  laws  was  second  only  to  their  opposition  to  the  consti- 
tutional amendments.  At  the  recent  session  the  House  of  Representa- 
tives passed  in  one  of  the  appropriation  bills  an  amendment  repealing 
the  election  laws,  and  the  Republican  Senate  would  have  gladly  ac- 
cepted the  issue  ;  but  the  Democratic  caucus  withdrew  the  anieudmentj 


560  SPEECHES   AND   EEPORTS   OF  JOHN   SHERMAN. 

and  these  laws  still  stand  to  guard  the  approaching  election.  But  the 
Democratic  party  has  not  made  and  dare  not  make  an  issue  upon  them. 

Another  long  struggle  between  the  two  parties  was  over  the  passage 
of  the  law  to  enforce  the  constitutional  amendments,  and  to  secure 
equal  rights  to  all  citizens.  In  the  resolution  I  read  to  you  they  acqui- 
esce in  the  amendments,  but  carefully  avoid  all  mention  of  the  enforce- 
ment acts.  This  is  easily  explained  by  the  fact  that  the  Democratic 
leaders  have  placed  a  construction  upon  the  amendments  that  will,  if 
accepted,  nullify  and  destroy  them,  and  invalidate  all  acts  to  enforce 
them.  Under  a  Democratic  administration  the  f  reedman  can  not  assert 
his  civil  rights  or  his  right  to  vote  unless  the  State  shall  deny  or  abridge 
it.  In  that  event  only  they  tell  us  can  Congress  interfere  by  appropri- 
ate legislation.  A  citizen,  a  mob,  a  city,  or  a  county  may  deny  the 
freedman  the  right  to  vote,  and  Congress  is  powerless  to  protect  him. 
Such  is  their  construction  of  the  amendments,  and,  if  adopted,  terror, 
violence,  fraud,  and  murder  can  deprive  negroes  of  all  civil  rights  if 
only  the  State  is  silent.  The  Republican  party,  how^ever,  insists  that 
Congress  may  enforce  the  constitutional  amendments  not  only  against 
the  laws  of  a  State,  but  against  every  person,  mob,  or  corporation  that 
denies  a  citizen  his  right  or  deprives  him  of  it.  And  this  vital  issue  is 
concealed  and  covered  up  in  the  Democratic  platform.  There  is  not 
one  word  in  it  about  protection  to  citizens  in  equal  rights.  The  Demo- 
crats acquiesce  in  the  amendments  as  they  construe  them,  but  give  no 
assurance  or  promise  that  they  will  enforce  them  by  appropriate  legis- 
lation. If  they  succeed,  and  the  negro  is  deprived  by  fraud  and  vio- 
lence of  his  civil  rights,  as  he  will  be,  they  wnll  say  "  the  State  does  not 
deny  or  abridge  your  rights,  and  therefore  Congress  can  not  interfere." 
But  the  State  will  be  neutral.  It  will  not  punish  a  violation  of  civil 
rights ;  and  thus  the  freedmen,  bound  hand  and  foot  by  this  Demo- 
cratic construction,  will  be  surrendered  to  the  tender  mercies  of  the 
Ku-Klux  and  White  Leagues,  who  are  as  safe  from  punishment  under 
State  laws  for  killing  negroes  as  for  planting  potatoes. 

JS^ow,  on  this  vital  question  the  Republican  platform  rings  out  like 
a  bell. 

This  is  the  third  resolution  : 

3.  The  permanent  pacification  of  the  southern  section  of  the  Union  and  the  com- 
plete protection  of  its  citizens  in  the  free  enjoyment  of  all  their  rights  are  duties  to 
which  the  Republican  party  stands  sacredly  pledged.  The  power  to  provide  for  the 
enforcement  of  the  principles  embodied  in  the  recent  constitutional  amendments  is 
in  the  Congress  of  the  United  States,  and  we  declare  it  to  be  the  solemn  obligation 
of  the  Legislative  and  Executive  departments  of  the  Government  to  put  into  imme- 
diate and  vigorous  use  all  their  constitutional  powers  for  removing  any  just  causes 
of  discontent  on  the  part  of  any  class,  and  for  securing  to  every  American  citizen 
complete  liberty  and  exact  equality  in  the  exercise  of  all  civil,  political,  and  private 
rights.  To  this  end  we  imperatively  demand  a  Congress  and  a  chief  Executive  whose 
courage  and  fidelity  to  these  duties  shall  not  falter  until  these  results  are  placed  be- 
yond dispute  or  recall. 

The  letters  of  acceptance  of  General  Hayes  and  Mr.  Wheeler  are 
clear  and  strong  to  the  same  effect,  w^hile  Tilden  and  Hendricks  talk 
about  reforming  everything  else  than  outrage  and  murder  in  the  South- 
ern States.     The  only  reference  made  to  either  of  them  in  their  letters 


DANGEES  OF  RESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     561 

of  acceptance  is  the  general  phrase  used  by  Mr,  Tilden,  that  if  he  is 
elected  he  will  exercise  the  powers  which  the  laws  and  the  Constitution 
give  him  to  protect  all  citizens,  whatever  their  former  condition,  and 
this  expressly  reserves  to  him,  though  without  committal  to  it,  the  right 
to  adopt  the  construction  of  the  Constitution  held  by  the  Democratic 
party  that  these  enforcement  acts  are  null  and  void.  He  occupies  pre- 
cisely the  position  of  Mr.  Buchanan,  who  said  he  was  oj^posed  to  seces- 
sion, but  had  no  power  to  prevent  it.  So  Mr.  Tilden  will  be  in  favor 
of  equal  rights,  but  will  have  no  power  to  protect  citizens  in  their  en- 
jo}Tuent  of  them.  A  reference  to  the  Constitution  in  this  connection 
implies  his  doubt  of  the  power  under  the  Constitution  to  enforce 
equal  rights.  A  man  must  be  blind  or  foolish  who  will  intrust  to  such 
men  the  lives  and  liberties  of  millions  of  freedmen. 

There  is  another  law  passed  by  the  Eepublican  party  against  the 
united  votes  of  all  the  Democrats  in  Congress,  upon  which  they  have 
not  and  dare  not  make  a  manly  issue,  and  that  is  the  resumption  act. 
Last  year  the  whole  party  in  Ohio,  with  Governor  Allen  and  General 
Ewing  at  the  head,  rung  the  changes  upon  this  act.  It  was  the  raw 
head  and  bloody  bones  of  their  speeches  and  their  dreams ;  and  the 
chief  mission  of"  the  Democratic  party  was  to  repeal  it.  Not  a  vestige 
was  to  remain.  Many  an  honest  man  was  led  to  vote  the  Democratic 
ticket  by  an  erroneous  conception  of  the  resumption  act,  and  in  the 
faith  that  Governor  Allen  would  in  some  way  veto  or  repeal  it.  _  WeU, 
we  have  had  a  Democratic  ]^ational  Convention  at  St.  Louis,  and 
here  is  what  it  says  about  resumption  and  the  resumption  act : 

"We  denounce  the  financial  imbecility  and  immorality  of  that  party  which,  during 
eleven  years  of  peace,  has  made  no  advance  toward  resumption,  no  preparation  for 
resumption,  but  instead  has  obstructed  resumption  by  wasting  our  resources  and  ex- 
hausting all  our  surplus  income ;  and,  while  annually  professing  to  intend  a  speedy 
retm-n  to  specie  payments,  has  annually  enacted  fresh  hindrances  thereto.  As  such 
a  hindrance  we  denounce  the  resumption-day  clause  of  the  act  of  1875,  and  demand 
its  repeal. 

This  is  piping  in  a  lower  key.  The  Democratic  party  denounces 
us  for  making  no  advance  toward  resumption  during  eleven  years  of 
peace.  I  have  felt  that  we  ought  to  have  done  so,  and  from  my  official 
position  proposed  various  measures  to  that  end ;  but  I  encountered  dif- 
ferences of  opinion  in  the  Eepublican  party  as  to  the  method  of  re- 
sumption, and  a  decided  opposition  from  Democratic  Senators  to  every 
plan  proposed  and  to  the  thing  itself. 

Governor  Tilden,  in  his  letter  of  acceptance,  recommends  two  plans 
in  aid  of  resumption — one  to  gradually  accumulate  coin  in  the  Trea- 
sury, and  thus  create  an  increasing  reserve  for  resumption;  and  the 
other  to  either  pay  or  fund  into  bonds  such  surplus  greenbacks  as  the 
wants  of  business  may  fail  to  keep  in  use  at  par  with  coin.  "Well,  I 
have  proposed  both  plans  from  1870  to  this  day,  and  so  liave  General 
Grant  and  General  Bristow,  and  the  great  body  of  the  Eepublican 
party,  and  we  have  met  with  the  opposition  and  denunciation  of  the 
Democratic  party,  especially  here  in  Ohio,  where  Governor  Allen, 
General  Ewing,  General  Carey,  and  all  the  rest  have  fairly  torn  a 
passion  to  tatters  in  denouncing  us  for  "  hoarding  gold  "  and  "  con- 
36 


562  SPEECHES  AND  REPORTS  OF  JOHN"  SHERMAN. 

tracting  greenbacks."  And  now,  forsooth,  these  same  gentlemen  are 
hm-rahing  for  Tilden  and  the  very  measures  we  proposed,  and  passing 
judgment  against  us  for  hindering  resumption.  So  has  it  been,  fellow 
citizens,  with  the  Democratic  party  on  every  question  of  principle  or 
policy  for  sixteen  ^^ears.  But  Governor  Tilden  goes  one  step  further 
than  we  have  gone.  He  proposes  to  pay  interest  on  greenbacks  to 
make  them  desirable  as  an  investment,  and  thus  retire  the  whole  body 
of  them  from  circulation,  and  to  continue  the  banking  system,  the 
strength  of  which  he  exaggerates,  and  give  to  the  banks  the  entire 
circulation.  Exeunt  greenbacks,  enter  bank  notes,  says  Governor  Til- 
den. But  last  year  it  was  "  away  with  the  banks  ;  more  greenbacks." 
How  can  we  meet  such  adversaries  ?  "What  honor  or  consistency  is 
there  in  such  political  jugglery  ? 

But  they  say  that  the  Republican  party  wasted  our  resources  and 
exhausted  all  our  surplus  income  during  those  eleven  years.  Well,  I 
know  that  we  used  the  surplus  income  in  paying  off  vast  sums  of 
floating  war  claims  and  debts,  as  well  as  the  interest  on  the  debt,  and 
also  the  sum  of  $500,252,802.59  of  the  principal  of  the  bonded  debt. 
I  had  regarded  this  as  a  matter  of  pride,  not  of  reproach.  They  say 
we  h.*ve  annually  enacted  fresh  hindrances  to  resumption.  I  do  not 
know  what  they  mean  by  this.  I  thought  I  had  annually  tried  to  get 
some  measure  of  resumption  enacted,  but  had  annually  failed  for 
want  of  votes,  but  I  was  not  aware  of  the  passage  of  acts  to  hinder 
resumption.  But  the  meanest  and  worst  clause  of  this  demagogical 
resolution  is  the  last :  "  As  such  a  hindrance  we  denounce  the  resump- 
tion-day clause  of  the  act  of  1875,  and  we  demand  its  repeal."  It  is 
not  the  resumption  act  they  denounce — that  is  approved — ^but  the 
clause  promising  to  redeem  on  the  1st  day  of  January,  1879  ;  and  that, 
not  because  it  is  wrong  to  resume  then,  but  because  our  promise  to 
resume  then  is  a  "  hindrance  "  to  resumption.  It  can  not  be  a  hin- 
drance earlier  unless  we  ought  to  resume  sooner.  And  so  all  the 
Democratic  opposition  to  the  resumption  act  is  because  we  did  not 
resume  sooner.  A¥e  hindered  or  delayed  resumption.  And  upon  this 
plank  Governor  Allen  and  General  Ewing  are  to  ride  to  victory,  and 
the  Kepublican  party,  which  last  year  was  tried  before  the  people  of 
Ohio  because  we  thought  it  right  to  keep  up  a  steady  march  toward 
resumption,  is  now  to  be  tried  by  the  Democratic  party  of  the  United 
States  for  devising  a  "hindrance" — many  " hindrances,"  an  "annual 
hindrance  " — to  resumption.  Thereupon  the  Democrats  solemnly  de- 
mand that  the  special  "  hindrance,"  the  fixing  of  a  day  so  remote  as 
January  1,  1879,  shall  be  repealed,  so  that  we  may  resume  sooner. 

And  now  come  Tilden  and  Hendricks  with  their  letters  of  accept- 
ance, after  much  tribulation  and  delay,  and  demand  the  repeal  of  the 
date  of  resumption  for  opposite  reasons.  They  are  both  riding  the 
same  mule,  but  face  in  opposite  directions.  Governor  Hendricks  wrote 
to  his  friends  in  the  House  of  Representatives  that  "  a  repeal  of  the 
resumption  clause,  etc.,  in  almost  any  form,  T\"ill  elect  the  State  ticket 
and  carry  the  Indianapolis  district."  Governor  Tilden  writes  that  the 
same  clause  is  a  hindrance  to  resumption,  and  ad"vises  that  gold  be 
hoarded,  that  greenbacks  be  paid  or  funded,  converted  into  an  invest- 


DAiq"GERS  OF  RESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.      563 

ment  in  order  to  secure  resiimptioii ;  and  thus  these  two  candidates, 
after  long  incubation  and  much  Mdne-drinking,  go  before  the  people  on 
the  same  ticket  as  candidates  of  the  Democratic  party  for  President  and 
Yice-President  of  the  United  States.  Arid  the  Democratic  House  of 
Representatives,  after  being  in  session  eight  months,  after  these  letters 
are  received,  in  haste,  under  the  spur  of  Governor  Hendricks's  promise 
concerning  the  election  in  Indiana,  passes  a  bill,  not  to  repeal  the  re- 
sumption act,  but  containing  a  single  clause  fixing  a  date  without  any 
substitute  whatever.  They  dare  not  propose  either  plan  suggested  by 
Governor  Tilden,  but  with  opposite  constructions  of  what  they  have 
done  they  will  seek  to  pervert,  mislead,  and  deceive  you.  In  JS^ew 
York  they  will  talk  about  resuming  and  Governor  Tilden's  plan  of 
resummg.  In  Ohio  and  Indiana  they  will  say  they  repealed  the  re- 
sumption act,  so  far  as  they  could,  and  will  promise  more  greenbacks. 
Fellow  citizens,  if  there  is  anything  which  ought  to  settle  the  fate  of 
the  Democratic  party  with  quiet,  sensible  men,  who,  seeking  no  office 
or  favor,  wish  to  do  what  is  right,  it  is  the  position  of  the  Democratic 
party  on  the  resumption  act.  Proposing  no  measure  itself,  for  Gover- 
nor Tilden's  letter  is  the  first  suggestion  by  any  leading  Democrat  of  a 
plan  to  secure  resumption,  abusing  us  one  year  for  wishing  to  resume 
and  the  next  year  for  hindering  resumption  ;  having  no  fixed  principle  ; 
openly  surrendering  all  they  struggled  for  during  the  war ;  not  daring 
to  take  issue  with  us  on  the  enforcement  or  the  election  laws,  and  creep- 
ing through  the  most  ridiculously  small  hole  in  the  resumption  act,  the 
Democratic  party  of  to-day  stands  before  you  without  a  single  principle 
or  measure  that  it  dares  to  proclaim. 

Let  us  now  briefly-  state  what  this  resumption  law  is.  It  contains 
several  distinct  provisions,  but  all  of  them  are  intended  to  bring  up  our 
greenbacks  and  bank  notes  to  equality  with  coin.  The  first  section 
provides  for  the  substitution  of  silver  coin  for  fractional  currency.  The 
reason  of  this  was  that  this  small  paper  currency  was  very  perishable, 
lasting  only  on  an  average  one  year,  and  costing  $1,400,000  a  year,  or 
three  and  one  half  per  cent,  on  its  amount.  It  was  not  money,  but  a 
promise  to  pay  money,  while  silver  coin  is  money  of  intrinsic  value 
that  redeems  itself  and  costs  for  coining  only  one  and  one  half  per 
cent.,  and  when  coined  lasts  indefinitely.  We  were  able  to  buy  silver 
bullion  and  coin  it  at  a  considerable  profit,  and  thus  redeem  a  costly, 
perishable,  dirty  paper  money  with  bright,  shining,  silver  coin — real 
money.  This  part  of  the  resumption  act  is  executing  itself  daily,  and 
everybody  agrees  that  it  was  a  wise  provision.  Another  provision  of 
this  act  was  for  free  banking.  Before  that  the  organization  of  national 
banks  had  become  a  monopoly.  The  limit  of  the  law  had  been  reached 
and  no  new  bank  could  be  authorized.  The  resumption  act  threw  down 
all  barriers  to  an  increase  of  the  number  of  banks,  and  put  banking  on 
the  footing  of  all  other  trades  or  business.  All  persons  can  now  en- 
gage in  banking  on  equal  terms  ;  start  a  bank  or  wind  it  up  ;  issue  more 
circulation  or  retire  it  as  freely  as  any  storekeeper  or  fanner  conducts 
his  business.  This  simple  provision  destroyed  all  the  illusions  about 
banking.  We  hear  no  more  of  excessive  profits.  What  any  man  can 
do  at  any  time  men  are  not  so  anxious  to  do.     Under  free  banking  more 


564  SPEECHES  AXD  EEPOETS  OF  JOHN"  SHERMAN. 

banks  have  been  discontinued  than  organized ;  more  circulating  notes 
retired  than  issued.  This  is  regulated  by  what  our  Democratic  friends 
call  the  "  wants  and  demands  of  trade  and  business."  This  provision 
is  so  eminently  just  that  he  would  be  a  bold  man  who  should  propose 
to  repeal  it  and  restore  the  monopoly  of  banking. 

Another  provision  of  the  resumption  act  was  that  as  new  bank  notes 
were  issued  United  States  notes  should  be  retired  until  the  amount 
should  be  reduced  to  $300,000,000.  This  provision  has  been  criticised, 
but  in  practical  execution  has  proved  its  wisdom.  The  volume  of  Unit- 
ed States  notes  is  diminished  without  decreasmg  the  aggregate  of  cir- 
culating notes.  The  only  contraction  of  the  currency  is  through  the 
voluntary  payment  and  retirement  of  bank  notes  by  the  banks  that 
issue  them,  which  is  the  necessary  result  of  free  banking.  Under  these 
provisions  the  United  States  and  the  banks  are  gradually  preparing  for 
resumption,  and  their  notes  approaching  the  gold  standard.  United 
States  notes  are  now  redeemable  in  silver  coin,  and  could,  if  Congress 
would  permit  it,  be  redeemed  in  the  old  silver  dollar.  We  have  reached 
resumption  in  silver  coin  two  years  before  the  resumption  act  takes  full 
effect. 

The  next  provision  of  this  act  is  that  we  will  pay  in  coin  such 
United  States  notes  as  may  be  j^resented  on  and  after  January  1,  1879, 
more  than  two  years  hence.  Now,  whether  we  ought  to  do  that, 
whether  we  can  do  it,  and  whether,  when  we  do  it,  prosperity  will  at 
once  revive,  are  matters  about  which  there  is  great  diversity  of  opinion. 
You  know  my  opinion,  that  not  only  public  honor  but  the  interest  of 
every  citizen  demands  that  this  promise  be  faithfully  kept,  and  that  if 
we  adhere  firmly  to  it,  resumption  in  gold  and  silver  coin  will  come  as 
quickly,  surely,  and  imperceptibly  as  resumption  in  silver  coin  has 
come.  No  doubt  it  is  expedient  for  Congress  to  pass  acts  in  aid  of  re- 
sumption. I  have  often  urged  it  to  do  so.  It  may  be  that  Congress 
will  have  to  postpone  the  day  of  resumption,  and  if  so,  it  is  to  be  pre- 
sumed that  Congress  will  do  its  duty ;  but  to  make  our  notes  equal  to 
gold  and  silver  coin,  and  steadily  to  pursue  a  policy  to  that  end,  is  an 
obligation  of  national  honor  to  which  the  Eepublican  party  is  commit- 
ted, and  which  it  can  not  violate.  Another  and  the  only  remaining  pro- 
vision of  the  resumption  act  is  the  authority  it  grants  to  the  Secretary  of 
the  Treasury  to  issue  United  States  bonds  to  enable  him  to  prepare  for 
and  maintain  resumption.  I  do  no|  believe  it  will  be  necessary  to  use 
this  power  further  than  it  has  been  used,  for  the  surplus  revenue  and 
the  sinking  fund,  now  available  for  this  purpose,  will,  I  believe,  be 
sufficient ;  but,  at  all  events,  the  interest  on  the  bonds  that  are  needed 
for  this  purpose  is  insignificant,  compared  with  the  great  benefits  that 
will  result  from  the  resumption  of  specie  pajmients  in  this  country. 

I  do  not  now,  fellow  citizens,  enter  fully  upon  the  great  question  of 
the  restoration  of  the  old  silver  dollar  as  the  money  of  account,  for  it 
has  not  yet  assumed  a  party  aspect.  I  have  given  the  subject  tlie  most 
careful  consideration,  and  was  the  first  to  propose  the  recoining  of  the 
old  silver  dollar.  That  it  will  and  ought  to  aid  us  greatly  in  the  prob- 
lem of  specie  resumption,  I  have  no  doubt.  But  there  are  connected 
with  the  issue  of  this  dollar  questions  about  which  there  is  and  will  be 


DANGERS  OF  EESTOEATIOIT  OF  DEMOCRATIC  PARTY  TO  POWER.     565 

a  wide  diversity  of  opinion — liow  rapidly  it  can  be  coined ;  how  far  it 
shall  be  made  a  legal  tender ;  the  purposes  to  which  it  shall  be  applied, 
whether  to  the  redemption  of  the  greenbacks  or  the  increase  of  our 
currency ;  whether  its  effect  will  be  to  demonetize  gold  and  what  its 
true  relation  to  gold  is.  All  these  are  questions  a  wise  man  will  con- 
sider fully  before  deciding. 

I  was  a  member  of  the  Conference  Committee  of  the  two  Houses 
on  the  silver  bill.  I  am  not  at  liberty  to  state  what  occurred,  except 
as  is  shown  by  the  action  of  the  two  Houses.  Both  Houses  were  in 
favor  of  issuing  the  old  dollar — the  dollar  in  legal  existence  since  1792, 
containing  412^  grains,  and  only  demonetized  in  1873,  when  it  was 
worth  two  per  cent,  more  than  the  gold  dollar.  It  was  then  and  for 
twenty  years  had  been  issued  only  for  export,  and  was  not  in  circula- 
tion. Still,  it  was  a  legal  standard  of  value  as  well  as  gold  and  always 
had  been,  and  it  was  the  right  of  any  debtor  to  pay  in  silver  dollars 
as  well  as  gold  dollars.  It  was  his  legal  option.  The  relative  value 
of  the  two  metals  had  often  varied  before,  and  still  the  right  remained 
to  the  debtor  to  pay  in  either  dollar,  and  therefore  in  the  cheaper  dol- 
lar. The  mere  disuse  of  the  coinage  of  the  silver  dollar  could  not  and 
ought  not  to  affect  preexisting  contracts.  And  now,  when  all  our 
domestic  contracts  have  been  based  upon  depreciated  paper  money, 
made  a  legal  tender  for  all  debts,  public  and  private,  except  customs 
duties  and  interest  of  the  public  debt,  it  would  seem  not  only  legal  but 
right  in  the  broadest  sense  of  the  word  that  we  should  avail  ourselves 
of  the  rapid  and  remarkable  fall  of  silver  bullion  to  recoin  the  old  silver 
coins,  including  the  old  silver  dollar,  the  oldest  of  our  coins,  and  with 
them  pay  our  depreciated  notes,  and  thus  restore  the  old  coin  standard. 
I  believe  a  decided  majority  of  both  Houses  were  in  favor  of  this  pol- 
icy, but  its  execution  is  a  work  of  time.  There  is  a  limit  to  our  abil- 
ity to  coin  silver  pieces,  and  mints  can  not  be  improvised  in  a  year. 
We  therefore  provided  for  all  the  silver  coin  that  can  possibly  be 
coined  at  the  mints  of  the  United  States,  Avorked  to  their  utmost 
capacity,  until  July,  1878.  So  far  we  agreed.  And  we  could  have 
agreed  upon  recoining  the  old  silver  dollar ;  but  whether  it  ought  to 
be  received  for  customs  duties,  now  payable  in  gold,  or  be  paid  out  for 
interest  on  the  public  debt,  we  could  not  agree.  We  concluded,  there- 
fore, that  as  it  could  not  be  coined  for  more  than  a  year,  to  organize  a 
commission,  composed  of  members  of  both  Houses  and  of  experts  in 
coinage  and  exchange,  with  a  view  to  collect  and  report  the  fullest 
information  possible.  Thus  the  question  of  the  old  silver  dollar  is 
postponed  until  next  winter,  when  it  may  be  decided  with  all  the 
lights  that  discussion  may  throw  upon  it.  I  know  that  it  can  be  and 
ought  to  be  made  an  instrument  of  resumption  as  well  as  a  vast  relief 
to  all  our  industrial  classes.  These  questions  will  be  decided  by  the 
Republican  party  as  all  the  great  questions  of  the  past  sixteen  years 
have  been  decided,  so  as  to  advance  the  general  interests  of  the  people. 
The  Democratic  party,  as  usual,  will  denounce  what  we  do,  then  hesi- 
tate, then  acquiesce,  and  then  approve. 

And  now,  fellow  citizens,  after  a  statement  of  the  principal  sub- 
jects that  have  been  before  us,  and  after  showing  you  that  upon  all 


566  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

tlie  questions  of  tlie  war  and  growing  out  of  tlie  war  the  Democratic 
party  has  confessed  its  errors  ;  that  upon  the  vital  topics,  protection  to 
all  in  the  exercise  of  equal  rights,  the  purity  of  elections,  and  specie 
payments,  its  position  is  either  cowardly,  evasive,  uncertain,  or  radi- 
cally wi'ong  ;  and  that  it  does  now  dare  to  stand  before  the  people  on 
any  question,  measure,  or  issue  advocated  by  it  as  a  party  within  twenty 
years,  I  come  directly  to  examine  the  ground  and  pretenses  upon 
which  it  enters  the  canvass.  Retrenchment  and  reform  !  Good  words. 
They  ought  to  be  the  aspiration  and  purpose  of  every  candidate  for 
presidential  honors  and  of  every  man  in  \  ublic  life.  The  question  is 
not  whether  we  favor  retrenchment  and  reform,  but  whether  Tilden 
and  Hendricks  are  more  likely  to  retrench  and  reform  than  Hayes  and 
Wheeler ;  whether  the  Democratic  party  with  its  followers  and  sup- 
porters, though  condemned  by  you  in  every  contest  for  years,  is  more 
likely  to  retrench  and  reform  than  the  men  composing  the  Republican 
party,  who  have  fought  your  battles  and  guided  your  counsels  with 
honor  and  safety  for  many  years.  It  is  not  the  cry  of  an  opposition 
hungry  for  public  plunder  that  must  decide  this  question.  Nor  is  it 
the  crime  or  perfidy  of  a  few  men  who  now  and  then  in  the  vast 
operations  of  a  government  may  have  proved  false  to  their  public 
trusts.  It  is  the  general  tendencies  and  acts  of  a  party  that  must  de- 
termine its  claims  to  public  confidence.  And  on  this  broad  issue  I 
defy  a  comparison  between  the  Republican  and  Democratic  parties. 

The  administration  of  General  Grant,  now  about  to  expire,  has  been 
arraigned  by  a  House  of  Representatives  armed  with  all  the  powers  of 
investigation.  Conscious  that  their  only  hope  lay  in  Ijlackening  the 
character  and  conduct  of  General  Grant  and  his  appointees,  the  Demo- 
cratic majority  organized  the  whole  House  into  committees  of  investi- 
gation. They  have  explored  every  department,  bureau,  and  oifice  of 
the  Government.  They  have  called  as  T^dtnesses  penitentiary  convicts 
and  the  insane  from  the  hospital.  They  have  seized  telegrams  by  the 
wholesale  and  examined  private  books  and  papers.  They  have  sought 
to  disclose  Cabinet  secrets  which  have  always  been  held  inviolable. 
They  have  employed  detectives  to  watch  accused  persons.  They  have 
examined  in  secret  witnesses  without  number  to  sustain  secret  accusa- 
tions, and  have  given  the  accused  no  benefit  of  cross-examination,  no 
opportunity  to  face  their  accusers,  no  specification  of  the  charges  against 
them  ;  and  what  is  the  result  of  it  all  'i  A  Secretary  of  War,  always  a 
Democrat,  appointed  l)y  General  Grant  in  a  spirit  of  hberality  and  for 
his  distinguished  military  services,  is  found  to  have  appointed  a  post 
trader  from  personal  considerations,  and  to  have  shared  in  his  profits. 
In  this  foray  they  found  that  a  prominent  Democrat  of  Ohio  received 
a  large  portion  of  a  claim  tliat  ought  never  to  have  been  paid.  They 
examined  the  Secretary  of  the  N'avy  for  eight  months,  ajid  then  re- 
ferred the  case  to  another  committee  to  report  whether  or  not  he  had 
been  guilty  of  a  technical  violation  of  law.  They  denounced  the  Credit 
Mobilier,  and  found  that  their  candidate  for  President  was  its  confi- 
dential lawyer.  In  nearly  every  case  they  have  failed  to  disclose  the 
testimony,  and  have  only  recently  ordered  it  to  be  printed,  so  as  to 
throw  it  into  the  canvass  without  any  opportunity  for  explanation. 


DANGERS  OF  RESTORATION  OF  DEMOCRATIC  PARTY  TO  POWER.     567 

So  far  as  we  know  tliere  has  been  nothing  disclosed  that  will  coin- 
pare  with  the  offenses  of  Floyd,  Thompson,  and  Toucey,  three  mem- 
bers of  the  last  Democratic  Cabinet.  They  started  for  a  campaign  of 
scandal,  and  they  have  made  no  investigation  where  they  have  not  run 
against  Democratic  misconduct.  In  the  mean  time  General  Grant  and 
General  Bristow  exposed  and  punished  the  whisky  ring.  No  guilty 
man  has  been  shielded  by  the  Republican  party.  Here  and  there  time 
has  shown  that  bad  appointments  have  been  made  and  officers  have 
betrayed  tlieir  trusts ;  but  when  we  come  to  compare  the  general  re- 
sults under  Republican  administrations,  we  find  that  there  has  been  a 
far  smaller  proportion  of  fraud,  peculation,  and  embezzlement  than 
during  any  Democratic  administration.  I  have  here  an  official  table 
showing  the  receipts  and  disbursements  of  the  Government  from  Janu- 
ary 1.  1834,  to  June  30,  1875,  exhibiting  also  the  amount  of  defalca- 
tions and  the  ratio  of  losses  per  $1,000  arranged  in  periods  of  four  years 
each.  This  table  shows  that  during  the  last  term  of  General  Jackson 
the  loss  on  money  received  was  $10.17  for  each  $1,000  ;  in  Yan  Buren's 
time  $3.01  for  each  $1,000  ;  in  John  Tyler's  time  $3.68  for  each  $1.000 ; 
in  Buchanain's  time  62  cents  for  each  $1,000  ;  in  Mr.  Lincoln's  time  10 
cents  for  each  $1,000 ;  in  Andrew  Johnson's  time  63  cents  for  each 
$1,000 ;  in  General  Grant's  first  term  37  cents  for  each  $1,000,  and  in 
General  Grant's  second  term  22  cents  for  each  $1,000.  In  the  general 
aggregate  the  loss  from  January  1,  1834,  to  June  30,  1861,  nearly  all 
which  was  during  Democratic  administrations,  was  $2.09  for  each 
$1,000 ;  and  from  July  1,  1861,  to  June  30,  1875,  during  Republican 
administrations,  the  loss  was  34  cents  for  each  $1,000. 

This  table  also  shows  that  in  the  disbursement  of  public  money 
during  General  Jackson's  second  term  the  loss  by  defalcation  was 
$10.55  for  each  $1,000 ;  in  Mr.  Yan  Buren's  term  it  was  $21.15  for 
each  $1,000;  in  John  Tyler's  term  it  ^  was  $10.37  for  each  $1,000;  in 
Mr.  Buchanan's  term  it  was  $6.98  for  each  $1,000 ;  in  Mr.  Lincoln's 
time,  or  during  the  war,  it  was  $1.41  for  each  $1,000;  in  Johnson's 
time  it  was  48  cents  in  each  $1,000 ;  in  General  Grant's  first  term  it 
was  40  cents  for  each  $1,000,  and  in  General  Grant's  second  term  it 
was  26  cents  for  each  $1,000.  During  the  whole  period  from  January 
1,  1834,  tq  June  30,  1861,  the  loss  in  disbursing  public  money,  under 
Democratic  .administrations,  was  $9.02  for  each  $1,000;  and  from  July 
1,  1861,  to  June  30,  1875,  under  Republican  administrations,  it  was  78 
cents  for  each  $1,000.  This  table  shows  at  once  the  relative  fidelity 
of  Democratic  and  Republican  administrations  in  the  collection  and 
disbursement  of  public  money,  as  shown  by  actual  results  and  by  au- 
thority that  can  not  be  questioned  or  denied.  In  the  light  of  these 
facts,  how  absurd  it  is  to  appeal  to  you  to  restore  the  Democratic  party 
to  power  again  in  order  to  secure  honesty  and  fidehty  in  public  officials  ! 

But  they  tell  you  they  are  for  retrenchment.  They  tell  you  what 
a  Democratic  House  has  done  to  reduce  expenditures.  Well,  this 
House  has  slashed  away  at  a  great  rate.  They  have  refused  appropria- 
tions for  the  most  necessary  wants  of  the  Government.  They  reduced 
the  pay  of  clerks  fixed  by  law  by  a  Democratic  Congress  in  1854,  when 
the  pay  was  gold.     They  reduced  the  pay  of  foreign  ministers  and 


568  SPEECHES  AND  KEPOKTS  OF  JOHN  SHERMAN. 

consuls  established  in  1856,  Thej  reduced  in  a  wild,  hap-hazard  way 
the  sums  approj)riated  for  public  buildings  in  process  of  erection,  and 
for  the  support  of  courts  regulated  by  law,  and  next  winter  they  will 
be  compelled  to  make  them  good  by  deficiency  bills.  It  is  the  old 
demagogical  trick  of  a  party  in  opposition  wishing  to  gain  power. 

The  devil  was  sick,  the  devil  a  monk  would  be ; 
The  devil  was  well,  the  devil  a  monk  was  he. 

It  is  easy  to  cut  down  appropriations,  but  this  is  not  always  retrench- 
ment. A  man  might  retrench  both  bread  and  meat,  but  he  would 
starve.  True  retrenchment  consists  in  producing  the  best  results  with 
the  smallest  sum  necessary.  I  do  not  say  the  Republican  l^arty  has 
always  done  this,  for  I  know  it  has  not ;  but  it  has  come  nearer  to  it 
than  the  wild  slashing  and  cutting  down  of  appropriations  by  the 
Democratic  House. 

Ever  since  the  war,  by  which  our  appropriations  have  been  increased 
manifold,  the  reduction  of  expenditures  has  steadily  gone  on,  except 
for  two  years,  wh6n  very  large  apjjropriations  were  made  for  public 
buildings  and  works  of  internal  improvement.  I  have  a  table  carefully 
prepared  in  the  Treasurv  Department  showing  that  the  ciurent  expen- 
ditures for  1875  were  $84,773,762,  in  currency,  and  in  1860  $63,025,- 
788,  in  gold,  for  similar  purposes.  Considering  the  increase  of  popula- 
tion and  the  depreciation  of  the  currency,  our  regular  expenditures  not 
growing  out  of  the  war  are  less  per  capita  than  before  the  rebellion. 
But  the  great  body  of  our  expenditures  in  1875,  as  for  every  year  since 
the  war,  was  for  items  directly  caused  by  the  w^ar,  amounting  to  $189,- 
849,630,  such  as  interest  on  the  public  debt,  pensions,  claims,  and  the 
like,  a  detailed  statement  of  which  I  have  in  this  document,  and  all  of 
which  are  the  direct  result  of  the  war,  and  are  propei'ly  chargeable  to 
the  Democratic  party  as  the  cause  and  author  of  the  war.  And  in  the 
future  the  Repnblican  party  is  much  more  likely  to  reduce  these  items 
than  the  Democratic  party. 

And  as  to  the  cry  for  reform,  the  promise  of  which  is  the  burden 
of  the  Democratic  platform,  it  is  the  old  cry  of  ''  stop  thief."  The 
Democratic  party  has  neither  proposed  nor  accomplished  any  reform 
for  thirty  years.  The  reform  which  is  demanded  by  the  general  voice 
of  the  people — the  reformation  of  our  civil  service — depends  almost 
entirely  upon  the  President  and  heads  of  departments.  The  Constitu- 
tion invests  them  alone  with  the  appointing  power.  The  law  now  on 
the  statute  book  passed  by  a  Republican  administration  confers  all  pos- 
sible power  upon  these  officers  to  accomplish  this  reform.  You  have 
the  plain  promise  of  Governor  Hayes  in  his  letter  of  accej^tance  that 
he  will  bring  it  about,  and  his  promise  is  one  that  has  never  been  broken. 
All  hope  of  civil-service  reform  must  depend  upon  the  character,  ten- 
dencies, and  good  faith  of  the  President.  Contrast  Governor  Hayes 
and  Mr.  Tilden,  and  then  answer  to  your  consciences  which  of  them  is 
more  likely  to  secure  reform.  Mr.  Tilden  is  a  Kew  York  lawyer, 
trained  in  the  school  of  Van  Buren,  who  was  the  author  of  the  policy 
that  "  to  the  victors  belong  the  spoils,"  His  political  life  has  been 
spent  in  the  city  of  K ew  York,  and  his  business  life  has  been  devoted 


DANGERS  OF  RESTORATIOI^"  OF  DEMOCRATIC  PARTY  TO  POWER.     569 

to  the  wrecking  of  corporations.  Would  any  sensible  man  look  to  him, 
followed,  as  he  will  be,  by  a  horde  of  hnnejry  oflfice-seekers,  to  effect  a 
reform  of  the  civil  service  ?  Governor  Hayes  was  reared  in  the  more 
modest  and  I  think  purer  school  of  Ohio  politics,  and  his  professional 
Kfe  has  been  spent  in  punishing  crime  and  securing  justice  to  the  poor 
and  defenseless.  His  administration  as  Governor  of  Ohio  has  been  dis- 
tinguished by  wise  management  of  our  benevolent  and  reformatory  in- 
stitutions, in  which  he  knew  no  politics,  and  won  the  respect  and  esteem 
of  his  political  adversaries.  You  know  him  well,  and  appreciate  his 
purity  and  firmness  of  character.  He  is  now  solemnly  pledged  to  re- 
form the  civil  service,  and  by  an  act  of  self-abnegation  he  gives  you  the 
highest  assurance  that  he  will  execute  that  pledge,  for  he  assures  you  in 
advance  that  he  will  in  no  event  be  a  candidate  for  a  second  term. 
What  motive  can  he  have  to  give  you  other  than  an  honest  and  pure 
administration  ? 

And  there  is  one  other  test  which,  when  applied  to  these  candidates, 
should  influence  the  mind  of  every  patriotic  citizen.  Mr.  Tilden  is  the 
reputed  author  of  the  "  submission  "  plank  in  the  Democratic  platform 
of  1864:.  If  he  distinguished  himself  by  any  act  of  patriotism  in  the 
time  that  tried  men's  souls,  I  never  heard  of  it.  Governor  Hayes  was 
distinguished  for  gallant  services  in  the  army,  and  bears  honorable 
wounds.  Every  page  of  his  life  is  marked  by  ardent  patriotism.  No 
consideration  for  his  own  interest  or  safety  could  induce  him  to  leave 
his  duty  in  the  field  until  the  surrender  of  every  rebel  army.  Surely, 
when  choosing  a  Chief  Magistrate,  this  is  the  highest  test  of  merit. 

Let  us,  my  Republican  friends,  enter  this  contest  with  firm  confi- 
dence that  the  people  will  do  what  is  best.  Let  us  again  gather  around 
the  Republican  party,  proud  of  all  the  good  it  has  done,  anxious  to  re- 
pair its  errors,  determined  to  advance  its  standard,  to  keep  fully  abreast 
of  the  noblest  and  highest  aspirations  and  purposes  of  our  age,  and  to 
crown  the  full  measure  of  our  political  life  by  protecting  all  men  in  equal 
rights,  by  redeeming  all  pledges  of  the  public  faith,  and  by  securing  all 
reforms  attainable  by  poor  human  nature.  Our  candidates  are  honest, 
honorable  men,  unblemished  in  name  or  reputation :  of  that  class  and 
type  of  men  called  "  self-made,"  because  their  high  position  is  the  nat- 
ural result  of  their  own  life's  lal)or  and  character,  without  the  aid  of 
wealth  or  superior  advantages.  With  such  a  party  and  such  candidates 
we  may  boldly  enter  the  lists  with  absolute  assm*ance  that  our  success 
will  advance  the  interests  and  honor  of  our  country. 


570  SPEECHES  AND  KEPORTS  OF  JOHN  SHERMAN. 

r 

CONDUCT  OF  PUBLIC  AFFAIKS. 

AT  MANSFIELD,    OHIO,   AUGUST  17,   1877. 

Fellow  Citizens,  Ladies  and  Gentlemen  :  Tlie  kindly  words  of 
welcome  uttered  by  my  friend  and  associate  of  many  years  move  me 
beyond  expression.  Tliey  recall  to  me  the  memory  of  the  early  time 
when  I  came  to  Mansfield,  then  a  scattered  hamlet  of  about  1,100  in- 
habitants, without  pavements  or  any  of  the  modern  conveniences  of 
cities  and  towns.  As  Mr.  Fledges  has  told  you,  very  many  of  those  I 
then  met  here  are  dead  and  gone.  I  was  a  boy  then.  A  generation 
has  passed  away,  and  the  sons  of  those  I  met  then  as  citizens  of  Rich- 
land County  now  fill  places  of  tnist  and  responsibility.  I  have  every 
reason  in  the  world  for  being  strongly  attached  to  this  town  of  Mans- 
field. You  have  always  been  kind  to  me.  Here  I  studied  law,  here  I 
practiced  my  profession  for  several  years,  here  I  married  my  wife,  a 
native  of  your  town,  here  I  have  lived  ever  since,  and  when  the  time 
comes,  when  this  mortal  coil  shall  be  shuffled  oif,  here,  probal)ly,  will 
my  body  rest  w^ith  your  fathers.  But  pardon  me,  fellow  citizens,  if, 
under  the  kind  w^orcls  of  welcome  of  your  spokesman,  my  old  and  hon- 
ored friend,  Mi\  Hedges,  I  have  forgotten  that  we  are  here  not  merely 
to  exchange  courtesies,  but  to  discuss  grave  matters  of  far  more  impor- 
tance than  the  life  or  memories  of  an  individual. 

I  am  here  to-night  to  state  to  you  my  views  of  what  has  thus  far 
been  done  by  the  present  Administration  in  its  conduct  of  public 
affairs.  I  wish  it  distinctly  understood  that  in  doing  so  I  speak  for 
myself  alone,  as  a  citizen  of  Ohio,  to  you  my  fellow  citizens  and  neigh- 
bors, to  whom  I  am  under  the  highest  obligations  of  gratitude  and 
duty.  The  President  authorized  me  to  say  one  thing,  and  one  thing 
only,  for  him,  and  in  his  name,  and  that  is  that  all  reports  that  impute 
to  him  any  participation  whatever  in  the  nomination  of  candidates  on 
3^our  State  ticket,  or  any  desire  or  purpose  to  influence  in  any  way  the 
senatorial  contest  in  Ohio,  are  utterly  groundless.  These  are  your 
matters,  and  I  can  assure  you  for  him  that  he  has  not  intei-posed  and 
will  not  interpose  in  any  such  contest  between  political  friends.  For 
anything  else  I  say  to  you,  neither  he  nor  my  old  and  honored  friend-, 
Judge  West,  is  responsible. 

You  all  know  that  I  am  now,  and  have  been,  warmly  attached  to 
the  Republican  party.  I  believe  in  its  principles  and  honor  its  work. 
With  my  strong  convictions  I  could  not  conceal  my  partisan  bias,  or 
my  earnest  hope  for  the  success  of  the  Republican  party ;  but  the  sub- 
jects of  which  I  intend  to  speak  to  you  to-night  will  not  lead  me  to  say 
much  of  former  political  struggles,  or  to  fight  our  old  battles  over 
again,  but  chiefly  to  discuss  the  actual  administrative  cpiestions  of  the 
day  as  they  have  arisen  since  the  fourth  of  March  last,  in  all  of  which 
you  are  alike  interested  whether  you  may  call  yourselves  Republicans 
or  Democrats.  On  these  questions  I  wish  to  appeal  fairly  to  the  can- 
dor and  good  judgment  of  honest  men  of  both  parties,  asking  for  the 


CONDUCT  OF  PUBLIC  AFFAIRS.  5T1 

administration  of  President  Hayes  only  tliat  considerate  eliarity  of 
judgment  whicli  must  be  extended  to  all  human  agents. 

When  he  was  inaugurated  he  found  thirty-six  States  in  the  full  and 
uncontested  exercise  of  all  the  powers  of  States  in  the  Union.  In  two 
States  only  were  there  contests  as  to  who  was  Governor.  Both  con- 
tests had  existed  from  January  to  March,  1877,  while  General  Grant 
was  President.  In  South  Carolina,  Governor  Chamberlain  claimed  to 
have  been  elected  on  the  Republican  ticket,  and  General  Hampton  on 
the  Democratic  ticket.  The  President  is  not  made  the  judge  of  who 
is  elected  Governor  of  a  State,  and  an  attempt  to  exercise  such  a  power 
would  be  a  plain  act  of  usurpation.  The  constitution  of  South  Caro- 
lina is  much  like  that  of  Ohio.  The  count  of  the  vote  was  to  be  made 
by  the  General  Assembly  of  the  State.  Unfortunately  for  Chamber- 
lain a  controlling  question  in  the  contest  had  been  decided  against  him 
by  a  Eepublican  court,  and  he  was  kept  in  possession  of  the  State  House 
only  by  the  actual  presence  of  United  States  trooj^s  in  the  building. 
He  had  appealed  again  and  again  to  President  Grant  to  recognize  him 
as  Governor  and  to  give  him  the  aid  of  Federal  troops  to  enforce  his 
claim,  which  General  Grant  had  refused,  seeking  only  to  preserve  the 
public  peace.  When  President  Hayes  was  inaugurated  both  contestants 
were  called  to  Washington  ;  both  were  patiently  heard,  and  the  ques- 
tions presented  were  patiently  and  carefully  examined.  The  President 
held  that  a  case  was  not  presented  in  which,  under  the  Constitution 
and  the  laws,  he  was  justified  in  using  the  army  of  the  United  States 
in  deciding  a  pm-ely  local  election  contest. 

The  soldiers  and  bayonets  of  the  United  States  were  then  withdrawn 
from  the  State  House — not  from  the  State,  nor  the  capital  of  the  State, 
but  from  the  building  in  which  the  Legislature,  which  alone  could  law- 
fully decide  this  contest,  must  meet.  This  was  all  that  was  done  by 
the  President,  and  Governor  Chamberlain,  without  further  contesting 
his  claim,  abandoned  it  and  left  the  State.  I  say  to  you  now  that, 
strongly  as  I  desired  the  success  of  Governor  Chamberlain  and  the  Re- 
publican party  in  South  Carolina,  I  believe  that  the  President  had  not 
the  shadow  of  a  right  to  interpose  the  power  of  the  army  in  this  con- 
test, and  his  attempt  to  do  so  would  have  been  rash  and  abortive  as 
well  as  without  legal  nght. 

The  case  of  Louisiana  was  far  more  difficult.  The  local  returning 
ofiicers  of  that  State  had,  after  a  full  examination,  certified  to  the  elec- 
tion of  the  Legislature,  with  a  Republican  majority  in  both  Houses. 
This  had  been  done  by  excluding  from  their  return  the  votes  of  certain 
parishes  and  counties  wherein  intimidation,  violence,  and  fraud  had 
prevailed  to  an  extent  suflicient  to  change  the  result  of  the  election.  I 
was  present,  at  the  request  of  General  Grant,  to  witness  the  count,  and 
I  assure  you,  as  I  have  said  ofiicially,  that  the  proof  of  this  intimidation, 
violence,  and  fraud,  extending  to  murder,  cruelty,  and  outrage  in  every 
form,  was  absolutely  conclusive,  showing  a  degree  of  violence  in  some 
of  those  parishes  that  was  more  revolting  and  barbarous  than  an}i;liing 
I  could  conceive  of.  It  was  plain  that  the  retm'uing  officers  had  the 
legal  right  to  pass  upon  and  certify  in  the  first  instance  who  were  elect- 
ed members  of  the  Legislature,  and  that  they  were  justified  by  the  evi- 


572  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

dence  in  excluding  bulldozed  parishes ;  but  it  was  equally  clear  that 
their  return  was  not  conclusive  upon  the  members  elected,  and  that 
each  House  had  the  constitutional  right  to  pass  upon  the  returns,  and 
the  election  of  its  members,  and  to  set  aside  the  action  of  the  Return- 
ing Board.  The  two  Houses,  when  organized,  had  also  the  power  to 
pass  upon  the  returns  of  the  election  of  Governor,  and  they  alone  and 
no  one  else  possessed  that  power.  ISTeither  the  President  of  the  United 
States  nor  the  Returning  Board  has  any  power  or  right  to  pass  upon 
the  election  of  Governor.  And  here  the  difficulty  in  the  Louisiana  case 
commences. 

Governor  Packard  contends  that  a  majority  of  the  two  Houses,  as 
duly  returned,  did  pass  upon  the  election  of  Governor,  and  did  return 
that  he  was  duly  elected,  but  this  was  stoutly  denied  by  Governor 
I^ichols.  This  vital  point  was  strongly  asserted  and  denied  by  the  ad- 
verse parties,  and  the  Legislature  of  Louisiana  divided  iuto  two  hostile 
bodies,  holding  separate  sessions,  each  asserting  its  legal  power,  and  de- 
nouncing the  other  as  rebels  and  traitors.  Governor  Packard  and  his 
Legislature  called  upon  President  Grant  for  the  aid  of  the  army  to  put 
down  insurrection  and  domestic  violence ;  and  here  I  confess  that  if  I 
had  been  President  instead  of  General  Grant,  I  would  have  recognized 
Packard  and  sustained  him  with  the  full  power  of  the  General  Govern- 
ment. My  intense  feeling  caused  by  the  atrocities  in  Louisiana  may 
have  unduly  influenced  me.  But  General  Grant  did  not  think  this  was 
his  duty.  I  do  not  criticise  his  action,  but  only  state  the  facts.  He 
would  only  maintain  the  peace.  He  would  not  recognize  Packard  as 
Governor,  but  I  know  what  is  now  an  open  secret,  that  it  was  the 
strong  bent  of  his  mind,  and  at  one  time  it  was  his  decision,  to  with- 
draw the  trooj^s,  recognize  I^ichols,  and  thus  end  this  dangerous  con- 
test.    He  did  not  do  this,  but  simply  kept  the  peace. 

But  during  these  two  months  the  whole  condition  of  affairs  had 
slowly  changed  in  Louisiana.  The  government  of  Packard  had  dwin- 
dled away  until  it  had  scarcely  a  shadow  of  strength  or  authorit}^,  ex- 
cept at  the  State  House,  where  it  was  upheld  by  Federal  bayonets. 
The  government  of  Nichols  had  extended  its  authority  over  the  State, 
and  was  in  full  existence  as  the  de  facto  government  of  Louisiana,  sup- 
ported by  the  great  body  of  the  white  men  and  nearly  all  the  wealth 
and  intelligence  of  the  State,  and  by  the  tired  acquiescence  of  a  large 
portion  of  the  colored  people,  some  of  whom  deserted  his  Legislature 
and  entered  that  of  Governor  Nichols.  The  delay  and  hesitation  of 
General  Grant  had  been  fatal  to  Packard,  and  when  Hayes  became 
President  the  practical  question  was  greatly  changed.  One  thing  was 
clear,  that  a  Legislature  had  been  duly  elected  in  the  November  pre- 
vious, and  was  then  in  existence,  though  separated  into  two  parts.  If 
the  members  lawfully  elected  could  be  convened,  they  could  decide 
the  question  of  who  was  Governor  alone  without  the  intervention  of 
troops,  and  their  decision  could  be  supported,  if  necessary,  by  the  Gen- 
eral Government. 

The  most  careful  consideration  was  given  to  this  question.  Days 
and  weeks  of  anxious  deliberation  were  given  to  it  by  the  President 
and  his  Cabinet.     But  one  way  seemed  open  for  a  peaceful  solution. 


CONDUCT  OF  PUBLIC  AFFAIRS.  573 

and  that  was  to  gather,  if  jiossible,  a  single  Legislature  which  could  be 
recognized  as  the  depositary  of  the  representative  will  of  the  people  of 
Louisiana.  If  this  could  be  done  it  had  the  unquestioned  right  to  de- 
cide who  had  been  elected  Governor,  and  all  other  questions  would 
settle  themselves.  To  aid  in  this  object,  a  commission  of  the  most 
eminent  men,  high  in  position,  from  diiferent  States  and  distinguished 
for  judicial  impartiality,  was  selected,  and  the  result  is  known  to  all. 
They  went  to  Louisiana,  and,  with  great  difficulty,  brought  together 
these  hostile  Legislatures,  which  met,  organized,  promptly  settled  the 
question  in  dispute  in  favor  of  the  government  of  Nichols,  and  thus 
put  an  end  to  this  most  dangerous  controversy.  'No  other  change  was 
made,  no  other  act  done  except  that,  when  the  solution  was  almost  ac- 
complished, the  few  troops  who  had  occupied  the  State  House  were 
withdrawn  a  few  squares  away,  to  their  barracks.  Thus,  in  this  peaceful 
appeal  to  the  Legislature  of  Louisiana,  was  settled  this  controversy, 
wdiich  endangered  the  peace  and  safety  not  only  of  that  State,  but  of 
the  whole  people  of  the  United  States.  This  is  the  sum  and  substance 
of  all  that  was  done  in  pursuance  of  the  Southern  policy,  as  it  is  called, 
of  the  President.  Perhaps  I  ought  to  state  that  his  policy  has  a  broader 
motive  than  a  mere  settlement  of  a  local  election  contest.  It  seeks  to 
bring  the  North  and  South  again  into  conditions  of  harmony  and  fra- 
ternity, and,  by  a  frank  appeal  to  the  generous  impulses  and  patriotic 
feeling  of  all  classes  of  people  in  the  South,  to  secure  not  only  peace 
among  themselves  but  the  equal  protection  of  the  laws,  and  security  in 
the  enjoyment  of  political  and  civil  rights  to  all. 

No  doubt  the  result  in  Louisiana  caused  some  disappointment  to 
many  Republicans  throughout  the  United  States,  who  deeply  sympa- 
thized with  their  Pepublican  brethren  in  that  State.  I  did,  and  do, 
share  in  that  feeling,  and  yet  I  feel  and  know  that  every  step  taken  by 
President  Hayes  was  rigiit,  in  strict  accordance  with  his  constitutional 
duty,  and  from  the  highest  motives  of  patriotism.  Some  are  foolish 
enough  to  talk  of  his  abandoning  the  colored  people  and  their  constitu- 
tional rights.  President  Hayes,  from  his  early  manliood,  has  been  an 
antislavery  man,  whose  life  was  imperiled  on  many  battle-fields  in  the 
great  cause  of  liberty.  Lie  sympathizes  more  with  the  colored  people, 
and  will  do  more  for  their  equal  rights,  than  those  who  falsely  accuse 
him ;  and  I  believe  this  day  that  the  policy  he  has  adopted  will  do  more 
to  secure  the  full,  practical  enforcement  of  those  rights  than  the  em- 
ployment of  an  army  tenfold  as  great  as  the  army  of  the  United  States. 

The  equal  rights  of  the  freedmen  are  now  placed  on  the  same  con- 
stitutional footing  as  ours.  Unarmed,  unorganized,  defenseless,  and 
ignorant  as  they  have  been,  they  can  realize  the  full  enjoyment  of  their 
rights  only  when  education  dispels  their  ignorance  and  teaches  them 
how  to  defend  their  rights.  The  policy  of  the  President  will  make  it 
possible  in  the  Gulf  States  for  them  to  secure  the  aid  and  sympathy  of 
an  influential  portion  of  the  whites.  It  has  also  secured  to  them  the 
pledge  of  honor  of  the  local  State  governments  to  protect  every  man 
in  full  equal  civil  and  political  rights.  No  people  can  be  more  inter- 
ested in  observing  this  pledge  than  the  governing  white  men  of  the 
South.     The  ultimate  safety  of  their  life  and  property  depends  upon 


5Y4  SPEECHES  AKD  REPORTS  OF  JOHJT  SHERMAN. 

it.  The  people  of  the  United  States  will  hold  them  to  it,  and  now, 
when  by  this  policy  of  President  Hayes  they  have  what  they  call  home 
rule,  upon  their  self-proclaimed  promise  that  home  rule  means  the  equal 
protection  in  equal  civil  and  jDolitical  rights  of  all,  they  have  to  fulfill 
this  promise  or  stand  dishonored  before  the  civilized  world.  The 
amendments  to  the  Constitution  will  stand,  and  they  will  be  enforced ; 
but  it  is  far  better  this  shall  be  done  by  the  consent  of  all,  in  the  in- 
terest of  all,  than  by  the  agency  of  an  army.  Constitutional  rights  can 
be  secured  only  by  legal  means.  The  whole  Southern  policy  of  Presi- 
dent Hayes  is  to  secure  constitutional  rights  not  only  by  legal  but  by 
peaceful  means,  by  an  appeal  to  the  interest  and  honor  of  all  classes ; 
but,  if  this  fails,  if  I  do  not  greatly  err,  he  will  not  be  wanting  in  the 
exercise  of  the  full  powers  of  his  great  ofiice  to  secure  the  civil  rights 
of  all,  without  distinction  of  race,  color,  or  condition. 

Another  question  of  administration  promptly  received  the  attention 
of  President  Hayes.  It  has  been  the  standing  promise  of  both  politi- 
cal parties  for  fifty  years  to  secure  civil-service  reform,  without  defining 
what  was  meant  by  this  phrase,  while  old  abuses  grew  and  new  abuses 
sprang  up  by  which  the  civil  service  of  the  Government  was  largely 
made  an  agency  to  control  the  action  of  parties,  and  to  influence  the 
rising  or  falling  fortunes  of  politicians,  while  the  public  service  was  a 
secondary  consideration.  Upon  this  subject  the  President  had  clear 
and  radical  views,  and  he  has  not  hesitated,  against  the  opposition  of 
many  in  his  own  party,  to  enter  upon  the  reform  of  these  abuses. 
Whether  true  or  not,  it  has  been  believed  that  the  Custom-Honse  in 
'New  York,  the  great  agency  for  the  collection  of  the  duties  on  im- 
ported goods,  was  especially  open  to  these  abuses,  and  that  the  public 
interests  were  sacrificed  to  the  advancement  of  the  political  and  pecu- 
niary interests  of  individuals.  The  President  directed  that  a  thorough 
investigation,  free  from  political  bias,  should'  be  made  there  by  inde- 
pendent men  of  both  parties,  aimed  not  at  individuals,  but  at  the  sys- 
tem itself.  It  was  in  the  progress  of  this  investigation  that  he  issued 
the  order  about  which  so  much  complaint  has  been  made.     Here  it  is : 

No  officer  should  be  required  or  permitted  to  take  part  in  the  management  of 
political  organizations,  caucuses,  conventions,  or  election  campaigns.  Their  right  to 
vote  and  express  their  views  on  public  questions,  either  orally  or  through  the  press, 
is  not  denied,  provided  it  does  not  interfere  with  the  discharge  of  their  official  du- 
ties. No  assessment  for  political  purposes  on  officers  or  subordinates  sliould  be 
allowed. 

This  order  was  promptly  denounced  as  an  invasion  of  the  rights  of 
individuals,  and  its  meaning  and  purport  were  grossly  perverted.  In  the 
Western  country,  where  our  political  movements  are  more  free  from  the 
influence  of  office-holders,  there  has  always  been  a  strong  popular  feel- 
ing against  the  interposition  of  machine  politicians.  The  people  here 
are  abundantly  able,  without  the  aid  of  office-holders,  to  manage  their 
conventions,  caucuses,  and  organizations,  and  it  has  always  been  a  matter 
of  complaint  even  in  our  counties  and  cities  whenever  rings  of  office- 
holders were  formed,  who  were  offensively  officious  in  controlling 
popular  conventions,  and,  as  a  rule,  such  things  have  not  been  tolerated. 
But  in  the  great  cities  the  office-holders  are  selected,  not  only  to  be  ac- 


CONDUCT  OF  PUBLIC  AFFAIRS.  575 

tive  at  the  election  or  to  influence  tlie  election,  but  to  run  the  maclii- 
neiy  by  which  nominations  are  made,  and  caucuses  held.  They  select 
delegates  to  conventions,  pay  their  expenses,  control  their  votes,  appear 
as  president,  secretary,  or  guiding  genius  of  the  convention,  and  thus 
the  whole  machinery  of  politics  is  an  office-holding  monopoly,  offensive 
to  the  mass  of  the  people,  and  tending  to  prevent  the  just  control  of 
political  movements  by  free,  unbiased  popular  opinion. 

It  was  this  abuse,  the  greatest  of  all,  at  which  the  President  struck 
directly.  The  President  has  not  objected,  and  never  did  object,  to  the 
most  active  men  being  appointed  to,  and  aspiring  for,  office.  He  would 
naturally  select  from  among  the  most  active  men  in  private  life  those 
who  are  to  hold  public  offices,  and,  other  things  being  equal,  would 
select  one  of  his  .own  party,  rather  than  one  of  the  adverse  party.  At 
all  events  that  is  my  own  view.  I  think  it  would  be  a  shade  dishonor- 
able for  a  man  to  seek  an  office  from  the  party  whose  success  and  prin- 
ciples he  opposed,  though  he  might  accept  an  office  tendered  to  him. 
It  is  natural  that,  in  selecting  men  for  office  from  the  great  political 
organizations  composed  of  large  masses  of  people,  friends  rather  than 
adversaries  should  be  selected.  But  there  are  occasions  when  the  party 
line  should  not  be  drawn,  and  in  all  cases  where  parties  put  up  bad 
men  it  is  the  first  bounden  duty  of  every  good  citizen  to  refuse  to  vote 
for  them,  and  thus  compel  the  selection  of  the  best  men  for  office.  But 
where  any  one  has  attained  office,  either  by  appointment  or  election,  he 
ought  not  to  consider  that  he  is,  therefore,  to  be  the  ruling  manager  of 
conventions  and  caucuses,  with  a  view  to  put  up  this  Republican  and 
put  down  another,  or  to  pull  down  this  Democrat  to  put  up  another. 
He  ought  to  hold  his  office  with  seemly  modesty,  leaving  it  to  the  peo- 
ple to  run  the  machinery  of  their  own  political  organizations.  There 
never  was  and  never  will  be  danger  in  our  system  that  the  necessary 
movements  of  the  people  need  the  guidance  of  paid  office-holders.  Of 
late  the  influence  of  office-holding  on  politics  has  grown  worse  and 
worse.  When,  eighteen  years  ago,  I  heard  a  prominent  member  of 
the  House  of  Kepresentatives  declare  that  it  cost  him  fifteen  thousand 
dollars  to  be  elected,  I  was  happy  to  respond  for  you  that  if  I  had 
spent  five  hundred  dollars  in  securing  my  election  1  should  have  been 
defeated,  and  I  can  say  in  your  presence,  for  you  know  it,  that  the  cus- 
tom then  prevailing  prevented  any  large  expenditure  of  money,  and 
that,  though  four  times  elected  to  Congress  in  this  district,  I  did  not, 
and  could  not,  without  danger  to  myself,  spend  any  considerable  sums 
on  my  election.  But  of  late  the  expenses  of  popular  elections  have  so 
increased  that  we  are  in  danger  of  the  very  evils  that  for  a  hundred 
years  disgraced  the  election  of  the  members  of  the  House  of  Commons, 
and  led  to  laws  of  the  greatest  severity  against  bribery  and  corruption. 

I  believe  in  the  order  of  the  President,  and  hope  he  will  stand  by 
it ;  and  if  he  adds  to  the  good  work  of  his  administration  the  breaking 
down  of  this  office-holding  officiousness  in  the  management  of  cam- 
paigns, this  running  of  caucuses  and  conventions  by  oifice-holders,  and 
forced  assessment  from  unwilling  office-holders  for  political  purposes, 
and  will  secure  to  the  people  a  free,  unbiased  control  of  their  primary 
movements  in  the  election  of  officers,  he  will  have  accomplished  a 


5Y6  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

work  second  only  in  importance  to  the  pacification  of  tlie  South.  The 
order  of  the  President  does  not  interfere  M^ith  the  right  of  any  officer 
to  vote  or  to  express  his  views  on  pubhc  questions,  either  orally  or 
through  the  press,  and  I,  at  your  invitation,  talk  to  you  to-day ;  but 
you  would  regard  it  as  offensive  if  I  should  undertake  to  manipulate 
your  conventions  to  secure  the  nomination  of  personal  friends,  or  inter- 
fere in  any  way  with  your  free  choice  in  popular  movements.  And 
this  is  all  that  the  order  of  President  Hayes  undertakes  to  prevent. 

I  come  now  to  speak  of  some  administrative  reforms  that  are 
usually  the  subject  of  demagogical  promises,  but  are  always  an  impera- 
tive duty,  w^hich  I  can  fairly  claim  has  been  faithfully  jDerformed  by 
this  administration.  The  expenses  of  the  Government  in  many 
branches  were  unnecessarily  large,  and  have  been  reduced  with  much 
advantage  to  you,  but  it  was  painful  to  make  the  reduction,  from  the 
necessity  of  discharging  a  large  number  of  employees.  This  has  been 
done  in  all  of  the  Departments,  but  mainly  in  the  Treasury  Depart- 
ment, which,  from  the  magnitude  of  its  operations,  employs  through- 
out the  United  States  about  twelve  thousand  persons.  In  one  bureau 
alone,  that  of  engraving  and  printing,  the  force  was  reduced  505  per- 
sons, making  an  annual  saving  of  $360,000. 

In  the  Kew  York  Custom-House  the  number  of  employees  has 
already  been  reduced  176,  making  a  saving  of  $255,020,  and  this  pro- 
cess has  not  yet  ended  at  that  port.  At  Baltimore  the  number  of 
employees  was  reduced  52,  and  the  amount  saved  was  $47,297.  In  the 
IS^ew  Orleans  Custom-House  the  number  of  employees  has  been  re- 
duced 87,  making  a  saving  of  $95,455.  In  San  Francisco  the  reduc- 
tion of  expense,  not  yet  completed,  is  estimated  to  amount  to  $73,440, 
in  Philadelphia  to  $56,750,  and  in  Boston  to  $122,740.  In  other  ports 
of  the  United  States  the  number  of  employees  has  been  reduced 
48,  making  a  saving  of  $47,154,  and  eight  appraisers,  at  ports  where 
their  services  are  no  longer  needed,  have  been  dispensed  with,  at  a 
saving  of  $23,500.  This  makes  a  reduction  in  the  customs  service 
since  the  4th  of  March,  1877,  of  $721,356  a  year.  This  process  will 
be  extended  to  all  of  the  Internal  Eevenue  officers  of  the  United 
States  with  a  very  large  saving  of  expense.  The  total  annual  reduc- 
tion made  thus  far  in  the  rents  paid  by  the  United  States  for  build- 
ings in  public  use  by  the  Treasury  Department  is  $58,852,  and  as 
leases  fall  in  this  reduction  will  be  largely  increased. 

Contracts  for  cutting  the  stone  for  several  of  the  larger  public 
buildings  w^ere  founded  ujjon  the  principle  of  the  Government  pay- 
ing to  the  contractors  the  cost  of  the  labor  and  material  employed  in 
the  cutting,  and  fifteen  per  cent,  added  thereto.  The  contract  for  the 
erection  of  the  building  for  the  use  of  the  State,  War,  and  l^avy  De- 
partments, w\as  so  changed  as  to  reduce  the  cost  more  than  $700,000. 
Contracts  for  the  supply  of  cut  granite,  for  the  Court-House  at  Phila- 
delphia and  the  Custom-House  at  Cincinnati,  have  been  modified  in 
such  a  manner  as  will  effect  a  saving  of  $450,000.  Similar  changes 
are  to  be  made  in  the  contracts  for  cut  stone  for  the  St.  Louis  Custom- 
House,  and  the  extension  of  the  Post-Office  and  Sub-Treasury  at  Bos- 
ton, which  will  doubtless  be  equally  favorable  to  the  Government. 


CONDUCT  OF  PUBLIC  AFFAIRS.  577 

A  still  more  dangerous  class  of  payments  from  the  Treasury  was  for 
old  claims,  pending  in  the  Treasury  Department,  many  of  them  founded 
u])on  ex  parte  testimony  and  believed  to  be  fraudulent.  Many  of  these 
have  been  suspended  or  rejected,  and  new  rules  in  regard  to  such  claims 
have  been  adopted,  which  will  save  to  the  Treasury  large  sums  of 
money,  and  I  hope  Congress  may  be  disposed  at  its  next  session  to 
revise  the  whole  mode  of  auditing  and  paying  them,  which  now,  in 
many  cases,  exposes  the  Government  to  open  and  glaring  fraud. 

I  have  cited  only  these  principal  cases  of  administrative  refonn, 
which  will  be  made  to  extend  to  every  branch  of  the  Government,  and, 
no  doubt,  will  receive  the  hearty  cooperation  of  Congress.  The  only 
rule  in  the  conduct  of  public  business  is  that  which  a  prudent  man 
would  adopt  in  his  own.  The  Government  ought  not  to  be  niggardly 
and  stingy  in  public  disbursements;  it  ought  to  receive  no  labor  or  ser- 
vice that  it  does  not  fairly  pay  for ;  but  a  waste  of  public  money  not 
only  puts  a  premium  on  office-holding,  but  demoralizes  all  who  are  en- 
gaged in  it.  A  close  and  careful  readjustment  of  the  civil  service  upon 
correct  business  principles  will  bring  our  national  expenditures  within 
the  amount  of  such  moderate  taxes  on  whisky,  tobacco,  and  beer,  and 
such  reasonably  moderate  duty  on  imported  goods,  as,  while  furnishing 
protection  to  our  own  industries,  will  not  crijjple  our  commerce  or  place 
our  industries  at  a  disadvantage  in  foreign  competition.  I  believe  the 
administration  is  perfectly  willing  to  share  with  Congress  in  the  work 
of  these  essential  reforms  in  our  civil  service. 

Much  the  largest  reduction  in  the  public  expenditure  has  been  ef- 
fected in  the  reduction  of  interest  on  the  public  debt.  The  great  body 
of  the  public  debt  is  now  payable  at  the  pleasure  of  the  United  States 
at  par  in  coin.  As  this  debt  now  bears  interest  at  six  per  cent.,  it  is 
manifest  that  if  money  can  be  borrowed  at  a  less  rate  the  old  bonds 
can  be  paid  off,  and  the  reduction  of  interest  lessens  to.  that  extent  the 
burden  of  the  debt.  Prior  to  the  1st  of  March  my  predecessor  had 
sold  fifty  millions  in  four  and  one  half  per  cent,  bonds  at  par  in  coin, 
the  proceeds  of  which  had  been  applied  to  the  redemption  of  six  per 
cent,  bonds.  Since  the  1st  of  March  there  have  been  sold,  under  the 
refunding  act,  $135,000,000  four  and  one  half  per  cent,  bonds,  and 
that  amount  of  six  per  cent,  bonds  has  been  paid  off  or  is  being  paid 
off,  and  canceled,  thus  saving  to  the  people  of  the  United  States  $2,- 
025,000  in  coin  for  this  year,'  and  each  year  hereafter. 

In  May  last  I  became  satisfied  that  the  credit  of  the  Government 
was  so  advanced,  and  the  money  market  so  favorable,  that  I  could  sell 
at  par  in  coin  bonds  of  the  United  States  bearing  interest  at  four  per 
cent,  per  annum,  and,  with  the  approval  of  the  President,  I  took  the 
responsibility  of  withdrawing  from  sale  one  hundred  millions  of  four 
and  one  half  per  cent,  bonds,  and  substituting  four  per  cent,  bonds. 
There  was  great  doubt,  among  bankers  and  business  men  here  and  in 
Europe,  of  the  al)ility  to  sell  these  bonds  at  par,  and  I  had  plenty  of 
advice  not  to  undertake  the  task.  Germany,  now  one  of  the  great 
powers  of  the  world,  had  recently  offered  her  four  per  cent,  bonds  at  a 
discount  of  more  than  five  per  cent.  The  Pussian  Government,  now 
under  the  stress  of  war,  was  selling  its  bonds  at  such  a  rate  that  they 
37 


578  SPEECHES  AXD  REPORTS  OF  JOHN  SHERMAN". 

yielded  over  eight  per  cent,  to  the  purchaser.  The  Portuguese  Govern- 
ment had  issued  a  three  per  cent,  loan  at  about  fifty  per  cent,  discount. 
Great  Britain,  the  highest  in  credit  of  all  the  great  nations,  had  sold 
her  three  per  cent,  consols  at  a  large  discount,  and  now,  although  they 
are  a  perpetual  annuity,  they  are  daily  quoted  at  from  ninety-four  to 
ninety-five  per  cent.  Still,  with  the  favorable  condition  of  the  money 
market,  with  industries  paralyzed  throughout  the  world,  with  money 
lyang  idle  in  great  hoards,  with  our  credit  untarnished,  with  our  nation 
confessedly  among  the  leading  powers  of  the  world,  and  with  our 
great  resources,  I  believed  that  the  public  interest  and  public  duty 
demanded  that  the  effort  to  sell  these  four  per  cent,  bonds  should  be 
made,  and  that  it  would  be  successful. 

The  great  national  loan  was  opened  by  popular  subscription  in  the 
United  States  on  the  16th  of  June,  and  within  thirty  days  afterward 
$67,600,000  were  taken  in  this  country  and  $10,200,000  in  Europe, 
making  $77,800,000  sold.  On  this  sum,  when  paid  and  applied  to  the 
payment  of  six  per  cent,  bonds,  there  will  be  an  annual  saving  to  the 
people  of  the  United  States  of  $1,556,000.  The  aggregate  saving  from 
both  classes  of  bonds  since  the  1st  of  March,  1877,  will  be  $3,581,000 
a  year  in  coin.  And  this  process  of  saving  has  just  commenced.  We 
may  confidently  hope  that,  if  no  adverse  legislation  shall  be  had  that 
will  injuriously  affect  the  public  credit,  the  entire  amount  of  the  pub- 
lic debt  bearing  interest  at  over  four  per  cent.,  now  amounting  to 
nearly  $1,700,000,000,  may,  as  it  becomes  redeemable,  be  converted  into 
bonds  bearing  not  exceeding  four  per  cent,  interest. 

And  now,  fellow  citizens,  this  brings  me  to  the  question  upon  which 
there  is  so  much  diversity  of  opinion,  so  many  strange  delusions,  and 
that  is,  the  question  of  specie  payments.  "What  do  we  mean  by  this 
phrase  ?  Is  it  that  we  are  to  have  no  paper  money  in  circulation  ?  If 
so  I  am  as  much  opposed  to  it  as  any  of  you.  Is  it  that  we  are  to  re- 
tire our  greenback  circiTlation  ?  If  so  I  am  opposed  to  it,  and  have 
often  so  said.  What  I  mean  by  specie  payments  is  simply  that  paper 
money  shall  be  made  equal  to  coin,  so  that  when  you  receive  it  it  will 
buy  as  much  beef,  corn,  or  clothing  as  coin. 

Now  the  importance  of  this  can  not  be  overestimated.  A  depre- 
ciated paper  money  cheats  and  robs  every  man  who  receives  it  of  a 
portion  of  the  reward  of  his  labor  or  production,  and  in  all  times  it 
has  been  treated  by  statesmen  as  one  of  the  greatest  evils  that  can  be- 
fall a  people.  There  are  times  when  such  money  is  unavoidable,  as 
during  war  or  great  public  calamity,  but  it  has  always  been  the  anxious 
care  of  statesmen  to  return  again  to  the  solid  standard,  coin.  There- 
fore it  is  that  specie  payments,  or  a  specie  standard,  is  pressed  by  the 
great  body  of  intelligent  men  who  study  these  questions  as  an  indis- 
pensable condition  of  steady  business  and  good  times. 

Most  of  you  will  agree  to  all  this,  and  will  differ  only  as  to  the 
mode  or  time ;  but  there  is  a  large  class  of  people  who  believe  that 
paper  can  be,  and  ought  to  be,  made  into  money  without  any  j)i'omise 
or  hope  of  redemption  ;  that  a  note  should  be  printed,  "  This  is  a  dol- 
lar," and  be  made  a  legal  tender.  I  regard  this  as  a  mild  form  of 
lunacy,  and  have  no  disposition  to  debate  with  men  who  indulge  in 


CONDUCT  OF  PUBLIC  AFFAIRS.  579 

such  delusions.  They  have  prevailed  to  some  extent  at  different  times 
in  all  countries,  but  their  life  has  been  brief,  and  they  have  ever 
shared  the  fate  of  other  popular  delusions.  Congress  will  never  enter- 
tain such  a  proposition,  and  if  it  should,  we  know  that  the  scheme 
would  not  stand  a  moment  before  tlie  Supreme  Court.  That  tribunal 
maintained  the  constitutionality  of  the  legal-tender  promise  to  pay  a 
dollar  only  by  a  divided  court,  and  on  the  ground  that  it  was  issued 
during  the  war,  in  the  nature  of  a  forced  loan,  to  be  redeemed  by  the 
payn;ent  of  a  real  dollar ;  that  is,  so  many  grains  of  silver  or  gold. 

I  therefore  dismiss  such  wild  theories,  and  speak  only  to  those  who 
are  willing  to  assume,  as  an  axiom  on  this  subject,  that  gold  and  silver, 
or  coined  money,  have  been  proved  by  all  human  experience  to  be  the 
best  possible  standards  of  value,  and  that  paper  money  is  simply  a 
promise  to  pay  such  coined  money,  and  should  be  made  and  kept  equal 
to  coined  money  by  being  convertible  into  it  on  demand. 

Now,  the  question  is  as  to  the  time  and  mode  by  which  this  may 
be  brought  about,  and  on  this  subject  no  man  should  be  dogmatic,  or 
stand  without  yielding  upon  a  plan  of  his  own,  but  every  man  should 
be  willing  to  give  and  take,  securing  the  best  expedient  that  public 
opinion  will  allow  to  be  adopted.  The  purpose  and  obligation  to  bring 
our  paper  money  to  the  standard  of  coin  have  been  over  and  over 
again  announced  by  acts  of  Congress  and  by  the  platforms  of  the  great 
political  parties  of  the  country.  If  resolutions  and  promises  would 
bring  about  specie  payments,  we  should  have  been  there  long  ago  ;  but 
the  diversity  of  opinion  as  to  the  mode  now — twelve  years  after  the 
close  of  the  war — still  leaves  our  paper  money  at  a  discount  of  five  per 
cent.  Until  this  is  removed  there  will  be  no  new  enterprises  involving 
great  sums,  no  active  industries,  but  money  will  lie  idle  and  watch  and 
wait  tlie  changes  that  may  be  made  before  we  reach  the  specie  standard. 

In  1S69  Congress  pledged  the  public  faith  that  the  United  States 
would  pay  gold  or  silver  dollars  for  United  States  notes.  Again,  in 
January,  1875,  after  more  than  a  year's  debate.  Congress  declared  that 
by  the  1st  of  January,  1879,  the  United  States  would  pay  its  notes  in 
coin.  The  Secretary  of  the  Treasury  is  expressly  required  to  prepare 
for,  and  maintain,  the  redemption  of  all  United  States  notes  presented 
at  the  Treasury  on  and  after  that  date,  and  for  that  purpose  he  is  au- 
thorized to  use  all  tlie  surplus  revenue,  and  to  sell  at  par  in  coin  bonds 
of  the  United  States  bearing  four,  four  and  one  half,  and  five  per  cent, 
interest.  It  is  this  law,  called  the  resumption  act,  now  so  much  dis- 
cussed in  the  papers,  that  imposes  upon  the  office  I  hold  most  difficult 
and  important  duties ;  and  without  replying  to  any  attacks  made  upon 
me,  I  am  anxious  to  submit  to  you,  personally,  what  I  have  done  and 
must  do  in  obedience  to  the  provisions  of  this  act.  It  is  said  that  the 
law  is  defective ;  but,  if  the  great  object  and  policy  of  the  law  are 
right,  the  machinery  of  the  law  could  easily  be  changed  by  Congress. 
That  resumption  can  be  secured  and  ought  to  be  secured  under  this 
law,  it  will  be  my  purpose  to  show  you,  and  I  shall  not  hesitate  to 
point  out  such  defects  in  the  law  as  have  occurred  to  me  in  execut- 
ing it. 

There  are  two  modes  of  resumption,  either  by  diminishing  the 


580  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

amount  of  notes  to  be  redeemed,  wliicli  is  commonly  called  a  contrac- 
tion of  the  currency,  or  by  the  accumulation  of  coin  in  the  Treasury,  to 
enable  the  Secretary  to  maintain  specie  payments.  The  one  practical 
defect  in  the  law  is,  that  the  Secretary  is  not  at  liberty  to  sell  bonds  of  the 
United,  States  for  United  States  notes,  but  must  sell  them  for  coin.  As 
coin  is  not  in  circulation  among  the  people,  he  is  practically  prohibited 
from  selling  bonds  to  the  people,  except  by  an  evasion  of  the  law  or 
through  private  parties.  Bonds  are  in  demand  and  can  readily  be  sold 
at  par  in  coin,  and  still  more  easily  at  par,  or  at  a  premium,  in  United 
States  notes.  The  process  of  selling  for  United  States  notes  would  not 
go  far  before  the  mere  fact  that  they  were  receivable  for  bonds  would 
bring  them  up  to  par  in  coin,  and  that  is  specie  payment. 

But  the  reason  of  the  refusal  of  Congress  to  grant  this  authority, 
often  asked  of  it,  was  that  it  would  contract  the  currency,  and  this  fear 
of  contraction  has  thus  far  prevented  Congress  from  granting  the 
easiest,  plainest,  and  surest  mode  of  resumption.  To  avoid  contraction, 
it  provided  that  national-bank  notes  might  be  issued  without  limit  as 
to  amount,  and  that,  when  issued.  United  States  notes  shotild  be  retired 
to  the  extent  of  four  fifths  of  the  bank  notes  issued.  This  was  the  only 
provision  for  redeeming  United  States  notes  that  Congress  made  or 
would  make,  and  this,  it  was  sujiposed,  would  reduce  the  United  States 
notes  to  $300,000,000  before  January  1,  1879.  The  actual  experiment 
only  proves  the  folly  of  the  cry  we  had  for  "  more  money,  more 
money." 

Here  was  free  banking,  a  free  and  almost  uniimited  right  to  every- 
body to  issue  more  money ;  but  unluckily  for  visionary  theorists,  it  was 
money  that  had  to  be  protected  by  the  deposit  of  securities,  not  wild- 
cat money,  but  money  that  people  could  sleep  upon  without  fear  of  the 
bank's  breaking.  The  result  is  that  under  free  banking  the  issue  of 
circulation  has  been  far  less  than  was  expected,  and,  therefore,  the  reduc- 
tion of  United  States  notes  has  been  less.  Still  there  was  some  reduc- 
tion. Greenbacks  have  been  retired  under  the  act  of  January,  1875,  to 
this  time  to  the  amount  of  $22,905,700,  and  nearly  twenty-nine  millions 
of  circulation  have  been  issued  to  national  banks.  Since  the  1st  of 
March  last  the  reduction  of  United  States  notes  has  been  $5,142,264, 
and  this  reduction  was  preceded  by  the  issue  to  banks  of  new  circula- 
tion, amounting  to  nearly  $6,500,000. 

I  do  not  say  that  this  is  the  only  reduction  of  the  currency  that 
has  taken  place,  but  it  is  the  only  reduction  that  has  been  made  by  the 
United  States.  The  national  banks,  under  a  different  law,  and  from 
the  very  necessity  of  free  banking,  are  at  liberty  to  retire  their  currency 
as  well  as  to  increase  it,  and  this  has  been  done  by  them  since  the  first 
of  January,  1875,  to  the  amount  of  $36,624,612.  But  this  is  a  reduc- 
tion eifected  by  each  bank,  guided  by  its  own  interest,  and  the  circula- 
tion it  can  safely  and  prudently  maintain. 

There  are  now  deposited  with  the  Treasury  by  private  corj)orations, 
banks,  and  individuals,  $57,170,000  of  United  States  notes.  Of  this 
there  were  deposited  by  the  national  banks  on  June  22d,  the  date  of 
their  last  statement,  $44,450,000,  and  they  have,  in  the  cash  reserve 
held  by  them,  $42,500,000  more  than  the  amount  required  by  law, 


CONDUCT  OF  PUBLIC  AFFAIRS.  581 

clearly  showiiify  that  there  will  be  no  lack  of  currency  when  it  shall  be 
demanded  for  the  requirements  of  business. 

Since  January  1,  1877,  the  United  States  has  issued  $34,236,000  of 
silver  coin,  and  has  redeemed  with  that  coin  $21,980,000  fractional 
currency,  now  almost  superseded  by  silver  coin,  and  it  also  holds 
$8,160,858  of  United  States  notes  for  the  redemption  of  fractional 
currency  still  outstanding.  In  this  there  was  no  contraction,  but  merely 
a  substitution  of  coin  for  fractional  currency. 

It  was  an  error  to  make  the  retirement  of  United  States  notes 
depend  upon  the  issue  of  bank  notes.  The  two  had  no  relation  to  each 
other,  but  the  retirement  of  United  States  notes  should  depend  entirely 
upon  the  amount  necessary  to  be  withdrawn,  to  advance  the  residue  to 
par  in  coin  within  the  lixed  time.  Tlie  simplest  mode  of  doing  this 
was  to  authorize  their  conversion  into  bonds  at  the  pleasure  of  the 
holder,  the  bonds  to  bear  the  lowest  rate  of  interest  that  would  in  or- 
dinary times  maintain  them  at  par  in  gold.  To  this  the  objection  is 
made  that  we  convert  a  non-interest-bearing  note  into  an  interest-bear- 
ing note ;  but  what  right  have  we  as  a  nation,  or  has  any  bank  or  indi- 
vidual, to  force  into  circulation  as  money  its  note,  uj)on  which  it  pays 
no  interest  ?  Why  ought  not  any  one  who  issues  a  promise  to  j^ay  on 
demand  to  be  made  to  pay  it  when  demanded  or  pay  interest  there- 
after ?  What  right  has  he,  in  law  or  justice,  to  insist  upon  maintaining 
in  circulation  his  note  which  he  refuses  to  pay  according  to  his  promise, 
and  which  he  refuses  to  receive  in  exchange  for  a  note  bearing  interest  ? 
A  certain  amount  of  United  States  notes  can  be,  and  ought  to  be,  main- 
tained at  par  in  coin,  with  the  aid  of  a  moderate  coin  reserve  held  in 
the  Treasury,  and  to  the  extent  that  this  can  be  done  they  form  the 
best  possible  paper  money,  a  debt  of  the  peoj^le  without  interest,  of 
equal  value  with  coin,  and  more  convenient  to  carry  and  handle.  Be- 
yond this  the  issue  of  paper  money,  either  by  the  Government  or  banks, 
is  a  dangerous  exercise  of  power,  injurious  to  all  classes,  and  should  not 
continue  a  single  day  beyond  the  necessities  that  gave  it  birth. 

But,  if  Congress  should  see  proper  to  confine  the  process  of  resump- 
tion to  the  present  law,  we  have  still  the  second  mode  of  resuming,  by 
accumulating  coin  gradually,  so  that  when  the  time  fixed  for  resump- 
tion arrives,  the  Treasury  may  be  able  to  redeem  such  notes  as  are  pre- 
sented. In  this  respect  the  resumption  act  is  as  full  and  liberal  as 
human  language  can  make  it.  The  Secretary  is  authorized  to  prepare 
for  resumption,  and  for  that  purpose  to  use  the  surplus  revenue  and  to 
sell  any  of  the  three  classes  of  bonds,  all  of  which  are  now  at  or  above 
par  in  coin.  The  power,  if  not  repealed,  can  be,  ought  to  be,  and  will 
be  exercised. 

This  accumulation,  both  of  silver  and  gold,  can  be  made  by  arrest- 
ing the  exportation  of  our  production  of  these  metals.  This  is  more 
than  suflieient  to  supply  our  wants  for  this  purpose,  and,  fortunately,  we 
have  for  exjDort  plenty  of  other  productions — corn,  cotton,  wheat,  and 
fabrics,  the  fruit  of  our  industry.  This  country  is  the  greatest  pro- 
ducer of  gold  and  silver  in  the  world.  The  balance  of  foreign  trade  is 
in  our  favor.  During  the  last  fiscal  year  our  exports  exceeded  our  im- 
ports in  gold  value  by  the  sum  of  $166,555,855,  and  this  balance  is 


582  SPEECHES   AND   EEPORTS   OF  JOHN   SHEEMAN. 

steadily  increasing.  This  year  Providence  lias  blessed  ns  with  an  enor- 
mous crop  of  ahnost  every  production  of  the  farm  or  plantation,  and 
the  foreign  demand  is  largely  increased  by  the  Russian  war.  Ilussia  is 
our  great  competitor  in  supplying  Europe  with  bread,  and  she  now 
will  consume  her  own  products.  We  have  now  reached  the  coiu  basis 
in  the  production  of  commodities  for  the  foreign  market.  Our  expor- 
tation of  home  fabrics  has  increased  and  is  increasing,  and  we  are  now 
competing  with  Manchester  and  Birmingham  in  the  sale  of  products 
that  have  made  those  cities  famous  throughout  the  world.  Our  manu- 
factures of  cotton,  iron,  and  wool,  now  rival  in  foreign  markets  the 
productions  of  the  oldest  countries  of  Europe. 

During  the  live  months  of  President  Hayes's  administration,  we 
have  made  an  actual  accumulation  of  currency,  and  of  gold  and  silver 
coin  and  bullion,  of  $44,340,832.  From  the  1st  of  May  to  this  time 
we  have  added  to  our  coin  reserve  $20,000,000  by  the  sale  of  bonds, 
without  disturbing  the  money  market  and  with  gold  steadily  on  the 
decline.  We  have  reduced  the  public  debt  since  the  1st  of  March  by 
the  sum  of  $29,441,824.  We  have  conducted  the  vast  operations  in 
our  loans,  already  referred  to,  without  disturbing  the  course  of  trade  or 
causing  a  shipment  of  gold.  All  the  fears  of  these  movements  have 
been  proved  to  be  groundless. 

We  are  now  within  five  degrees  of  the  specie  standard.  We  have 
still  seventeen  months  before  us  in  which  to  complete  the  task.  The 
same  progress  that  has  been  made  since  the  1st  of  March,  continued 
twelve  months  longer,  will  certainly  bring  us  to  specie  payments.  I 
feel  confident  in  saying  to  you  this  day  that,  if  undisturbed,  with  or 
without  a  change  of  the  law,  every  dollar  of  United  States  notes  will 
before  the  time  fixed  for  resumption  buy  as  much  as  can  be  bought 
with  an  equal  amount  of  either  gold  or  silver.  A  construction  of  the 
resumption  act  has  often  been  pressed  upon  the  Department  which,  if 
correct,  would  make  it  still  more  easy  to  carry  it  into  execution.  It  is 
insisted  that  the  Secretary  has  the  power,  in  preparing  for  resumption, 
to  sell  bonds  for  coin,  and  then  to  sell  the  coin  for  United  States  notes 
to  be  hoarded  in  preparation  for  resumption.  The  Department  has  not 
acted  upon  any  such  construction,  but  has  sold  gold  only  m  the  current 
course  of  business,  or  for  the  actual  redemption  of  notes  supplanted  by 
national-bank  notes.  If  this  power  is  exercised,  it  should  be  only  in 
pursuance  of  the  plain  will  of  Congress.  In  the  execution  of  so  deli- 
cate a  duty,  no  power  should  be  used  except  such  as  is  clearly  given. 

The  act  of  April,  1876,  for  the  redemption  of  fractional  currency, 
provides  that  silver  coin  may  be  issued  in  exchange  for  United  States 
notes,  and  that  such  notes  shall  be  held  as  a  special  fund  for  the  re- 
demption of  fractional  currency.  This  fund  and  the  ordinary  cur- 
rency balance  in  the  Treasury  embrace  the  only  paper  money  owned 
by  the  Government.  The  coin  and  legal  tenders  deposited  in  the 
Treasury  are  the  property  of  private  individuals,  over  which  it  has  no 
control. 

I  have,  fellow  citizens,  I  hope  without  wearisome  detail,  gone  over 
some  points  on  this  question  of  resumption.  It  is  a  dull  but  important 
topic,  which  affects  your  daily  affairs,  and  upon  which  my  official  duty 


CONDUCT  OF  PUBLIC  AFFAIRS.  583 

compels  me  to  act,  and  I  assure  yon  that  I  have  acted  only  from  the 
clearest  convictions  of  public  interest. 

A  currency  of  United  States  notes  based  upon  the  public  credit, 
always  convertible  into  coin,  and  so  limited  in  amount  and  supported 
by  reserves  that  its  convertibility  cannot  he  endangered,  supplemented 
by  a  bank  currency  free  and  open  to  all  alike,  based  upon  public  se- 
curities, so  that  in  any  event  the  note-holder  is  safe  from  loss,  always 
redeemable  in  coin  or  United  States  notes,  unlimited  in  amount  except 
by  the  wants  of  business — this  is  the  kind  of  paper  money  that  will 
start  again  the  wheels  of  industry,  swell  out  the  sails  of  your  commerce, 
and  give  employment  to  your  artisans.  This,  indeed,  would  be  the 
best  paper  currency  in  the  world.  Let  this  currency  be  supported  by 
a  public  credit  against  which  no  whisper  of  doubt  can  be  uttered,  and 
your  public  debt  will  be  reduced  to  its  lowest  possible  burden  of  in- 
terest, and  will  become  the  great  depository  of  the  savings  of  labor,  the 
trustee  of  tlie  widow  and  orphan,  the  safe  rest  of  capital  not  employed 
in  active  industries. 

These,  as  I  understand  them,  are  the  great  financial  objects  of  this 
Administration ;  and  with  your  jDermission  and  the  approval  of  Con- 
gress, the  President  may  hope  to  celebrate  his  out-going  with  your 
debt  reduced  to  four  per  cent,,  and  every  note  of  the  United  States 
M^orth  par  in  the  best  coin  issued  from  the  mint.  You  now  stand  in 
the  forefront  of  this  battle.  I  beseech  you  to  uphold  his  hands,  and 
not  let  the  delusions  of  the  hour  or  the  temporary  languor  of  business, 
which  you  share  with  the  rest  of  the  civilized  world,  turn  you  from  a 
j^olicy  which  you  have  approved  and  the  fmits  of  which  you  can  now 
hope  to  gather. 

It  is  very  common,  fellow  citizens,  to  hold  the  Government  respon- 
sible for  hard  times  caused  by  the  ebb  and  flow  of  trade  and  produc- 
tion. If  the  crop  fails,  the  Administration  is  abused.  If  wages  or 
prices  fall,  the  (government  is  blamed.  If  production  exceeds  the 
market  made  by  consumption,  it  is  easier  to  abuse  some  officer  of  the 
Government  than  to  find  out  the  real  cause.  And  so  it  happens  that, 
under  any  Government,  whatever  may  be  its  form,  if  a  panic,  or  hard 
times,  or  over-production,  or  a  pestilence,  famine  or  plague  comes,  the 
men  in  office  are  made  the  scape-goats  for  troubles  which  it  is  far  be- 
yond their  power  either  to  produce  or  to  remedy.  And  so  now,  when 
throughout  the  world  trade  is  languishing,  and  wages  have  fallen,  and 
industry  does  not  reap  its  usual  reward,  it  is  common  for  demagogues 
to  say,  "  turn  out  the  Administration  and  put  us  in  and  all  will  be 
well."  Such  arguments  are  fit  only  for  fools.  Human  governments 
can  have  but  little  influence  over  the  causes  that  produce  the  rise  and 
fall  of  prices,  the  abundance  or  want  of  employment.  These  great 
movements  are  governed  by  higher  laws,  and  the  puppets  that  for  the 
time  hold  official  authority  have  no  more  influence  over  them  than 
flies  have  over  the  revolution  of  the  wheel  to  which  they  cling.  At 
this  time  our  country  is  the  most  prosperous  in  the  world,  though  we 
suifer,  to  some  extent,  from  the  same  causes  that  bring  stagnation  to 
the  industries  of  all  commercial  countries. 

I  have  here  copious  extracts  from  papers  published  in  England, 


584  SPEECHES  AND  KEPORTS   OF  JOHN   SHEPvMAN. 

Belgium,  Germany,  and  France,  all  nations  of  wealth  and  power,  in 
profound  peace,  and  all  suffering  from  extreme  adversity  and  de- 
pression in  trade  and  j)rices.  The  iron  trade  in  England  has  passed 
through  extreme  depression,  during  which  some  of  the  largest  and 
wealthiest  manufacturing  concerns  had  to  succumb  to  the  severe  reac- 
tion, while  operatives  suffered  in  the  greatest  degree  from  the  increased 
supply  of  labor  and  greatly  diminished  prices.  It  has  fallen  off  nearly 
fifty  per  cent.  The  Belgian  iron  trade  was  almost  extinguished  and 
the  workmen  employed  driven  to  other  pursuits.  This  industry  is  the 
one  that  has  suffered  most  in  our  own  country,  but  we  are  rapidly  re- 
covering by  unbounded  natural  resources,  and  by  reduced  cost  of  pro- 
duction. I  have  before  me  an  English  paper  showing  that  the  exports 
of  cotton  fabrics  from  Manchester,  especially  to  the  United  States, 
have  been  largely  reduced.  The  quantity  of  cotton  goods  shipped  to 
this  country  has  fallen  off  in  five  years  from  129,000,000  yards  to 
59,000,000  yards,  and  that  of  woolen  goods  from  6,000,000  yards'  to 
1,478,000  yards  ;  while  our  own  production  has  enormously  increased, 
and  we  are  now  exporting  both  cottons  and  woolens.  In  Germany,  of 
thirty-two  companies  enumerated  in  a  table  I  have  before  me,  only  six 
show  any  dividend  whatever  for  the  last  year,  and  the  aggregate  ac- 
counts show  a  loss  of  $1,800,000  on  the  year's  operations.  As  to  the 
silk  trade  in  France,  which  is  one  of  the  great  branches  of  the  industry 
of  that  country,  it  appears,  from  a  paper  I  have  before  me,  that  there 
are  about  30,000  silk  looms  at  Lyons,  and  nearly  half  of  these  are  now 
idle.  The  number  of  weavers  now  out  of  employment  is  roughly  esti- 
mated at  from  twelve  to  fifteen  thousand.  I  might  supplement  these 
general  statements  by  picturing  the  distress  in  all  these  great  and  rich 
countries,  compared  with  which  the  great  suffering  of  our  peoj)le  is  insig- 
nificant. With  us  the  worst  is  over,  and  the  vast  industry  which  gives 
employment  to  the  great  body  of  our  people — that  of  agriculture — is 
now  extremely  prosperous.  It  is  a  common  saying  that  "  the  farmers 
are  growing  rich,"  and  as  they  grow  rich  other  industries  will  thrive, 
and  trade  revive.  To  attribute  the  distresses,  which  I  know  you  suffer 
in  common  with  the  rest  of  mankind,  to  any  causes  growing  out  of  the 
administration  of  our  Government,  is  extreme  folly.  Unlike  the  laws 
of  most  European  countries,  our  laws  are  framed,  as  far  as  possible, 
to  promote  industry,  to  protect  labor,  and  to  distribute  wealth.  Here 
we  give  to  every  man  the  same  privileges,  civil  and  political,  whether 
he  be  rich  or  poor,  and  whatever  may  be  his  condition  in  life.  He 
must  enter  into  competition  with  others,  but  there  are  no  discrimina- 
tions against  him.  The  remedy  for  periodical  depressions  no  human 
hand  can  point  out  or  administer.  That  must  be  the  result  of  time, 
of  industry,  of  economy.  'No  doubt  soon,  industry  will  revive,  and 
we  may  expect  a  season  of  prosperity.  The  poor  do  not  suffer  alone 
from  hard  times.  The  first  blow  always  falls  upon  those  who  have 
property  investments,  which  are  swept  away,  and  then  the  evil  affects 
all  classes  alike.  All  that  you  can  ask  of  the  Government  is  that  it 
will  administer  the  limited  powers  conferred  upon  it  with  the  same 
intelligence  and  economy  that  you  would  expect  of  private  citizens, 
doing  all  it  can  within  those  powers  to  confer  the  greatest  good  upon 


CONDUCT   OF  PUBLIC   AFFAIRS.  585 

the  greatest  number.  This,  I  believe,  is  now  being  done  by  the  Il^a- 
tional  Government. 

Every  man  of  you  is  deeply  interested  in  the  strength  and  power 
of  this  Government,  though  its  operations  may  be  far  from  you.  This 
was  shown  in  the  important  services  rendered  by  the  general  Govern- 
ment in  the  recent  widely  extended  strikes  by  the  employees  of  rail- 
roads, which  reached  from  Philadelphia  to  New  Orleans,  aifected  all 
the  great  trunk  lines  of  the  country,  and  for  a  time  paralyzed  several 
powerful  States.  For  a  time  they  threatened  civil  war  and  anarchy, 
and  caused  great  destruction  of  life  and  property.  The  Administration 
was  called  upon  by  the  Governors  of  West  Virginia  and  Maryland, 
two  Democratic  States,  to  aid  in  putting  down  domestic  violence.  Our 
small  army  was  scattered  over  the  Western  country.  The  last  House 
of  Eepresentatives  had  refused  to  ax)propriate  for  pay  or  supplies  for 
the  army,  lest,  forsooth,  it  might  be  used  in  a  State  to  put  down  domes- 
tic violence.  Those  calls  were  promptly  met  by  President  Playes,  and, 
by  a  judicious  use  of  the  small  force  at  his  command,  and  the  skillful 
action  of  the  officers  in  command,  especially  of  General  Hancock  and 
General  Schofield,  the  regular  army  was  the  chief  means  of  suppress- 
ing domestic  violence  extending  to  many  States,  and  which  could  al- 
most be  ranked  as  civil  war.  "No  just  man  will  withhold  from  the 
Administration  fair  praise  for  a  difficult  task  well  done.  These  strikes 
bring  prominently  into  American  politics  the  contest  between  capital 
and  labor  that  for  many  years  disturbed  Great  Britain,  and  was  the 
cause  of  the  atrocities  of  the  reign  of  terror  during  the  French  Rev- 
olution in  1793.  Happily,  in  this  country  our  strikes  have  been  local 
and  unimportant,  but  the  great  change  made  in  our  industries  since  the 
war,  the  enormous  enlargement  of  our  mining  and  manufacturing  in- 
dustries, the  great  increase  in  the  number  of  corporations  and  their 
extended  power  and  influence,  compel  us  to  consider  this  question,  and, 
if  possible,  to  find  a  remedy.  When  labor  is  chiefly  confined  to  the 
cultivation  of  the  soil  on  separate  farms,  no  contest  between  capital 
and  labor  can  arise,  and  when,  as  in  fonner  times,  our  mechanics  were 
independent  artisans,  each  working  either  alone  or  with  a  few  others  in 
shops  scattered  throughout  the  country,  there  could  be  no  such  trouble. 
But  when  great  corporations  or  individuals  employ  large  numbers  of 
persons  who  depend  upon  their  daily  labor  for  their  daily  bread,  and 
whose  wages  may  be  affected  at  any  time  by  the  will  of  the  capitalist, 
there  has  been,  and  always  will  be,  an  irrepressible  conflict  between 
the  man  who  furnishes  or  directs  the  capital  and  the  laborer  who  does 
the  work.  When  to  this  was  added  the  fact  that,  by  recent  consolida- 
tions, great  railroad  companies  have  been  formed,  each  doing  a  trans- 
portation business  larger  than  the  whole  transportation  on  the  Missis- 
sippi or  on  the  lakes  in  the  North,  with  officers  possessing  the  power 
to  change  at  pleasure  the  rate  of  freight,  and  the  wages  ot  employees, 
it  was  inevitable  that  the  conflict  should  some  time  come  between  the 
corj3orations  and  their  employees. 

Let  me  illustrate  the  enormous  power  that  is  now  practically  con- 
centrated within  the  will  of  four  men.  When  the  war  broke  out  the 
common  cry  of  the  West  was  that  no  rebel  cannon  should  threaten  the 


586  SPEECHES   AND  EEPORTS  OF  JOHN  SHEPvMAK 

commerce  of  the  Mississippi  Yalley.  Our  commerce  should  flow  un- 
taxed to  the  sea.  The  entire  tonnage  passing  any  giv^en  point  on  the 
Mississippi  Kiver  is  now  estimated  to  be  3,000,000  tons.  The  great 
lakes  on  the  North  have  been  spoken  of  since  the  discovery  of  America 
as  the  wonderful  provision  of  Nature  for  the  vast  internal  commerce 
of  the  continent.  The  whole  tonnage  passing  a  given  point  on  the 
hue  of  the  lakes  is  about  3,000,000  tons.  The  Erie  canal  in  New 
York,  from  Buffalo  to  Albany,  has  been  extolled  as  a  work  of  master 
statesmen,  which  has  contributed  more  to  the  interior  development  of 
this  country  than  any  other  single  work,  and  has  immortalized  the 
names  of  l)e  Witt  Clinton  and  others.  The  entire  tonnage  of  this 
canal  during  the  last  year  is  officially  stated  at  2,418,423,  and  of  all  the 
New  York  canals,  including  the  Erie,  at  4,172,179  tons.  These  three 
water  arteries  of  commerce,  two  natural  and  one  artificial,  float  a  ton- 
nage of  10,172,179  tons,  and  a  few  years  ago  were,  practically,  the  sole 
means  of  transit  between  the  East  and  the  West  and  the  North  and 
the  South.  Now,  within  a  very  few  years,  and  mainly  since  the  close 
of  the  war,  there  have  been  built  up  four  grand  trunk  lines  of  railway- 
reaching  from  the  Atlantic  seaboard  far  away  into  the  West,  with  their 
lines  in'all  directions  like  the  branches  of  great  trees,  their  organization 
extending  to  almost  every  hamlet  in  the  Mississippi  Yalley  or  the  At- 
lantic slope,  and  a  commerce  so  vast  that  in  coniparison  with  it  the 
great  water  lines  of  communication  become  insignificant. 

Last  year  the  Erie  Kailway  carried  5,922,911  tons ;  the  New  York 
Central  Kailway  carried  6,803,680  tons;  the  Pennsylvania  Kailroad 
carried  9,922,911  tons ;  and  the  Baltimore  and  Ohio  Railroad  is  esti- 
mated to  have  carried  5,000,000  tons ;  or  an  aggregate  of  27,649,502 
tons,  being  nearly  three  times  as  much  as  the  entire  commerce  by  water. 
This  immense  commerce,  which  touches  the  business  and  home  and  life 
of  every  citizen  of  the  United  States,  East  or  West,  within  the  reach  of 
its  influence,  is  controlled  in  all  its  parts  by  the  ultimate  will  of  four 
men ;  for,  though  there  are  many  agents  employed  in  this  vast  busi- 
•ness,  with  boards  of  directors  and  intermediate  superintendents,  yet, 
practically,  the  executive  and  controlling  power  of  these  great  corpora- 
tions rests  with  their  presidents,  whose  will  or  pleasure  may  raise  the 
freight  on  produce,  and  thus  affect  every  farmer  in  the  land,  or  may 
raise  or  lower  the  wages  of  every  emj)loyee,  and  thus  affect  the  bread 
and  life  of  every  one  dependent  upon  these  laboring  men. 

It  is  just  to  say  that  the  gentlemen  holding  these  important  posi- 
tions are  among  the  ablest  and  most  sagacious  of  the  business  men  of 
this  country,  but  they  must  necessarily  be  governed  in  the  main  by  the 
interests  of  the  corporations  they  represent,  and  must  look  to  those 
interests  as  the  dominating  and  controlling  motive  that  guides  their 
acts.  A  few  years  ago  the  freight  on  these  roads  was  deemed  to  be 
unduly  high,  and  this  aroused  the  whole  farming  interest  of  the  West, 
under  the  name  of  Grangers,  who  were  able  to  secure  hostile  legislation 
in  some  of  the  States,  and  so  to  control  public  opinion  that  the  freights 
in  due  time  were  reduced.  But,  more  potent  than  all,  the  sudden  de- 
pression of  business  caused  by  the  panic  of  1873  led  to  a  rivalry  and 
competition  between  these  great  lines  that  in  a  short  time  reduced  the 


CONDUCT  OF  PUBLIC   AFFAIRS.  587 

rates  for  freight  and  passengers  below  the  actual  cost  of  the  business, 
thus  tending  to  destroy  the  capital  invested  in  more  than  two  thirds  of 
the  railway  lines  in  the  United  States,  and  greatly  crippling  the  finan- 
cial condition  of  the  trunk  lines.  These  corporations  have  endeavored 
in  various  ways  to  come  to  an  agreement ;  but  either  because  they  were 
not  faithfully  observed,  or  from  the  inherent  difficulty  of  making  com- 
binations between  powerful  rivals,  the  agreements  have  been  succes- 
sively broken  and  abandoned,  and  now  it  may  be  said  that,  on  an  aver- 
age, the  amount  received  for  freight  and  passengers  does  not  pay  the 
actual  cost  of  running  the  lines.  The  result  has  been  that  the  railroad 
companies,  unwilling  to  see  their  property  entirely  destroyed,  have 
gradually  reduced  the  wages  of  the  employees  until — if  we  can  believe 
what  has  been  said — in  some  cases  they  are  barely  sufficient  to  pay  for 
the  merest  necessaries  of  life.     Hence  the  strikes. 

It  has  always  been  feared  that  our  Republican  system  of  Govern- 
ment, which  depends  upon  the  will  of  the  majority,  could  not  long 
survive  the  condition  of  affairs  developed  by  these  strikes.  Macaulay 
and  Alison  have  both  described,  in  prophetic  language,  the  effects  of 
a  struggle  between  capital  and  labor  in  a  government  like  ours,  but, 
like  most  English  writers,  they  overlooked  the  strong  conservative 
power  in  a  government  by  the  people,  where  the  majority  must  always 
be  independent  farmers,  mechanics,  and  working  men  who  have  respect 
for  law,  religion,  and  order.  We  have,  no  doubt,  large  numbers  of  men 
who  will  not  reason  about  this  matter,  but  will  rush  to  the  torch  or  to 
crime  to  cure  what  they  regard  as  wrongs,  but  the  great  body  of  our 
people  have  always  shown  sufficient  moderation  and  intelligence  to  lead 
them  to  find  a  peaceful  and  proper  remedy  for  all  the  ills  which  life 
may  develop. 

And  now,  fellow  citizens,  I  beg  you  not  to  believe  that  this  is  an 
easy  task,  and  not  to  reject  counsels  of  moderation  and  forbearance. 
The  laborer  is  worthy  of  his  hire,  and,  in  this  country  especially,  should 
always  receive  enough  to  maintain  his  family  in  decency  and  comfort. 
But  we  can  not  secure  this  great  blessing  by  intimidating  capital,  by 
burning  houses,  by  preventing  other  people  from  laboring,  or  by  any 
violence  or  crime.  Cajjital,  when  threatened,  shrinks  away,  and  with- 
out it  your  labor  cannot  be  employed.  You  can  encourage  its  employ- 
ment only  by  a  reasonable  prospect  of  a  just  reward  in  the  way  of 
interest  or  profit. 

I  will  not  undertake  in  this  speech  to  state  ideas  that  have  become 
settled  convictions,  because  it  would  take  too  long ;  but  my  conclusion 
years  ago,  when  this  subject  was  under  debate  in  the  Senate,  was  that 
the  framers  of  the  Constitution  had  wisely  provided  an  authority  to 
govern,  by  general  laws,  inter-State  railways,  and  that  in  this  way  con- 
troversies between  capital  and  labor  may  be  prevented  where  they 
affect  the  commerce  of  the  country.  That  authority  is  the  Congress  of 
the  United  States.  ISTo  State  is  broad  enough  to  deal  with  this  ques- 
tion, for  these  railroad  lines  extend  through  many  States.  No  local 
authority  can  deal  with  it,  because  the  local  authorities  may  be  over- 
awed, or  act  under  the  influence  of  passion  or  resentment.^  Mayors 
and  governors,  and  local  militia,  are  well  enough  for  the  ordinary  pro- 


588  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

tection  of  society,  but  they  are  not  fitted  to  deal  witli  a  contest  between 
great  bodies  of  citizens  in  tlie  same  commnnity,  where  the  divisions  are 
so  wide  and  broad  as  to  amount  to  domestic  violence  or  civil  war.  The 
Congress  of  the  United  States  is  expressly  authorized  to  protect  a  State 
against  domestic  violence,  and  to  regulate  commerce  with  foreign 
nations  and  among  the  several  States,  and  the  inter-State  commerce 
thus  2)rovided  for  is  now  conducted  mainly  by  these  great  lines  of  rail- 
way. The  framers  of  the  Constitution  could  not  foresee  railroads,  or 
the  vast  extension  of  our  country  and  its  varied  interests ;  but  they  did 
provide  that  commerce,  in  all  its  forms,  foreign  and  domestic,  by  what- 
ever agency  conducted,  might  be  controlled  by  an  authority  more  free 
from  local  prejudice  than  any  other  that  could  be  selected.  My  hope, 
then,  is  that  Congress  will  pass  laws  to  establish  and  limit  maximum 
rates  of  freight,  so  that  the  production  of  a  farmer  may  not  be  in  dan- 
ger of  confiscation  by  exorbitant  rates ;  that  it  will  limit  and  restrain 
the  reduction  of  freights  so  as  to  destroy  the  ability  of  railroad  com- 
panies to  pay  fair  prices  for  honest  labor,  and  that  it  will  prevent  them 
from  making  paupers  of  men  who  perform  essential  functions  in  com- 
merce. Congress  may  thus,  by  wise  general  laws,  control  the  most 
powerful  corporations  as  well  as  the  humblest  citizens. 

All  men  ought,  however,  to  understand,  whatever  may  be  their 
wrongs  or  injuries,  that  in  our  free  system  there  is  but  one  remedy, 
and  that  is  by  peaceful,  lawful  appeals  to  the  constituted  authorities, 
both  State  and  JS^ational.  No  man  has  a  right  to  redress  his  injuries 
by  violence  or  crime.  No  government  can  live  where  mobs  can  make 
laws  and  prevent  laborers  from  working.  The  right  of  a  laborer  to 
refuse  to  work  without  such  ^^ay  as  he  demands  is  clear  and  unques- 
tionable ;  but,  whatever  civil  remedies  the  law  may  give  him,  he  can 
not  resort  to  violence  to  prevent  either  the  movement  of  commerce  or 
the  employment  of  others,  without  endangering  our  whole  system  and 
encountering  the  full  force  and  power  of  the  Government.  The  very 
fact  that  tlie  stopping  of  trains  on  the  four  great  lines  of  railway  would 
l)ring  hunger  and  want  to  millions  of  laboring  peojDle,  and  deprive 
other  millions  of  a  market  for  their  produce,  would  array  against  strik- 
ing laborers  who  resorted  to  violence  not  only  the  whole  power  of  the 
Government,  but  the  moral  and  physical  force  of  the  remainder  of  the 
community.  When  laboring  men,  or  any  class  of  men,  resort  to  vio- 
lence and  crime  to  protect  even  real  rights,  they  must  be  dealt  with  in 
the  same  way  as  others  who  violate  the  law,  however  much  men  may 
sympathize  with  their  distress.  I  am  stating  only  what  the  law  has 
always  provided,  and  I  state  it  with  full  sympathy  in  an  honest  demand 
by  laboring  men  for  fair  wages  for  a  fair  day's  work.  "We  must  obey 
the  law  and  we  must  punish  any  violation  of  the  law.  Life  and  prop- 
erty must  be  protected.  These  are  the  conditions  upon  which  society 
exists,  and  no  party  can  temjDorize  or  hesitate  in  the  face  of  an  open 
revolt  against  these  principles  of  public  order.  But,  while  this  is  true, 
we  must  not  fail  to  examine  the  complaint  of  the  humblest  citizen  and 
give  him  all  the  protection  and  all  the  remedy  that  a  just  Government 
can  give. 

And  now,  fellow  citizens,  in  conclusion,  allow  me  to  express,  so  far 


ANNUAL  REPORT  TO   CONGRESS.  589 

as  language  enables  me,  my  heartfelt  thanks  for  the  courtesy  and  kind- 
ness you  always  have  shown  me,  not  only  during  this  short  visit,  but  in 
all  the  time  I  have  lived  among  you.     I  can  only  say,  I  thank  you. 


ANNUAL   KEPORT   TO   CONGEESS. 

Treastjry  Depaetment, 
Washington,  D.  C,  December  3,  1877. 

Sm: 

******** 

The  contract  of  August  2-i,  1876,  made  by  the  Secretary  of  the 
Treasury  with  certain  parties,  for  the  negotiation  of  $300,000,000  four 
and  one  half  per  cent,  bonds,  had  so  far  been  executed  on  the  1st  of 
March,  1877,  that  $90,000,000  had  been  sold  to  the  associated  con- 
tractors, and  calls  had  been  made  for  the  redemption  of  a  like  amount 
of  five-twenty  bonds. 

Wliile  the  contract  expired  in  terms  on  the  30th  day  of  June,  1877, 
it  contained  a  stij)ulation  that  it  might  be  terminated  by  the  Secretary 
of  the  Treasuiy,  upon  ten  days'  notice,  after  the  4th  of  March,  1877. 

In  May  last  it  became  apparent  to  the  Secretary  that,  by  a  favorable 
change  in  the  money  market,  four  per  cent,  bonds  could  be  sold  at  par, 
in  coin,  with  great  advantage  to  the  Government ;  and,  availing  him- 
self of  the  privilege  secured  by  the  contract,  he  gave  notice  that  he 
would  limit  the  sale  of  four  and  one  half  per  cent,  bonds  to  $200,- 
000,000. 

On  the  11th  day  of  May  it  was  agreed  that  a  portion  of  the  latter 
should  be  sold  under  the  authority  of  the  resumption  act  for  resump- 
tion purposes,  and  subscriptions  were  rapidly  made  until  the  aggregate 
reached  $200,000,000,  of  which  $185,000,000  were  applied  to"  the  re- 
demption of  an  equal  amount  of  six  per  cent,  bonds. 

On  the  9th  day  of  June,  1877,  the  Secretary  entered  into  a  contract 
with  a  portion  of  the  previously  associated  parties  for  the  sale  at  par, 
in  coin,  of  the  four  per  cent,  bonds  of  the  United  States,  authorized  to 
be  issued  by  the  refunding  act.  This  contract  was  in  substance  similar 
to  previous  contracts,  but  was  to  terminate  on  the  30th  day  of  June, 
1878,  with  the  right  reserved  to  the  United  States  to  terminate  it  at 
any  time  after  the  31st  of  December,  1877,  by  giving  ten  days'  notice 
thereof  to  the  contracting  parties.  This  contract  also  contained  a 
stipulation,  as  follows : 

It  is  also  agreed  that  the  parties  of  the  second  part  shall  offer  to  the  ])eople  of 
the  United  States,  at  par  and  accrued  interest  in  coin,  the  four  per  cent,  registered 
consols  and  four  per  cent,  coupon  consols  of  the  denominations  of  $50  and  $100 
embraced  in  this  contract,  for  a  period  of  thirty  days  from  the  ])ublic  notice  of  such 
subscriptions,  and  in  such  cities  and  upon  such  notice  as  the  Secretary  of  the  Trea- 
sury may  prescribe  prior  to  the  opening  of  the  lists ;  and  further,  to  offer  to  the 
subscribers  the  option  of  paying  in  installments  extending  through  three  months. 

Under  this  contract,  invitations  having  been  published,  subscriptions 
to  this  loan  were  opefied  on  the  16th  of  June,  1877.    AVithin  the  period 


590  SPEECHES  AND  KEPORTS   OF  JOHN  SHEPvMAN. 

of  thirty  days  thereafter  the  subscriptions  had  reached  the  sum  of 
$75  496,550,  which  were  payable  within  ninety  days  from  the  date  of 
subscription,  or  on  or  before  the  16th  of  October.  Every  subscription 
to  these  bonds  has  been  paid,  and  of  the  proceeds  $50,000,000  have 
been  applied  to  the  redemption  of  an  equal  amount  of  six  per  cent, 
bonds.  The  residue  has  been  applied  to  resumption  pui-poses,  as  here- 
after stated.  The  annual  reduction  of  interest  on  the  public  debt  thus 
made  is  as  follows  : 

By  the  sale  of  $185,000,000  four  and  one  half  per  cent,  bonds 12,775,000 

By  the  sale  of  |50,600,000  four  per  cent,  bonds 1,000,000 

Aggregating $3,775,000 

In  October  last,  after  the  payment  of  the  popular  subscriptions, 
arrangements  were  perfected  to  open  further  subscriptions  to  the  four 
per  cent,  loan,  and  a  call  was  about  to  issue  for  ten  millions  of  six  per 
cent,  bonds;  but  it  was  temporarily  postponed  by  reason  of  the  agita- 
tion of  the  repeal  of  the  resumption  act  and  the  remonetization  of  sil- 
ver, which  the  associates  believed  would  prevent  further  sales  of  these 
bonds.  For  this  reason  they  declined  to  offer  them,  and  no  further 
call  of  six  per  cent,  bonds  was  therefore  made. 

On  the  19tli  of  June,  pending  tlie  subscriptions,  the  Secretary  in- 
formed the  associates,  in  an  ofhcial  letter,  that,  as  the  Government 
exacts  in  payment  for  these  bonds  their  face  value  in  gold  coin,  it  was 
not  anticipated  that  any  future  legislation  of  Congress,  or  any  action 
of  any  department  of  the  Government,  would  sanction  or  tolerate  the 
redemption  of  the  principal  of  these  bonds,  or  the  payment  of  the 
interest  thereon,  in  coin  of  less  value  than  the  coin  authorized  by  law 
at  the  time  of  their  issue — being  gold  coin.  The  general  confidence  of 
the  public  that  so  just  a  principle  of  good  faith  would  be  observed  by 
the  Government  no  doubt  largely  contributed  to  the  success  of  the  loan. 
Whatever  policy  the  Government  may  adopt  at  any  time  in  its  system 
of  coinage,  it  should  not  reduce  the  value  of  the  coin  in  which  it  pays 
its  obligations  below  that  it  demanded  and  received.  The  Secretary 
earnestly  urges  Congress  to  give  its  sanction  to  this  assurance. 

The  higli  credit  of  the  United  States,  the  faithful  observance  of  its 
public  obligations,  the  abundance  of  its  wealth  and  resources,  the  rapid 
reduction  of  its  debt,  the  great  accumulation  of  savings  among  the 
j)eople,  the  favorable  state  of  foreign  trade — all  contribute  to  enable 
the  United  States  to  borrow  both  from  its  own  people  and  in  foreign 
markets  on  the  most  favorable  terms. 

The  Secretary  does  not  doubt  that,  if  no  questions  had  arisen  dis- 
turbing the  public  credit,  the  six  per  cent,  bonds  would  be  rapidly 
paid  oif  by  the  proceeds  of  the  four  per  cent,  bonds,  sold  at  par  in  coin 
or  its  equivalent. 

The  highest  public  credit  can  be  secured  only  by  a  constant  observ- 
ance of  every  public  engagement,  construed  according  to  its  letter  and 
spirit.  Thus  far  this  course  has  been  faithfully  pursued  by  the  United 
States.  "Without  it,  our  ample  resources  and  ability  to  pay  are  of  no 
avail.  At  a  time  when  we  are  enjoying  such  credit,  and  rapidly  se- 
curing the  benefit  of  it  by  the  reduction  of  the  rate  of  interest  from 


ANNUAL  REPORT  TO  CONGRESS.  591 

six  to  four  per  cent.,  it  would  seem  to  be  a  grievous  error  to  raise  a 
question  about  the  coin  in  which,  the  interest  is  payable.  Self-interest 
alone,  without  i-espect  to  pride  in  public  credit,  would  lead  us  to  secure 
so  great  a  benefit  as  would  be  the  saving  of  one  third  of  the  interest  of 
the  public  debt. 

Of  the  six  per  cent,  loans  about  $660,000,000  are  now  redeemable  at 
the  pleasure  of  the  United  States,  and  of  the  whole  debt  $1,452,000,000 
are  redeemable  before  or  on  the  1st  of  May,  1S81.  By  the  reduction 
of  the  interest  from  six  to  four  per  cent,  on  the  public  debt  now  re- 
deemable, there  would  be  a  saving  of  $13,200,000  annually ;  and  by 
the  reduction  to  four  per  cent,  of  the  interest  on  tlie  total  debt  redeem- 
able by  the  1st  of  May,  1881,  there  would  be  a  saving  of  $22,006,205.50 
per  annum. 

Any  measure  that  creates  distrust  or  doubt  will  arrest  this  process, 
and,  by  disabling  the  United  States  from  borrowing,  will  compel  the 
continued  payment  of  the  high  rate  of  six  per  cent. 

If,  therefore,  the  public  interests  demand  the  issue  of  silver  dollars 
— a  subject  hereafter  discussed — it  is  respectfully  submitted  to  Congress 
that  an  express  exception  be  made  requiring  that  gold  coin  alone  shall 
be  paid  for  principal  or  interest  on  bonds  issued  to  public  creditors 
since  February  12,  1873,  the  amount  of  which  is  $592,990,700.  These 
bonds  have  entered  into  the  markets  of  the  world.  If  the  market  value 
of  the  silver  in  the  new  coin  is  less  than  that  of  the  gold  dollar,  a  forced 
payment  in  the  new  coin  is  a  repudiation  of  a  part  of  this  debt.  The 
saving  that  would  thus  be  made  is  utterly  insignificant  compared  with 
the  injury  done  to  the  public  credit. 

And  even  as  to  bonds  issued  prior  to  February  12,  1873,  public 
policy  and  enlightened  self-interest  require  us  to  pay  them  in  the  coin 
then  in  circulation  and  contemplated  by  both  parties  as  the  medium  of 
payment.  Silver  dollars  have  not  been  in  circulation  in  the  United 
States  since  1837,  and  since  1853  fractional  silver  coins  have  been  in 
circulation  and  a  legal  tender  only  for  limited  sums,  and  have  not  been 
contemplated  as  the  medium  of  payment  since  any  considerable  portion 
of  the  outstanding  bonds  were  issued.  The  silver  dollar  was,  in  fact, 
more  valuable  than  the  gold  dollar.  It  does  not  become  a  nation  like 
ours  to  avail  itself  of  the  market  depreciation  of  silver  to  gain  a  small 
saving  by  the  payment  of  silver  dollars  instead  of  the  coin  contem- 
plated when  the  bonds  were  issued.  A  far  greater  saving  and  higher 
public  honor  can  be  secured  by  the  sale  of  four  per  cent,  bonds  under 
the  refunding  act  and  the  payment  of  outstanding  bonds  in  gold  coin. 
An  assurance  given  by  Congress  of  such  payment  would  at  once  secure 
the  complete  success  of  the  refunding  process  and  greatly  advance  the 
present  high  credit  of  the  United  States. 

Another  practical  impediment  in  the  sale  of  bonds  was  that,  under 
the  law,  the  Secretary  could  receive  coin  alone  in  payment  for  them, 
and  the  only  existing  coin  that  could  be  received,  under  the  law,  was 
gold  coin.  As  this  was  not  in  general  circulation,  it  was  impractica- 
ble for  the  people  to  pay  it  into  the  Treasury  for  these  bonds.  There- 
fore it  became  necessary  to  conduct  all  sales  through  third  parties,  who 
could  receive  bank  bills.  United  States  notes,  drafts,  certificates,  and 


592  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

other  forms  of  commercial  jDaper,  and  convert  them  into  coin.  The 
Secretary,  therefore,  i-ecommends  that  he  be  authorized  to  sell  such 
bonds  either  for  coin  or  for  its  equivalent  in  United  States  notes. 

By  the  resumi3tion  act  approved  January  14,  1875,  the  Secretary  of 
the  Treasury  is  required  to  redeem  legal-tendei'  notes  to  the  amount  of 
eighty  per  centum  of  the  sum  of  national-bank  notes  issued,  and  to 
continue  such  redemption,  as  circulating  notes  are  issued,  until  there 
shall  be  outstanding  the  sum  of  $300,000,000  of  such  legal-tender 
United  States  notes,  and  no  more. 

In  obedience  to  this  act,  there  have  been  issued  since  March  1, 1877, 
to  national  banks,  $10,123,995  of  circulating  notes,  and  there  have  been 
redeemed,  retired,  and  canceled  $12,899,196  of  United  States  notes, 
leaving  outstanding  on  the  1st  instant  the  sum  of  $351,340,288. 

By  the  same  act  it  is  provided  that,  on  and  after  the  first  day  of 
January,  1879,  the  Secretary  of  the  Treasury  shall  redeem  in  coin  the 
United  States  legal-tender  notes  then  outstanding,  on  their  presentation 
for  redemption  at  the  office  of  the  Assistant  Treasurer  of  the  United 
States  in  the  city  of  ISTew  York,  in  sums  of  not  less  than  fifty  dollars. 
"  And,  to  enable  the  Secretary  of  the  Treasury  to  prepare  and  provide 
for  the  redemption  in  this  act  authorized  or  required,  he  is  authorized 
to  use  any  surplus  revenues  from  time  to  time  in  the  Treasury  not 
otherwise  appropriated,  and  to  issue,  sell,  and  dispose  of,  at  not  less 
than  par  in  coin,  either  of  the  descrijDtions  of  bonds  of  the  United 
States  described  in  the  act  of  Congress  approved  July  14, -1870,  en- 
titled '  An  act  to  authorize  the  refunding  of  the  national  debt,'  with 
like  qualities,  jDrivileges,  and  exemptions,  to  the  extent  necessary  to 
carry  this  act  into  full  effect,  and  to  use  the  proceeds  thereof  for  the 
purposes  aforesaid." 

In  obedience  to  this  provision,  the  Secretary  has  sold  at  par,  for 
coin,  $15,000,000  four  and  one  half  per  cent,  bonds,  or  $5,000,000 
during  each  of  the  months  of  Mav,  June,  and  July  last,  and  has  sold 
$25,000,000  at  par  in  coin  of  four  per  cent,  bonds,  or  $5,000,000  for 
each  of  the  months  of  August,  September,  October,  November,  and 
December.  Of  the  coin  thus  received,  $4,000,000  have  been  sold  for 
the  redemption  of  United  States  notes,  and  the  residue  is  in  the  Treas- 
ury. The  surplus  revenue  has  also,  under  the  same  authority,  been  ap- 
plied to  tlie  redemption  of  the  residue  of  United  States  notes,  not 
redeemed  by  tlie  sale  of  coin  as  above  stated,  and  the  balance  is  held 
in  the  Treasury  in  preparation  for  resumption. 

These  operations,  aided  greatly,  no  doubt,  by  the  favorable  condition 
of  our  foreign  commerce,  have  advanced  the  market  value  of  United 
States  notes  to  ninety-seven  and  three  eighths  per  cent.,  or  within  nearly 
two  and  a  half  per  cent,  of  coin.  They  have  also  conclusively  demon- 
strated the  practicability  of  restoring  United  States  notes  to  par  in  coin 
by  the  time  fixed  by  law,  and  that  without  disturbing  either  domestic 
or  foreign  trade  or  commerce.  Every  step  has  been  accompanied  with 
growing  business,  with  the  advance  of  public  credit,  and  the  steady 
appreciation  of  United  States  notes.  The  export  of  bullion  has  been 
arrested,  and  our  domestic  supply  has  accumulated  in  the  Treasury. 
The  exportation  of  other  domestic  products  has  been  largely  increased. 


ANNUAL  REPORT  TO   CONGRESS.  593 

witli  great  advantage  to  all  industries.  The  course  adopted  under  the 
resumption  act,  as  herein  set  forth,  if  pursued,  will  probably  be  followed 
with  like  favorable  results,  and  a  sufficient  fund  for  the  maintenance  of 
resumption  will  doubtless  accumulate  in  the  Treasury  at  or  before  the 
date  fixed  by  law.  The  provision  for  free  banking  has  aided  this  pro- 
cess by  allaying  imaginary  fears  that  would  otherwise  have  been  aroused 
by  the  withdrawal  of  United  States  notes. 

The  Secretary  can  not  too  strongly  urge  the  firm  maintenance  of  a 
policy  that  will  make  good  the  promise  contained  in  the  United  States 
notes  when  issued — a  promise  repeated  in  the  act  "  to  strengthen  the 
public  credit,"  approved  March  18,  1869,  and  made  definite  and  effec- 
tive by  the  resumption  act. 

Dishonored  notes,  less  valuable  than  the  coin  they  promise,  though 
justified  by  the  necessity  which  led  to  their  issue,  should  be  made  good 
as  soon  as  practicable.  The  public  credit  is  injured  by  failure  to  redeem 
them.  Every  holder  who  was  compelled  by  law  to  receive  them  has 
been  deprived  of  a  part  of  his  just  due.  IS'ow,  when  our  national  re- 
sources are  ample,  when  the  process  of  appreciation  is  almost  complete, 
when  the  wisdom  of  the  existing  law  has  been  demonstrated,  it  is  the 
dictate  of  good  policy  and  good  faith  to  continue  this  process  of  pre- 
paration, so  that  at  or  before  the  time  fixed  by  law  every  United  States 
note  will  have  equal  purchasing  power  with  coin.  To  reverse  this  pol- 
icy in'  the  face  of  assured  success  will  greatly  impair  the  public  credit, 
arrest  the  process  of  deducing  the  interest  en  the  public  debt,  and  cause 
anew  the  'financial  distress  our  country  has  recently  suffered. 

The  resum23tion  act  contemplates  the  reduction  by  the  first  day  of 
January,  1879,  of  the  amount  of  United  States  notes  to  $300,000,000, 
by  the  cancellation  of  such  notes  to  the  extent  of  eighty  per  cent,  of 
the  circulation  issued  to  national  banks. 

The  amount  of  circulation  so  issued  may  not  be  sufficient  to  accom- 
plish the  reduction  contemplated  ;  the  Secretary  therefore  recommends 
that  authority  be  given  to  gradually  fund  into  four  per  cent,  bonds  all 
United  States  notes  in  excess  of  $300,000,000,  the  bonds  to  be  issued 
at  par  for  coin  or  its  market  equivalent  in  United  States  notes.  This 
will  be  in  harmony  with  the  declared  object  of  existing  law,  and  will 
open  an  easy  way  by  which  the  peo'jjle  may  invest  their  savings  in  a 
public  security.  Or  the  reduction  of  United  States  notes  to  the  maxi- 
mum of  $300,000,000  may  be  accomplished  if  Congress  will  authorize 
the  coinage  of  the  silver  dollar,  to  be  exchanged  for  United  States  notes 
on  the  demand  of  the  holder,  such  notes  to  be  retired  and  canceled. 

Existing  laws  do  not  clearly  define  whether  United  States  notes, 
when  redeemed  after  January  1,  1879,  may  be  reissued.  The  first  sec- 
tion of  the  resumption  act  plainly  provides  for  the  permanent  substitu- 
tion of  silver  coin  for  the  whole  amount  of  fractional  currency  out- 
standing. Section  3  plainly  provides  for  the  permanent  reduction  of 
United  States  notes  to  an  amount  not  exceeding  $300,000,000.  No  dis- 
tinct legislative  declaration  is  made  in  the  resumption  act  that  notes 
redeemed  after  that  limit  is  reached  shall  not  be  reissued  ;  but  section 
3579  of  the  Kevised  Statutes  of  the  United  States  provides  that,  "when 
any  United  States  notes  are  returned  to  the  Treasury,  they  may  be  re- 
38 


594  SPEECHES   AND  REPORTS  OF  JOHN  SHERMAN. 

issued  from  time  to  time,  as  the  exigencies  of  tlie  public  interest  may 
require." 

The  Secretary  is  of  the  opinion  that,  under  this  section,  notes,  when 
redeemed  after  the  1st  of  January,  1879,  if  the  amount  outstanding  is 
not  in  excess  of  $300,000,000,  may  be  reissued  as  the  exigencies  of  the 
public  service  may  require.  A  note  redeemed  with  coin  is  in  the  Treas- 
ury, and  subject  to  the  same  law  as  if  received  for  taxes,  or  as  a  bank 
note  when  redeemed  by  the  corporation  issuing  it.  The  authority  to 
reissue  it  does  not  depend  upon  the  mode  in  which  it  is  returned  to  the 
Treasury.  But  this  construction  is  controverted,  and  should  be  settled 
by  distinct  provisions  of  law.  It  should  not  be  open  to  doubt  or  dis- 
pute. The  decision  of  this  question  by  Congress  involves  not  merely 
the  construction  of  existing  law,  but  the  public  policy  of  maintaining  in 
circulation  United  States  notes,  either  with  or  without  the  legal-tender 
clause.  These  notes  are  of  great  public  convenience :  they  circulate 
readily ;  are  of  universal  credit ;  are  a  debt  of  the  people  without  inter- 
est ;  are  protected  by  every  possible  safeguard  against  counterfeiting  ; 
and,  when  redeemable  in  coin  at  the  demand  of  the  holder,  form  a 
paper  currency  as  good  as  has  yet  been  devised.  It  is  conceded  that  a 
certain  amount  can,  with  the  aid  of  an  ample  reserve  in  coin,  be  always 
maintained  in  circulation.  Should  not  the  benefit  of  this  circulation 
inure  to  the  people,  rather  than  to  coi-porations,  either  State  or  national  ? 
The  Government  has  ample  facihty  for  the  collection,  custody,  and  care 
of  the  coin  reserves  of  the  country.  It  is  a  safer  custodian  of  such  re- 
serves than  a  multitude  of  scattered  banks  can  be.  The  authority  to 
issue  circulating  notes  by  banks  is  not  given  to  them  for  their  benefit, 
but  for  the  public  convenience,  and  to  enable  them  to  meet  the  ebb  and 
flow  of  currency  caused  by  varying  crops,  productions,  and  seasons.  It 
is  indispensable  that  a  power  should  exist  somewhere  to  issue  and  loan 
credit  money  at  certain  times,  and  to  redeem  it  at  others.  This  func- 
tion can  be  perfonned  better  by  corporations  than  by  the  Government. 
The  Government  cannot  loan  money,  deal  in  bills  of  exchange,  or  make 
advances  on  property. 

The  Secretary  ventures  to  express  the  opinion  that  the  best  currency 
for  the  people  of  the  United  States  would  be  a  carefully  limited  amount 
of  United  States  notes,  promptly  redeemable  on  presentation  in  coin, 
and  supported  by  ample  reserves  of  coin,  and  supplemented  by  a  system 
of  national  banks,  organized  under  general  laws,  free  and  open  to  all, 
with  power  to  issue  circulating  notes  secured  by  United  States  bonds 
deposited  with  the  Government,  and  redeemable  on  demand  in  United 
States  notes  or  coin.  Such  a  system  will  secure  to  the  people  a  safe 
currency,  of  equal  value  in  all  parts  of  the  country,  receivable  for  all 
dues,  and  easily  convertible  into  coin.  Interest  can  thus  be  saved  on  so 
much  of  the  public  debt  as  can  be  conveniently  maintained  in  perma- 
nent circulation,  leaving  to  national  banks  the  proper  business  of  such 
corporations,  of  providing  cm'rency  for  the  varying  changes,  the  ebb 
and  flow  of  trade. 

The  legal-tender  quality  given  to  United  States  notes  was  intended 
to  maintain  them  in  forced  circulation,  at  a  time  when  their  deprecia- 
tion was  inevitable.     When  they  are  redeemable  in  coin  this  quality 


ANNUAL  KEPORT  TO   CONGRESS.  595 

may  either  be  withdrawn  or  retained,  without  affecting  their  use  as 
currency  in  ordinary  times.  But  all  experience  has  shown  that  there 
are  periods  when,  under  any  system  of  paper  money,  however  carefully 
guarded,  it  is  impracticable  to  maintain  actual  coin  redemption.  Usu- 
ally contracts  will  be  based  upon  current  paper  money,  and  it  is  just 
that,  during  a  sudden  panic  or  an  unreasonable  demand  for  coin,  the 
creditor  should  not  be  allowed  to  demand  payment  in  other  than  the 
currency  upon  which  the  debt  was  contracted.  To  meet  this  contin- 
gency, it  would  seem  to  be  right  to  maintain  the  legal-tender  quality 
of  the  United  States  notes.  If  they  are  not  at  par  with  coin,  it  is  the 
fault  of  the  Government  and  not  of  the  debtor ;  or,  rather,  it  is  the 
result  of  unforeseen  stringency  not  contemplated  by  the  contracting 
parties. 

In  establishing  a  system  of  paper  money  designed  to  be  permanent, 
it  must  be  remembered  that  heretofore  no  expedient  has  been  devised, 
either  in  this  or  other  countries,  that  in  times  of  panic  or  adverse  trade 
has  prevented  the  drain  and  exhaustion  of  coin  reserves,  however  large 
or  carefully  guarded.  Every  such  system  must  provide  for  a  suspension 
of  specie  payment.  Laws  may  forbid  or  ignore  such  a  contingency, 
but  it  will  come ;  and,  when  it  comes,  it  cannot  be  resisted,  but  should 
be  acknowledged  and  declared,  to  prevent  unnecessary  sacrifice  and 
ruin.  In  our  free  government  the  power  to  make  this  declaration  will 
not  be  willingly  intrusted  to  individuals,  but  should  be  determined  by 
events  and  conditions  known  to  all.  It  is  far  better  to  fix  the  maximum 
of  legal-tender  notes  at  $300,000,000,  supported  by  a  minimum  reserve 
of  $100,000,000  of  coin,  only  to  be  used  for  the  redemption  of  notes 
not  to  be  reissued  until  the  reserve  is  restored.  A  demand  for  coin 
suflicient  to  exhaust  such  a  reserve  may  not  occur ;  but,  if  events  force 
it,  its  existence  would  be  known  and  could  be  declared,  and  would 
justify  a  temporary  suspension  of  specie  payments.  Some  such  expe- 
dient could  no  doubt  be  provided  by  Congress  for  an  exceptional  emer- 
gency. In  other  times  the  general  confidence  in  these  notes  would 
maintain  them  at  par  in  coin,  and  justify  their  use  as  reserves  of  banks 
and  for  the  redemption  of  bank  notes. 

In  this  connection,  the  Secretary  calls  the  attention  of  Congress  to 
the  report  of  the  Comptroller  of  the  Currency. 

The  number  of  national  banks  in  existence  on  the  1st  day  of  ]^ovem- 
ber  last  was  2,080.  The  amount  of  their  circulating  notes  retired  within 
the  year  prior  to  N"ovember  1,  1877,  is  $20,681,637.  The  amount  of 
circulating  notes  issued  to  national  banks  during  the  same  period  is 
$16,306,030.  The  aggregate  amount  of  their  circulation  outstanding  is 
$316,775,111.     Their  loans  and  discounts  amount  to  $888,243,290.17. 

The  general  solvency  of  the  national  banks,  as  now  organized,  and 
their  benefit  to  the  people,  have  been  demonstrated  during  a  period  of 
fourteen  years.  No  one  has  lost  a  dollar  by  receiving  their  notes.  They  - 
have  been  less  subject  to  revulsion  and  failure  than  any  other  corpora- 
tions or  firms.  Their  organization  under  a  general  law  containing  every 
safeguard  which  experience  has  suggested— the  supervision  over  them 
by  the  Comptroller  of  the  Currency,  the  frequent  and  unforeseen  ex- 
aminations to  which  they  are  subject,  the  sworn  statements  required  of 


596  SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 

them  of  every  detail  necessary  to  disclose  their  condition,  the  absolute 
secui-ity  of  their  issues — makes  this  system  of  banking  as  safe  and  effi- 
cient as  any  yet  devised.  The  remaining  condition  to  perfect  this  sys- 
tem is  that  their  notes  should  be  readily  convertible  into  coin.  While 
United  States  notes  were  irredeemable  and  depreciated,  it  was  not  pos- 
sible that  bank  notes  should  rise  above  the  par  of  United  States  notes. 
The  tnie  test  of  this  system  of  banking  will  come  when  the  United 
States  notes  are  maintained  at  par  with  coin;  then  the  banks  must 
redeem  their  notes  in  coin  or  United  States  notes  equal  to  coin. 

The  ample  statistics  given  by  the  Comptroller,  and  his  comparison 
of  the  reserves  and  condition  of  the  national  banks  with  the  reserves 
and  condition  of  other  systems  of  banking  in  specie-paying  times,  give 
assurance  that  the  national  banks  are  able  to  redeem  their  circulating 
notes  in  coin  at  any  date  hxed  upon  by  the  Government,  They  cer- 
tainly should  not  enjoy  the  franchise  of  circulating  as  money  their 
non-interest-bearing  notes,  unless  they  are  prepared  to  redeem  them. 
The  present  system  of  redemption  of  bank  notes  at  the  Treasury  of  the 
United  States  can  be  continued  after  United  States  notes  are  at  par  with 
coin  as  well  as  now.  If  experience  should  show  that  additional  reserves 
are  necessary,  they  can  be  required.  Then,  as  now,  their  notes  will  be 
amply  secured  by  the  deposit  of  bonds,  and  confidence  in  this  security 
will  dispel  the  fear  of  failure,  which  under  former  systems  has  been 
the  cause  of  sudden  runs  or  demands  on  banks  for  payment  of  their 
notes.  If  the  policy  of  the  Government  should  be  to  maintain  in  cir- 
culation at  par  with  coin  a  maximum  of  three  hundred  millions  of 
United  States  notes,  and  to  sujDport  them  with  a  reserve  of  not  less 
than  one  hundred  millions  in  coin,  these  notes  will  be  the  natural 
reserves  of  the  banks,  and  more  convenient  for  that  purpose  than  a 
deposit  of  coin  in  their  vaults. 

Tlie  real  danger  that  in  former  systems  threatened  a  bank  was  its 
liability  for  deposits.  If  these  were  suddenly  withdrawn  or  greatly 
diminished,  the  note-holder  was  the  chief  sufferer.  The  first  rumor  of 
weakness  about  a  bank  brought  a  demand  from  depositors  and  note- 
holders alike ;  but  under  the  national  banking  system  the  note-holder 
is  secure  and  indifferent  whether  the  bank  breaks  or  not,  and  the 
depositor,  who  is  a  voluntary  creditor  of  the  bank,  is  not  likely  to 
hasten  its  fall.  He  is  usually  paid  by  a  transfer  of  credits,  and  in  most 
cases  is  a  debtor  as  well  as  a  creditor  of  the  bank.  Scarcely  five  per 
cent,  of  deposits  are  paid  by  currency. 

The  capital  stock  of  national  banks  paid  in  is  now  $4:T9,467,T71,  and 
the  surplus  fmid  and  other  undivided  profits  is  now  $166,348,799.96. 
The  banks  are  exceptionally  strong  in  their  cash  reserves.  Their  con- 
dition is  as  favorable  to  maintain  redemption  in  coin  as  in  United 
States  notes,  and  the  Secretary  concurs  in  the  opinion  of  the  Comptrol- 
ler that  they  ought  to  be,  can  be,  and  will  be  prepared  for  redemption 
of  their  circulating  notes  in  coin  or  in  United  States  notes  equal  to  coin 
by  the  time  fixed  by  law,  without  interfering  with  their  ability  or  dis- 
position to  render  their  aid,  as  now,  l)y  loans  and  discounts,  in  conduct- 
ing the  business  and  exchanges  of  the  country.  The  market  value  of 
their  circulating  note  is  ninety-seven  and  three  eighths  per  cent.     The 


ANNUAL  REPOKT  TO  CONGRESS.  597 

difference  is  not  equal  to  six  months'  interest  on  the  bonds  deposited 
for  the  security  of  the  notes,  and  not  five  per  cent,  of  their  surphis  on 
hand.  It  is  scarcely  to  be  credited  that  the  payment  of  this  will  dis- 
turb in  any  way  the  even  course  of  their  business. 

Complaint  is  made  by  the  banks  and  bankers  of  the  country  of  the 
tax  on  tlieir  deposits,  and  attention  is  called  to  what  is  said  by  the 
Comptroller  of  the  Currency  as  to  the  repeal  of  this  tax.  While  the 
necessity  exists  for  collecting  the  amount  of  revenue  now  required,  the 
Secretary  is  not  prepared  to  recommend  such  repeal ;  but  whenever  a 
sufficient  amount  of  revenue  for  the  support  of  the  Government  can  be 
derived  from  the  other  articles  now  subject  to  taxation,  a  reduction  of 
bank  taxation  will  then  be  advisable. 

The  cost  of  the  redemption  of  bank  notes  in  United  States  notes  at 
the  Treasury,  under  the  present  system,  does  not  exceed  one  sixth  of 
one  per  cent,  on  the  amount  redeemed,  and  is  refunded  to  the  Gov- 
ernment by  the  banks.  The  redemption  is  a  great  convenience  to  them 
and  to  the  public,  and  should  be  continued. 

The  act  creating  the  national  banking  system  recognizes  the  charac- 
ter of  these  banks  as  Government  agents  or  depositaries.  They  could 
greatly  assist  in  the  process  of  refunding ;  they  are  conveniently  dis.- 
tributed  so  as  to  be  within  easy  reach  of  the  people  of  the  United 
States.  The  Secretary  is  of  the  opinion  that  they  can  be  under  exist- 
ing law,  and  ought  to  be,  made  the  agents  of  the  Government  in  the 
sale  of  bonds,  upon  conditions  that  w411  make  it  for  their  interest  to 
promote  such  sales,  and  will  be  safe  and  advantageous  to  the  Govern- 
ment. Various  plans  have  been  submitted  to  secure  their  cooperation, 
and  the  best  will  be  adopted. 

The  Secretary  calls  the  attention  of  Congress  to  the  report  of  the 
Director  of  the  Mint.  The  general  management  of  the  mints  and 
assay  offices,  and  the  amount,  accuracy,  and  perfection  of  their  work, 
are  highly  satisfactory.  The  coinage  of  gold  and  silver,  their  relative 
value  to  each  other,  and  their  legal-tender  qualities,  are  now  the  sub- 
jects of  discussion  and  legislation  in  all  civilized  countries.  These 
questions  are  especially  important  to  the  United  States,  now  in  transi- 
tion from  an  irredeemable  paper  cuiTency  to  a  mixed  currency  redeem- 
able in  coin,  and  will  justify  the  Secretary  in  a  fuller  presentation  of 
these  topics  than  is  usual  in  his  annual  report. 

The  resumption  act  of  January  14, 1875,  provided  for  tlie  exchange 
and  substitution  of  silver  coin  for  fractional  currency.  To  facilitate 
this  exchange,  the  joint  resolution  approved  July  22,  1876,  provided 
that  such  coin  should  be  issued  to  an  amount  not  exceeding  $10,000,- 
000,  for  an  equal  amount  of  legal-tender  notes.  It  also  provided  that 
the  aggregate  amount  of  such  coin  and  fractional  currency  outstanding 
should  not  exceed,  at  any  time,  $50,000,000.  That  limit  would  have 
been  reached  some  time  since  if  the  whole  amount  of  fractional  cur- 
rency issued  and  not  redeemed  had  been  held  to  be  "  outstanding." 
It  was  well  known,  however,  that  a  very  large  amount  of  fractional 
cuiTency  issued  had  been  destroyed,  and  could  not  be  presented  for 
redemption,  and  could  hardly  be  held  to  be  "  outstanding."  The 
Treasurer  of  the  United  States,  the  Comptroller  of  the  Currency,  and 


598  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

the  Director  of  the  Mint  concurred  in  estimating  the  amount  so  lost 
and  destroyed  to  be  not  less  than  $8,083,513. 

As  it  was  evident  that  Congress  intended  to  provide  an  aggregate 
issue  of  $50,000,000  of  such  coin  and  currency  in  circulation,  the 
Secretary  directed  the  further  issue  of  silver  coin  equal  in  amount  to 
the  currency  estimated  to  have  been  lost  and  destroyed. 

It  is  submitted  that  the  limitation  upon  the  amount  of  such  frac- 
tional coin  to  be  issued  in  exchange  for  United  States  notes  should  be 
repealed.  This  coin  is  readily  taken,  is  in  great  favor  with  the  people, 
its  issue  is  profitable  to  the  Government,  and  experience  has  shown 
that  there  is  no  difficulty  in  maintaining  it  at  par  with  United  States 
notes.  The  estimated  amount  of  such  coin  in  circulation  in  the  United 
States  in  1860,  at  par  with  gold,  was  $43,000,000.  Great  Britain, 
with  a  population  of  32,000,000,  maintains  an  inferior  fractional  coin 
to  the  amount  of  $92,463,500,^^  at  par  with  gold,  and  other  nations 
maintain  a  much  larger  jper  cajnta  amount.  The  true  limit  of  such 
coin  is  the  demand  that  may  be  made  for  its  issue  ;  and  if  only  issued 
in  exchange  for  United  States  notes,  there  is  no  danger  of  an  excess 
being  issued. 

•  By  the  coinage  act  of  1873  any  person  may  deposit  silver  bullion 
at  the  mint  to  be  coined  into  trade  dollars  of  the  weight  of  420  grains 
troy,  upon  the  payment  of  the  cost  of  coinage.  This  provision  was 
made  at  a  time  when  such  a  dollar  was  worth  in  the  market  $1-0213 
in  gold,  and  was  designed  for  the  use  of  trade  in  China,  where  silver 
was  the  only  standard.  By  the  joint  resolution  of  July  22,  1876, 
passed  when  the  trade  dollar  in  market  value  had  fallen  greatly  below 
one  dollar  in  gold,  it  was  pro\aded  that  it  should  not  be  thereafter  a 
legal  tender,  and  the  Secretary  of  the  Treasury  was  authorized  "  to 
limit  the  coinage  thereof  to  such  an  amount  as  he  may  deem  sufficient 
to  meet  the  export  demand  for  the  same."  Under  these  laws  the 
amount  of  trade  dollars  issued,  mainly  for  exportation,  was  $30,710,- 
400.  In  October  last  it  became  apparent  that  there  was  no  further 
export  demand  for  trade  dollars,  but  deposits  of  silver  bullion  were 
made,  and  such  dollars  were  demanded  of  the  mint  for  circulation  in 
the  United  States,  that  the  owner  might  secure  the  difference  between 
the  value  of  such  bullion  in  the  market  and  United  States  notes.  At 
the  time  the  mints  were  fully  occupied  by  the  issue  of  fractional  and 
other  coins  on  account  of  the  Government,  Therefore,  under  the 
authority  of  tlie  law  refeiTed  to,  the  Secretary  directed  that  no  further 
issues  of  trade  dollars  should  be  made  until  necessary  again  to  meet 
an  export  demand.  In  case  another  silver  dollar  is  authorized,  the 
Secretary  recommends  tliat  the  trade  dollar  be  discontinued. 

The  question  of  the  issue  of  a  silver  dollar  for  circulation  as  money 
has  been  much  discussed  and  carefully  examined  by  a  commission  or- 
ganized by  Congress,  which  has  recommended  the  coinage  of  the  old 
silver  dollar.  With  such  legislative  provision  as  will  maintain  its  cur- 
rent value  at  par  with  gold,  its  issue  is  respectfully  recommended.  A 
gold  coin  of  the  denomination  of  one  dollar  is  too  small  for  convenient 

*  As  estimated  by  Mr.  Freemantle,  Deputy  Master  of  the  Royal  Mint,  December,  18Y5. 


ANNUAL  EEPORT  TO^  CONGRESS.  599 

circulation,  wliile  sucli  a  coin  in  silver  would  be  convenient  for  a  mul- 
titude of  daily  transactions,  and  is  in  a  form  to  satisfy  the  natural  in- 
stinct of  hoarding. 

Of  the  metals,  silver  is  of  most  general  use  for  coinage.  It  is  a 
part  of  every  system  of  coinage,  even  in  countries  where  gold  is  the 
sole  legal  standard.  It  best  measures  the  common  wants  of  life,  but, 
from  its  weight  and  bulk,  is  not  a  convenient  medium  in  the  larger 
exchanges  of  commerce.  Its  production  is  reasonably  steady  in  amount. 
The  relative  market  value  of  silver  and  gold  is  far  more  stable  than 
that  of  any  other  two  commodities ;  still,  it  does  vary.  It  is  not  in 
the  power  of  human  law  to  prevent  the  variation.  This  inherent  diffi- 
culty lias  compelled  all  nations  to  adopt  one  or  the  other  as  the  sole 
standard  of  value,  or  to  authorize  an  alternative  standard  of  either,  or 
to  coin  both  metals  at  an  arbitrary  standard,  and  to  maintain  one  at 
par  with  the  other  by  limiting  its  amount  and  legal-tender  quality,  and 
receiving  or  redeeming  it  at  par  with  the  other. 

It  has  been  the  careful  study  of  statesmen  for  many  years  to  secure 
a  bimetallic  currency  not  subject  to  the  changes  of  market  value,  and 
so  adjusted  that  both  kinds  can  be  kept  in  circulation  together,  not 
alternating  with  each  other.  The  growing  tendency  has  been  to  adopt 
for  coins  the  principle  of  "  redeemability  "  applied  to  different  forms 
of  paper  money.  By  limiting  tokens,  silver  and  paper  money,  to  the 
amount  needed  for  business,  and  promptly  receiving  or  redeeming  all 
that  may  at  any  time  be  in  excess,  all  these  forms  of  money  can  be 
kept  in  circulation,  in  large  amounts,  at  par  with  gold.  In  this  way 
tokens  of  inferior  intrinsic  value  are  readily  circulated,  but  do  not  de- 
preciate below  the  paper  money  into  which  they  are  convertible.  The 
fractional  silver  coin  now  in  circulation,  though  the  silver  of  which  it 
is  composed  is  of  less  market  value  than  the  paper  money,  passes  read- 
ily among  all  classes  of  people,  and  answers  all  the  purposes  for  which 
it  was  designed.  And  so  the  silver  dollar,  if  restored  to  our  coinage, 
would  greatly  add  to  the  convenience  of  the  people.  But  this  coin 
should  be  subject  to  the  same  rule,  as  to  issue  and  convertibility,  as 
other  forms  of  money.  If  the  market  value  of  the  silver  in  it  were 
less  than  that  of  gold  coin  of  the  same  denomination,  and  it  were  is- 
sued in  unlimited  quantities,  and  made  a  legal  tender  for  all  debts,  it 
would  demonetize  gold  and  depreciate  our  paper  money. 

The  importance  of  gold  as  the  standard  of  value  is  conceded  by  all. 
Since  1834  it  has  been  practically  the  sole  coin  standard  of,  the  United 
States,  and  since  1815  has  been  the  sole  standard  of  Great  Britain. 
Germany  has  recently  adopted  the  same  standard.  France  and  other 
Latin  nations  have  suspended  the  coinage  of  silver,  and,  it  is  supposed, 
will  gradually  either  adopt  the  sole  standard  of  gold  or  provide  for 
the  convertibility  of  silver  coin,  on  the  demand  of  the  holder,  into  gold 
coin. 

In  the  United  States  several  experiments  have  been  made  with  the 
view  of  retaining  both  gold  and  silver  in  circulation.  The  Second 
Congress  undertook  to  establish  the  ratio  of  fifteen  of  silver  to  one  of 
gold,  with  free  coinage  of  both  metals.  By  this  ratio  gold  was  under- 
valued, as  one  ounce  of  gold  was  worth  more  in  the  markets  of  the 


600  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

world  than  fifteen  ounces  of  silver,  and  gold  therefore  was  exported. 
To  correct  this,  in  1837  the  ratio  was  fixed  at  sixteen  to  one,  but  six- 
teen ounces  of  silver  were  worth  in  the  market  more  than  one  ounce 
of  gold,  so  that  silver  was  demonetized. 

These  difiiculties  in  the  adjustment  of  gold  and  silver  coinage  were 
fully  considered  by  Congress  prior  to  the  passage  of  the  act  approved' 
February  21,  1853.  By  that  act  a  new  and,  it  was  believed,  a  penna- 
nent  policy  was  adopted  to  secure  the  simultaneous  circulation  of  both 
silver  and  gold  coins  in  the  United  States.  Silver  fractional  coins  were 
provided  for  at  a  ratio  of  14*88  in  silver  to  one  in  gold,  and  were  only 
issued  in  exchange  for  gold  coin.  The  right  of  private  parties  to  de- 
posit silver  bullion  for  such  coinage  was  repealed,  and  these  coins  were 
issued  from  bullion  purchased  by  the  Treasurer  of  the  Mint,  and  only 
upon  the  account  and  for  the  profit  of  the  United  States.  The  coin 
was  a  legal  tender  only  in  payment  of  debts  for  all  sums  not  exceeding 
five  dollars.  Though  the  silver  in  this  coin  was  worth  in  the  market 
3-13  cents  on  the  dollar  less  than  gold  coin,  yet  its  convenience  for  use 
as  change,  and  its  issue  by  the  Government  only  in  exchange  for  and 
its  practical  convertibility  into  gold  coin,  maintained  it  in  circulation 
at  par  with  gold  coin.  If  the  slight  error  in  the  ratio  of  1792  pre- 
vented gold  from  entering  into  circulation  for  forty-five  years,  and  the 
slight  error  in  1837  brought  gold  into  circulation  and  banished  silver 
until  1853,  how  much  more  certainly  will  an  error  now  of  nine  per 
cent,  cause  gold  to  be  exported  and  silver  to  become  the  sole  standard 
of  value !  Is  it  worth  while  to  travel  again  the  round  of  errors,  when 
experience  has  demonstrated  that  both  metals  can  only  be  maintained 
in  circulation  together  by  adhering  to  the  policy  of  1853  ? 

The  silver  dollar  was  not  mentioned  in  the  act  of  1853,  but  from 
1792  until  1874  it  was  worth  more  in  the  market  than  the  gold  dollar 
provided  for  in  the  act  of  1837.  It  was  not  a  current  coin  contem- 
plated as  being  in  circulation  at  the  passage  of  the  act  of  February  12, 
1873.  The  whole  amount  of  such  dollars  issued  prior  to  1853  was 
$2,553,000.  Subsequent  to  1853,  and  until  it  was  dropped  from  our 
coinage  in  1873,  the  total  amount  issued  was  $5,492,838,  or  an  aggre- 
gate of  $8,045,838,  and  this  was  almost  exclusively  for  exportation. 

By  the  coinage  act  approved  February  12,  1873,  fractional  silver 
coins  were  authorized,  similar  in  general  character  to  the  coins  of  1853, 
but  with  a  slight  increase  of  silver  in  them,  to  make  them  conform 
exactly  to  the  French  coinage,  and  the  old  dollar  was  replaced  by  the 
trade  dollar  of  420  grains  of  standard  silver. 

Mucli  complaint  has  been  made  that  this  was  done  with  the  design 
of  depriving  the  people  of  the  privilege  of  paying  their  debts  in  a 
cheaper  money  than  gold,  but  it  is  manifest  that  this  is  an  error.  No 
one  then  did  or  could  foresee  the  subsequent  fall  in  the  market  value 
of  silver.  The  silver  dollar  was  an  unknown  coin  to  the  people,  and 
was  not  in  circulation  even  on  the  Pacific  slope,  where  coin  was  in 
common  use.  The  trade  dollar  of  420  grains  was  substituted  for  the 
silver  dollar  of  412^  grains  because  it  was  believed  that  it  was  better 
adapted  to  supersede  the  Mexican  dollar  in  the  Chinese  trade,  and  ex- 
periment proved  this  to  be  true.    Since  the  trade  dollar  was  authorized 


ANNUAL  REPORT  TO  CONGRESS.  601 

$30,710,400  have  been  issued,  or  nearly  four  times  the  entire  issue  of 
old  silver  dollars  since  the  foundation  of  the  Government.  Had  not 
the  coinage  act  of  1873  been  passed,  the  United  States  Avould  now  be 
compelled  to  suspend  the  free  coinage  of  silver  dollars,  as  the  Latin  na- 
tions did,  or  to  have  silver  as  the  sole  coin  standard  of  value. 

Since  February,  1873,  great  changes  have  occurred  in  the  market 
value  of  silver.  Prior  to  that  time  the  silver  in  the  old  dollar  was 
worth  more  than  a  gold  dollar,  while  at  present  it  is  worth  about  92 
cents.  If  by  law  any  holder  of  silver  bullion  might  deposit  it  in  the 
mint  and  demand  a  full  legal-tender  dollar  for  every  41 2|-  grains  of 
standard  silver  deposited,  the  result  would  be  inevitable  that  as  soon  as 
the  mints  could  supply  the  demand  the  silver  dollar  would,  by  a  finan- 
cial law  as  fixed  and  invariable  as  the  law  of  gravitation,  become  the 
only  standard  of  value.  All  forms  of  paper  money  would  fall  to  that 
standard  or  below  it,  and  gold  would  be  demonetized  and  quoted  at  a 
premium  equal  to  its  value  in  the  markets  of  the  world.  For  a  time 
the  run  to  deposit  bullion  at  the  mint  would  give  to  silver  an  artificial 
value,  of  which  the  holders  and  producers  of  silver  bullion  would  have 
the  sole  benefit.  The  utmost  capacity  of  the  mints  would  be  employed 
for  years  to  supply  this  demand  at  the  cost  of  and  without  profit  to  the 
people.  The  silver  dollar  would  take  the  place  of  gold  as  rapidly  as 
coined,  and  be  used  in  the  payment  of  customs  duties,  causing  an  accu- 
mulation of  such  coins  in  the  Treasury.  If  used  in  paying  the  interest 
on  the  public  debt,  the  grave  questions  already  presented  would  arise 
with  public  creditors,  seriously  affecting  the  public  credit. 

It  is  urged  that  the  free  coinage  of  silver  in  the  United  States  will 
restore  its  market  value  to  that  of  gold.  Market  value  is  fixed  by  the 
world,  and  not  by  the  United  States  alone,  and  is  affected  by  the  whole 
mass  of  silver  in  the  world.  As  the  enormous  and  continuous  demand 
for  silver  in  Asia  has  not  prevented  the  fall  in  silver,  it  is  not  likely 
that  the  limited  demand  for  silver  coin  in  this  country,  where  paper 
money  is  now  and  will  be  the  chief  medium  of  exchange,  will  cause 
any  considerable  advance  in  its  value.  This  advance,  if  any,  will  be 
secured  by  the  demand  for  silver  bullion  for  coin  to  be  issued  by  and 
for  the  United  States,  as  well  as  if  it  were  issued  for  the  benefit  of  the 
holder  of  the  bullion.  If  the  financial  condition  of  our  country  is  so 
grievous  that  we  must  at  every  hazard  have  a  cheaper  dollar,  in  order 
to  lessen  the  burden  of  debts  already  contracted,  it  is  far  better,  rather 
than  to  adopt  the  single  standard  of  silver,  to  boldly  reduce  the  number 
of  grains  in  the  gold  dollar,  or  to  abandon  and  retrace  all  efforts  to 
make  United  States  notes  equal  to  coin.  Either  expedient  will  do 
greater  harm  to  the  public  at  large  than  any  possible  benefit  to  debtors. 

The  free  coinage  of  silver  will  also  impair  the  pledge  made  of  the 
customs  duties,  by  the  act  of  February,  1862,  for  the  payment  of  the 
interest  of  the  public  debt.  The  policy  thus  far  adhered  to,  of  col- 
lecting these  duties  in  gold  coin,  has  been  the  chief  cause  of  upholding 
and  advancing  the  public  credit,  and  making  it  possible  to  lessen  the 
burden  of  interest  by  the  process  of  refunding. 

In  view  of  these  considerations,  the  Secretary  has  felt  it  to  be  his 
duty  to  earnestly  m*ge  upon  Congress  the  serious  objections  to  the  free 


602  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAK 

coinage  of  silver  on  such  conditions  as  will  demonetize  gold,  greatly 
disturb  all  the  financial  operations  of  the  Government,  suddenly  revo- 
lutionize the  basis  of  our  currency,  throw  upon  the  Government  the 
increased  cost  of  coinage,  arrest  the  refunding  of  the  public  debt,  and 
impair  the  public  credit,  with  no  apparent  advantage  to  the  people  at 
large. 

"The  Secretary  believes  that  all  the  beneficial  results  hoped  for  from 
a  liberal  issue  of  silver  coin  can  be  secured  by  issuing  this  coin,  in  pur- 
suance of  the  general  policy  of  the  act  of  1853,  in  exchange  for  United 
States  notes,  coined  from  bullion  purchased  in  the  open  market  by  the 
United  States,  and  maintaining  it  by  redemption,  or  otherwise,  at  par 
with  gold  coin.  It  could  be  made  a  legal  tender  for  such  sums  and  on 
such  contracts  as  would  secure  to  it  the  most  general  circulation.  It 
could  be  easily  redeemed  in  United  States  notes  and  gold  coin,  and 
only  reissued  when  demanded  for  public  convenience.  If  the  essential 
quality  of  redeemability  given  to  United  States  notes,  bank  bills, 
tokens,  fractional  coins,  and  currency  maintains  them  at  par,  how  much 
easier  it  would  be  to  maintain  the  silver  dollar,  of  intrinsic  market 
value  nearly  equal  to  gold,  at  par  with  gold  coin,  by  giving  to  it  the 
like  quality  of  redeemability !  To  still  further  secure  a  fixed  relative 
value  of  silver  and  gold,  the  United  States  might  invite  an  internation- 
al convention  of  commercial  nations.  Even  such  a  convention,  while 
it  might  check  the  fall  of  silver,  could  not  prevent  the  operation  of 
that  higher  law  which  places  the  market  value  of  silver  above  human 
control.  Issued  upon  the  conditions  here  stated,  the  Secretary  is  of 
opinion  that  the  silver  dollar  will  be  a  great  public  advantage,  but  that 
if  issued  without  limit,  upon  the  demand  of  the  owners  of  silver  bul- 
lion, it  wiU  be  a  great  public  injury.     *     *     *     * 

JOHN  SHEEMAN, 

Secretary. 

The  Honorable  the  SpeaTcer  of  the  House  of  Bepresentatives. 


riNAlS^CES. 

DELIVERED  AT  TOLEDO,  MONDAY,  AUGUST  S6,  1878. 

Fellow  Citizens  :  When  I  informed  the  Eepublican  State  Commit- 
tee that  I  could  speak  once  in  Ohio  during  my  brief  visit,  they  inquired 
if  it  would  be  agreeable  to  me  to  speak  in  Toledo.  I  promptly  an- 
swered yes,  for  I  knew  that,  though  your  political  associations  had  been 
gi-eatly  disturbed  by  questions  wfcch  sprung  out  of  the  hardness  of  the 
times  and  the  panic  of  1873,  you  would  yet  give  me  a  patient  hearing, 
and  thus  be  able  better  to  judge  how  far  we  disagree.  ^ 

I  naturally  suppose  that  you  desire  me  to  speak  mainly  on  financial 
topics.  My  official  position  for  many  years  in  the  Senate  connected  me 
with  the  financial  laws  of  Congress,  and  my  present  office  requires  me 
to  carry  them  into  execution.     They  relate  mainly  to  the  public  credit. 


FINANCES.  603 

the  public  debt,  our  coin  and  currency,  and  the  system  of  taxes  by  which 
the  Government  is  supported.  These  topics  are  necessarily  interwoven 
with  each  other,  but  each  canvass  brings  some  of  them  into  more  prom- 
inence than  others. 

The  questions  most  discussed  are  those  relating  to  silver  and  resump- 
tion. These  are  only  branches  of  the  cmTcncy  question,  but  they  pre- 
sent the  main  difficulties  in  the  administration  of  the  Treasury  Depart- 
ment, and  will  be  mainly  the  subject  of  my  remarks.  The  election  this 
fall  for  members  of  the  House  of  Representatives  will  practically  settle 
them.  There  ought  to  be  no  partisan  or  personal  feeling  about  them, 
for  we  are  all  interested  alike  in  promoting  the  common  good,  and  in 
settling  upon  a  sound  basis  the  currency  of  the  country. 

In  undertaking  to  address  you  I  will  frankly  and  freely  express  my 
own  opinion,  but,  while  I  remain  in  an  executive  office,  I  shall  cheer- 
fully obey  aud  execute  the  judgment  of  my  fellow  citizens  as  expressed 
by  Congress,  or  give  way  to  some  one  who  will  do  so. 

What  I  want  is  the  largest  amount  of  currency  that  can  be  main- 
tained at  par  with  the  established  coin  of  the  country.  From  the  di- 
versity of  our  wants  we  must  have  different  kinds  of  money,  to  mea- 
sure great  and  little  wants.  We  must  have  coin  money  and  paper 
money,  and  plenty  of  both.  What  I  contend  for  is  that,  though  our 
money  may  be  of  different  kinds,  it  must  all  have  the  same  purchasing 
power.  The  essential  qualities  of  all  good  money  are  stability,  equality, 
and  convertibility.  The  dollar  of  one  kind  should  buy  as  much  as  the 
dollar  of  another  kind.  Depreciated  money  cheats  the  ignorant  and 
the  unwary,  and  enriches  the  money-changer.  The  poor  man  whose 
dependence  is  upon  his  daily  labor  is  the  victim  of  depreciated  money, 
for  he  must  take  what  is  offered,  and  he  is  always  paid  in  the  poorest 
money. 

No  distinction  should  be  made  between  coin  and  paper  money,  or 
between  the  note-holder  and  the  bond-holder.  The  money  provided 
by  the  Government  should  pay  all  debts  and  be  used  for  all  debts. 

Subject  to  these  conditions  I  am  for  the  largest  amount  of  each, 
kind  of  money  demanded  for  the  wants  of  business,  and  if  you  agree 
with  me  in  these  general  propositions  there  will  be  no  quaiTel  be- 
tween us. 

Gold,  silver,  and  copper,  as  well  as  the  modern  contrivance  of  paper 
money,  are  all  useful  means  of  exchange,  and  ought  to  be  freely  used 
and  always  maintained  at  par  with  each  other. 

Minor  coins  of  baser  metals  are  indispensable  for  the  immediate 
small  wants  of  life.  To  measure  these  wants  silver  coins  would  have 
to  be  too  small  in  size,  and  therefore  copper  and  nickel  are  used  ;  but 
these  metals  are  so  cheap  that,  if  coined  at  their  intrinsic  vahie,  the 
coins  would  be  too  large  for  convenience  ;  and  so  by  common  consent 
the  old  copper  cents  are  abandoned,  and  token  coins  of  copper  and 
nickel  are  issued  at  several  times  their  intrinsic  value,  but  are  main- 
tained at  par  by  the  necessity  for  their  use,  and  by  being  redeemable  in 
money  of  full  value  when  presented  in  considerable  sums. 

Silver  money  is  the  best  and  most  convenient  for  the  market  and 
shopping  transactions  of  life.     Silver  coins  are  by  all  odds  more  nmner- 


G04  SPEECHES   AND  EEPORTS  OF  JOHN  SHERMAN. 

ous  than  coins  of  gold,  even  in  countries  where  gold  alone  is  the  stan- 
dard of  value.  The  shilhngs  and  half  crowns  of  Great  Britain  out- 
numher  the  sovereigns  many  times,  and  in  the  United  States  the  silver 
coins  issued  from  February  1,  1875,  to  August  1,  1878,  numbered 
220,829,540,  while  the  whole  number  of  gold  pieces  issued  during  that 
time  in  the  United  States  was  7,710,040. 

'Ko  form  of  paper  money  can  profitably  take  the  place  of  silver. 
Our  old  fractional  currency  was  the  best  substitute  ever  devised,  but 
this  cost  annually  nearly  four  per  cent,  to  maintain  it  in  decent  condi- 
tion, or  nearly  the  interest  of  the  money,  while  the  amount  lost, 
wasted,  and  destroyed  was  a  heavy  tax  upon  the  people  who  used  it. 
It  lasted  on  an  average  only  fifteen  months,  while  coin  lasts  thirty 
years.  The  largest  j)ossible  use  of  silver  and  its  freest  circulation  are 
indispensable  to  any  system  of  money  that  can  be  devised,  but  it  must 
be  maintained  in  some  way  at  or  near  the  intrinsic  value  of  other 
money. 

If  silver  is  coined  at  less  than  its  market  value  and  issued  without 
limit,  it  will  as  surely  displace  gold  as  water  will  displace  air.  There- 
fore, fractional  silver  is  hmited  to  $50,000,000,  and  is  issued  only  when 
required  in  exchange  for  United  States  notes.  If  it  becomes  too 
abundant,  it  comes  into  the  Treasury  for  taxes  and  is  paid  out  only 
when  demanded  or  willingly  received. 

So  the  coining  of  the  new  silver  dollar,  though  a  legal  tender  for 
all  purposes,  is  limited  by  law  to  from  $2,000,000  to  $4,000,000  a 
month.  The  silver  in  this  dollar  is  worth  less  in  the  market  than  the 
gold  or  even  the  paper  dollar,  and,  if  issued  without  limit,  the  silver 
dollar  will  surely  depreciate  below  the  gold  dollar,  and  will  become 
the  single  standard  of  value.     This  is  as  certain  as  the  march  of  time. 

But  gold  also  is  an  indispensable  standard  of  value.  It  measures 
all  the  larger  transactions  of  business  life.  It  is  used  as  such  by  most 
Christian  and  civilized  nations  of  the  world,  and  its  demonetization 
would  be  as  great  an  injury  as  the  demonetization  of  silver. 

Kow,  fellow  citizens,  I  am  in  favor  of  so  adjusting  this  matter  that 
both  metals  will  circulate  at  par  with  each  other,  that  you  will  have 
gold  eagles  and  silver  dollars,  and  that  a  dollar  of  either  will  j)urchase 
precisely  the  same  quantities. 

This  can  be  done  while  the  market  value  of  silver  is  lower  than  it 
should  be  in  view  of  its  legal  ratio  with  gold,  either. 

First,  by  limiting  the  amount  of  silver  to  be  issued  ; 

Second,  by  readjusting  the  relative  weight  of  coins,  either  by  in- 
creasing the  weight  of  the  silver  coin,  or  lessening  that  of  the  gold 
coin,  or  equalizing  them  by  increasing  the  weight  of  silver  and  lessen- 
ing that  of  the  gold  ;  or, 

Third,  by  some  plan  to  be  adopted  by  the  International  Conference 
between  bimetallic  nations  now  in  session,  which  I  sincerely  trust  may 
arrive  at  some  practical  result. 

Any  plan  to  keep  these  coins  on  a  par  with  each  other  will  meet 
my  hearty  concurrence,  but  I  am  utterly  opposed  to  any  measure  that 
will  deprive  us  of  the  use  of  either  of  them,  circulating  side  by  side, 
with  equal  purchasing  power,  at  par  with  each  other.     I  assure  you  in 


FINANCES.  605 

all  frankness  that  the  silver  question  must  be  solved  in  some  way,  or 
we  will  have  to  adopt  the  single  standard  of  silver  like  the  Chinese  and 
other  Asiatic  nations. 

And  now,  fellow  citizens,  I  come  to  the  most  important  question  of 
this  canvass. 

Our  paper  cuiTcncy  is  now  hajjpily  brought  very  near  to  par  with 
coin. 

Will  you  insist  upon  keeping  it  at  par,  or  will  you,  by  repealing 
the  resumption  act,  retrace  the  steps  already  taken,  and  embark  again 
upon  the  sea  of  irredeemable  paper  currency  ?  Shall  our  paper  money 
hereafter  be  redeemable  in  coin  upon  the  demand  of  the  holder  and  be 
maintained  at  par  with  coin,  or  shall  it  be  what  its  friends  call  a  "  fiat " 
money,  irredeemable  in  coin,  dependent  upon  the  daily  trade-marks  of 
bankers  and  brokers  for  its  value,  and  upon  the  changing  majorities  in 
Congress  for  its  amount  and  quality  ? 

This  county  of  Lucas  has  always  been  a  good  Republican  county. 
It  earnestly  supported  the  administration  of  Abraham  Lincoln,  sup- 
ported all  the  measures  of  the  war,  and  in  patriotic  exertions  and  sacri- 
fices for  the  cause  of  the  Union  was  not  excelled  by  any  jjortion  of  the 
United  States  of  equal  population.  It  is  to  you  as  Repubhcans  that  I 
wish  to  address  what  I  have  to  say  to-night. 

It  was  the  Republican  party  which  devised  and  issued  the  green- 
backs, and  which  has  thus  far  sustained  them  and  advanced  tliem  by 
slow  and  gradual  processes  to  par  with  coin. 

No  doubt  there  have  been  honest  differences,  as  it  is  natural  there 
would  be,  as  to  the  means  by  which  the  result  has  been  brought  about, 
but  there  should  be  no  difference  among  Republicans  as  to  the  desire 
that  tlie  money  contrived  by  their  policy,  and  the  chosen  instrument 
by  which  the  forces  of  the  United  States  were  marshaled  during  om* 
war,  should  be  made  and  kept  equal  to  coin. 

However  varying  cun-ents  of  public  opinion  or  temporary  depres- 
sion of  industry  may  tend  to  disturb  the  public  judgment,  it  should  be 
the  will  and  the  duty  of  the  great  party  to  which  we  belong  to  make 
good  the  promises  printed  on  the  face  of  United  States  notes,  especially 
when  this  is  demanded  not  only  by  national  honor,  but  by  the  clearest 
public  policy.  In  this  money,  which  is  our  own,  we  naturally-  take 
pride.  We  guarded  it  in  its  cradle  when  it  was  reviled  and  derided  by 
our  political  adversaries,  at  a  time  when  it  was  said  it  would  wander 
like  Cain  with  a  mark  upon  its  brow,  dishonored  and  repudiated.  We 
believed  in  it  then  and  we  believe  in  it  now. 

When  it  was  issued  we  promised  to  redeem  it  in  coin,  and  every 
fresh  issue  was  accompanied  by  a  fresli  promise.  In  1866  we  not  only, 
by  law,  promised  to  redeem  it,  but  provided  for  the  gradual  contraction 
of  its  amount.  In  1868  we  suspended  the  contraction  but  renewed  the 
promise.  In  1869  we  solemnly  pledged  tlie  public  faith  to  redeem  the 
notes  in  coin. 

1^0  step,  however,  was  taken  for  their  redemj)tion,  and,  under  the 
stimulus  of  inflation,  speculation  ran  riot,  visionary  schemes  were  en- 
tered upon,  extravagance  prevailed,  until  in  September,  1873,  the  bub- 
ble burst,  prices  fell,  the  wild  delusions  of  the  time  were  dissipated, 


606  SPEECHES   AM)  REPORTS  OF  JOHN  SHERMAN. 

and  business  men  had  to  face  the  inevitable  evils  that  always  come 
from  irredeemable  paper  money. 

Then,  after  fifteen  months'  debate  in  Congress  and  before  the  peo- 
ple, as  a  remedy  for  the  evils  we  were  suffering,  the  resumption  act 
was  passed.  Its  only  object  was  to  make  our  paper  money  equal  to 
coin.  It  was  not  the  best  possible  measure,  but  was  the  only  one  that 
could  be  agreed  upon.  It  was  very  general  in  its  provisions,  but  it 
gave  ample  power  to  prepare  for  and  to  maintain  resumption. 

It  did  not  abolish  the  greenback.  On  the  contrary  the  greenbacks 
were  expressly  to  be  retained  to  the  extent  of  $300,000,000  as  a  part  of 
the  permanent  currency  of  the  country,  and,  on  the  1st  of  January, 
1879,  were  to  be  made  as  good  as  coin,  to  be  redeemable  in  coin,  and 
to  be  issued  and  reissued  as  the  money  of  the  people,  the  chief  part  of 
our  paper  currency.  This  was  to  be  the  fulfillment  of  our  promises. 
This  was  our  answer  to  those  who  said  the  greenback  would  never  be 
redeemed. 

And  now,  fellow  citizens,  the  resumption  act  has  vindicated  itself. 
We  will  be  prepared,  when  the  time  fixed  shall  arrive,  to  execute  it  and 
maintain  it,  with  entire  confidence  in  its  happy  effect  in  the  revival  of 
business  and  the  restoration  of  confidence. 

Four  months  before  the  time  fixed,  silver,  gold,  and  paper  are  almost 
on  a  par  with  each  other. 

A  greenback  will  now  buy  within  one  half  of  one  jDer  cent,  as  much 
provision,  clothing,  and  other  things  as  the  best  gold  coin  ever  issued 
from  the  mint.  The  laboring  man  has  a  standard  of  value  equal  to  that 
of  the  bond-holder.  The  only  promise  unfulfilled  by  the  Republican 
psirtj  is  almost  jDcrformed. 

The  steps  by  which  the  result  has  been  achieved  were  simple,  law- 
ful, and  beneficent,  and  perhaps  it  is  best  for  me  to  state  them  as  briefly 
as  I  can. 

First.  Silver  coin  has  been  gradually  substituted  for  fractional  cur- 
rency. The  amount  of  fractional  currency  redeemed  to  the  17th  of 
this  month  is  $25,080,609.  The  amount  of  fractional  silver  coin  issued 
to  the,same  date  is  $39,307,680.  Here  has  been  no  contraction,  but  an 
increase  of  over  $14,000,000  current  money  by  the  substitution  of  a 
durable  coin  for  an  expensive  and  wasteful  note. 

Second.  A  gradual  retirement  has  been  effected  of  United  States 
notes  from  $382,000,000  January,  1875,  to  $346,681,016.  This  reduc- 
tion was  made  only  as  circulating  notes  were  issued  to  national  banks, 
and  only  to  the  extent  of  eighty  per  cent,  of  the  notes  so  issued.  This 
was  to  be  continued  until  the  amount  outstanding  was  $300,000,000, 
but  Congress,  during  the.  recent  session,  in  view  of  the  general  desire 
to  stop  reduction,  suspended  it,  and  fixed  the  amount  of  United  States 
notes  at  $346,681,016,  the  amount  then  outstanding.  Though  this  adds 
to  the  difficulties  of  executing  the  resumption  law,  still  I  have  entire 
confidence  in  our  ability  to  maintain  that  amount  in  circulation. 

Third.  Coin  has  been  accumulated  in  the  Treasury  in  anticipation 
of  resumption.  The  authority  to  thus  accumulate  is  plainly  given  by 
tlie  resumption  act,  and  was  the  chief  means  provided  to  secure  and 
maintain  resumption.     My  predecessors,  no  doubt  believing  that  this 


FINANCES.  607 

acciiirmlation  ought  not  to  commence  during  tlieir  terms,  had  taken  no 
steps  under  the  provisions  of  the  resumption  act. 

When  I  assumed  the  duties  of  my  present  office,  after  careful  study 
of  the  whole  subject,  I  determined  that  it  would  be  necessary  to  accu- 
mulate, in  addition  to  the  surplus  revenue,  the  sum  of  $100,000,000  of 
gold  coin,  and  that  it  ought  to  be  accumulated  at  the  rate  of  $5,000,000 
a  month  from  the  1st  of  May,  1877,  to  the  date  of  resumption. 

It  was  confidently  declared  by  those  who  opposed  the  law  that  it 
would  be  impossible  to  accumulate  this  coin  without  putting  up  the 
price  of  gold,  and  thus  defeating  the  object,  but  the  exjDeriment  shows 
that  it  was  not  only  feasible,  but  advantageous  to  the  current  business 
of  the  country. 

W^e  accunmlated  easily  during  eight  months  of  the  year  1877  at  the 
rate  of  $5,000,000  a  month,  with  gold  constantly  declining  in  price. 
This  process  was  arrested  by  the  debates  in  Congress  and  the  threatened 
repeal  of  the  resumption  act,  but  was  again  resumed  in  the  sj^ring  of 
tliis  year,  when  it  was  found  still  more  easy  to  accumulate  coin  by  the 
sale  of  41  per  cent,  bonds,  and  the  original  plan  was  executed  sooner 
than  was  anticipated,  by  the  rapid  sale  of  the  bonds,  so  that  on  the  10th 
of  this  month  the  Treasury  of  the  United  States  was  supplied  with 
$209,011,753.15  gold  and  silver  coin  and  bullion. 

I  have  received  a  recent  statement  from  the  Treasurer  of  the  United 
States  which  shows  the  precise  condition  of  the  Treasury,  in  view  of 
resumption,  as  follows : 

Tbeasuet  of  the  United  States,      ) 
"Washington,  D.  C,  August  20,  1878.  j 
Sie:  I  have  the  honor  to  advise  you  that,  on  August  10,  1878,  there  were  in  the 
Ti'easury  as  follows: 

Gold  coin $185,273,016  85 

Standard  dollars 10,38tJ,2(i6  00 

Gold  bullion 6,589,65'?  89 

Silver  bullion 6,81'i,812  41 

$209,011,753  15 

Of  which  there  will  be  required  for  the  following  payments: 

Unmatured  calls  of  5-20  bonds $45,000,000  00 

Coin  certificates  outstanding  on  that   date   $43,721,370, 

less  $17,195,180  redeemed  and  in  Treasury 26,526,190  00 

Principal  of  debt  estimated  to  be  due  and  unpaid  on  tliat 

date 4,000,000  00 

Coin  interest  estimated  to  be  due  and  unpaid  on  that  date      4,000,000  00 

$79,526,190  00 

Excess $129,485,563  15 

The  gold  coin  on  hand,  stated  above  at  $185,273,016.85,  does  not  include  re- 
deemed gold  certificates,  or  any  other  coin  item,  but  is  actually  gold  coin. 
There  was  in  the  Treasury  of  that  date  $5,095,246.38  fractional  silver  coin. 
Very  respectfully,  JAS.  GILFILLAN",  Treasurer  United  States. 

lion.  John  Sherman,  Secretary  of  the  Treasury. 

It  thus  appears  that,  over  and  above  all  coin  liabilities,  the  Treasury 
has  $129,485,563.15,  besides  $5,095,246.38  fractional  silver  coin,  avail- 
able for  resumption  purposes  w^ithout  any  charge  or  demand  whatever 
against  it,  and  supported  by  the  power,  if  necessary,  to  sell  bonds  in 
aid  of  resumption.     With  this  sum  and  with  the  powers  conferred  by 


608  SPEECHES   AND  EEPORTS   OF  JOHN  SHERMAN. 

law,  I  am  satisfied  that  it  is  easy  to  maintain  resumption,  and  such,  I 
beheve,  is  now  the  judgment  of  the  best  business  men  of  the  country, 
and  of  those  most  experienced  in  financial  matters. 

I  do  not  think  it  necessary  to  enter  into  more  detail  as  to  the  plan 
of  or  the  ability  to  maintain  resumption,  or  as  to  the  arguments 
for  or  against  the  measures  adopted  in  aid  of  it,  as  the  subject  was 
thoroughly  discussed  in  Congress  and  my  own  views  fully  explained 
to  the  committees  of  Congress  in  interviews  published  by  the  Senate 
and  House  last  winter,  and  no  doubt  accessible  to  you. 

It  is  sufficient  to  say  that  since  the  passage  of  the  resumption  act 
every  promise  and  expectation  of  its  friends  has  been  justified  by  events, 
and  every  prophecy  of  its  opponents  has  been  falsified.  Every  step 
in  the  process  of  resumption  has  been  open,  public,  and  frank,  and 
beneficial  in  a  business  sense. 

All  the  evils  which  you  have  suffered  are  the  direct  result  of  the 
inflation  of  paper  money  and  the  panic  which  preceded  the  resump- 
tion act.  The  whole  process  of  resumption  has  substantially  been  car- 
ried on  since  the  1st  of  May,  187Y,  and  has  been  attended  with  reviving 
business  and  prosperity.  The  failures  that  have  occurred  during  this 
time  have  been  the  direct  result  of  engagements  and  contracts  made 
before  that  date. 

And  now,  fellow  citizens,  the  real  question  is.  Shall  we  go  forward 
and  complete  this  process,  or  shall  we  go  back  again  to  the  period  of 
irredeemable  money  with  its  inevitable  resulting  consequence  of  ex- 
pansion, inflation,  and  panic  ?  As  3'ou  are  the  judges  of  last  resort  on 
this  question,  I  beg  of  you  to  consider  some  general  principle  gathered 
from  the  experience,  not  only  of  our  own  people,  but  of  all  nations  who 
have,  at  any  period,  maintained  mixed  standards  of  paper  money. 

Irredeemable  paper  money  is  only  justified  by  war  carried  to  the 
extent  of  national  peril,  vrhen  the  life  of  the  nation  is  at  stake.  It 
ought  to  be  redeemable  as  soon  as  the  public  exigencies  will  permit. 
It  is  not  money,  but  the  promise  to  pay  money.  These  are  axioms  of 
political  economy,  the  truth  of  which  all  experience  has  demonstrated. 

We  issued  this  money  only  in  the  midst  of  such  a  peril. 

Our  error,  if  any,  has  been  that  we  have  delayed  too  long  the  mea- 
sures of  resumption,  l^ow,  when  they  are  almost  complete,  and  gold 
and  silver  and  paper  money  are  practically  convertible  one  into  the 
other,  when  there  is  the  same  money  for  the  bond-holder  and  the  note- 
holder, the  rich  and  the  poor,  when  silver  can  be  had  for  notes,  and 
gold  in  ample  store  awaits  the  day  of  resumption,  we  Kepublicans  should 
not  debate  the  question  of  the  repeal  of  the  resumption  act. 

With  all  our  promises  on  record,  m'c  should  not  be  deluded  by  the 
cry  for  "  fiat "  money.  Precisely  what  is  the  meaning  of  this  phrase  I 
do  not  know,  but  I  presume  it  means  a  money  that  is  not  measured  by 
any  other,  that  is  not  redeemable  in  any  other,  but  has  its  origin,  force, 
sanction,  and  value  in  the  mandate  of  the  Government,  and  will  vary 
day  by  day  in  purchasing  power. 

As  between  this  kind  of  money  and  the  old  greenback  regenerated, 
restored,  convertible  into  coin,  the  standard  of  all  value,  and  the  medi- 
urn  of  all  payments,  I  am  for  tlie  greenback  against  "  fiat "  money. 


FINANCES.  609 

A  great  nation  like  ours,  rich  in  varied  resources,  witli  a  free  people 
of  remarkable  intelligence,  is  not  driven  to  resort  to  any  expedients 
wliicli  would  affect  the  public  credit  or  the  public  debt,  or  disturb  our 
harmonious  relations  in  trade  with  foreign  nations,  but  should  adapt 
its  money  to  the  money  of  the  civilized  world,  make  it  as  good  as  any 
other  money,  and  maintain  its  standard  of  value  as  high  as  that  of  any 
coin  ever  issued  from  the  mint. 

Some  of  you  who  believe  in  "fiat"  money  say  you  desire  the  same 
result,  but  it  is  clear  that  you  can  only  maintain  this  money  at  par  with 
coin  either  by  a  careful  limitation  of  its  amount  or  by  actual  redemp- 
tion in  coin  when  demanded.  If  that  is  what  you  mean  by  "  fiat " 
money,  then  we  will  not  disagree,  but  it  is  well  known  that  those  who 
advocate  "  fiat "  money  want  to  increase  the  amount  beyond  a  sum  that 
can  be  maintained  at  par  with  coin,  and  seek  thus  to  cheapen  money 
by  making  it  less  valuable  than  coin. 

I  can  imagine  how  a  man  deeply  in  debt  and  hoping  to  escape  bank- 
ruptcy may  desire  to  cheapen  the  money  in  which  liis  debt  is  to  be  paid, 
but  why  should  a  laboring  man  whose  daily  toil  is  measured  by  the 
money  he  receives  desire  to  cheapen  it  ?  AVhy  should  a  farmer  who 
sells  his  productions  for  money  desire  to  lessen  its  purchasing  power  ? 
Why  should  a  prudent,  thrifty,  industrious  man  engaged  in  any  occupa- 
tion, and  who  hopes  by  his  thrift  and  industry  to  accumulate  for  him- 
self a  competence,  desire  to  have  his  labor  measured  by  a  money  of 
unstable  value  ?  It  is  the  interest  of  every  one  engaged  in  industrial 
employments,  and  who  is  not  a  speculator  or  a  broker,  to  have  a  fixed 
standard  of  value.  If  any  of  you  who  labor  or  are  farmers,  mechanics, 
or  belong  to  any  of  the  industrial  classes  of  life,  have  hope  in  a  depre- 
ciated money,  you  are  greatly  misled. 

All  the  great  men  of  our  country,  om'  Revolutionary  fathers  and 
their  descendents  in  the  war  of  1812,  and  the  statesmen  of  the  days  of 
General  Jackson,  deeply  felt  the  evils  of  irredeemable  paper  money, 
and  experience  led  them  to  the  conviction  that  gold  and  silver  coin,  or 
paper  money  well  secured  and  convertible  into  gold  and  silver  coin, 
was  the  best  for  all  classes  and  for  all  industries. 

In  these  general  views  in  favor  of  resumption  adopted  by  the  Re- 
publican party  we  have  had  the  sympathy  and  concurrence  of  a  certain 
portion  of  the  Democratic  party,  who,  though  they  have  always  by  in- 
stinct and  habit  voted  against  every  measure  of  the  Republican  party 
from  the  beginning  of  the  war  to  this  time,  even  in  the  darkest  hour 
of  the  war,  have  always  professed  to  be  in  favor  of  and  talked  in 
favor  of  good  money  redeemable  in  coin.  This  class  of  Democrats, 
though  they  opposed  the  resumption  act,  did  it  because  they  declared 
it  to  be  a  hindrance  to  resumption,  and  denounced  us  because  we  did 
not  resume  sooner.  This  was  the  position  of  the  last  IS'ational  Demo- 
cratic Convention. 

Senator  Thurman,  my  colleague  for  many  years  in  the  Senate,  was 
one  of  this  class  of  Democrats ;  and,  although  our  financial  measures 
did  not  exactly  please  him,  and  he  generally  voted  against  them,  yet 
he  freely  said,  like  Mr.  Bayard  and  others,  that  he  desired  resumption 
and  stood  by  the  old  Jackson  Democracy  in  favor  of  hard  money. 
39 


610  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

The  exigencies  of  party  tactics  have  led  him  recently  to  make  a  speech, 
to  which,  with  entire  respect  for  him,  I  desire  briefly  to  reply ._  So  far 
as  he  seeks  to  show  his  consistency  and  concurrence  with  his  fellow 
Democrats,  it  is  a  domestic  matter,  and  I  will  not  interfere,  but  some 
of  the  positions  taken  by  him  I  must  contest.     He  says : 

I  think  I  do  them  no  injustice  when  I  say  that  the  leaders  of  the  Republican 
party  are  in  favor  of  directly  the  opposite  course— that  is  to  say,  they  would  retire 
all  the  greenbacks  in  order  that  their  places  might  be  filled  with  national-bank 
notes. 

Senator  Thurman  is  greatly  mistaken  in  this  position.  As  I  have 
already  shown,  the  Eepublican  party  is  not  in  favor  of  retiring  the 
greenbacks  in  order  that  their  place  may  be  filled  with  national-bank 
notes. 

No  doubt  some  Eepublicans,  like  some  Democrats,  are  in  favor  of 
the  United  States  withdrawing  from  the  business  of  issuing  paper 
money,  but  the  Eepublican  party  has  never  taken  such  a  position,  and 
now  distinctly  maintains  the  right  and  duty  of  the  Government  to  keep 
in  circulation  such  an  amount  of  United  States  notes  as  can  be  readily 
maintained  at  par  with  coin. 

In  every  law  authorizing  these  notes  there  is  a  limit  fixed  to  their 
amount. 

During  the  war  the  guarantee  was  made,  and  never  has  been  vio- 
lated, that  the  amount  should  not  exceed  $400,000,000,  and  no  author- 
ity has  ever  been  conferred  upon  any  ofiicer  of  the  Government  to 
reduce  the  amount  below  $300,000,000,  but  now  the  minimum  limit  is 
fixed,  as  I  have  already  stated,  at  $346,681,016. 

In  his  speech  at  Hamilton,  Senator  Thurman  openly  advocates  in- 
creasing the  amount  of  United  States  notes  outstanding  from  $346,- 
000,000  to  $668,000,000  by  issuing  United  States  notes  in  jilace  of  the 
national-bank  notes  outstanding.  He  declares  that  the  principal  feature 
of  the  Democratic  platform  is  the  proposed  substitution  of  greenbacks 
for  national-bank  notes.  He  would  thus  render  specie  payments  impos- 
sible during  this  and  perhaps  the  next  generation,  and  this  at  a  time 
when  specie  resumption,  which  he  has  so  strongly  favored,  is  on  the 
eve  of  success. 

The  position  of  the  Eepublican  party  is  in  favor  of  greenbacks  re- 
stored to  their  normal  condition  of  paper  money,  equal  to  coin  and 
redeemable  in  coin  on  the  demand  of  the  holder,  while  the  position  of 
the  Democratic  party,  as  stated  by  Judge  Thurman,  is  in  favor  of  the 
issue  and  maintenance  in  circulation  of  $668,000,000  of  United  States 
notes  without  any  provision  whatever  for  their  redemption  or  their 
conversion  into  coin. 

Tliis  issue  is  distinctly  made,  and  for  one  I  distinctly  accept  it. 

We  favor  paper  money  redeemable  in  coin,  and  the  largest  amount 
tTiat  can  be  maintained  at  par  with  coin,  while  he  favors  an  amount  of 
papei-  issued  directly  by  the  Government,  not  convertible  into  coin, 
vdth  no  provision  for  its  redemption,  and  to  an  amount  which  no  one 
has  claimed  can  be  maintained  at  par  with  coin. 

He  says  it  is  just  as  easy  to  maintain  $668,000,000  greenbacks  at 


FINANCES.  611 

par  with  coin  as  it  is  to  maintain  $346,000,000  greenbacks  and  $322,- 
000,000  national-bank  notes  at  par  witli  coin. 

But  he  forgets  to  state  that  the  bank  notes  are  payable  in  green- 
backs and  not  in  coin,  and  that  they  are  to  be  redeemed  by  the  banks 
at  their  risk  and  expense,  and  not  by  the  United  States.  No  coin  re- 
serve is  needed  by  them  for  such  redemption.  The  issue  of  these  notes 
aids  in  maintaining  the  United  States  notes  at  par  with  coin  instead  of 
obstructing  it. 

The  banks  are  required  to  keep  in  their  vaults  and  in  the  Treasury 
of  the  United  States  an  ample  reserve  of  United  States  notes  and  bonds 
to  redeem  their  notes,  and  thus  give  to  the  United  States  notes  a  use 
which  tends  to  maintain  them  at  par  with  coin. 

The  whole  burden  now  resting  upon  the  Government  is  to  maintain 
resumption  upon  the  amount  of  United  States  notes,  and  this  confess- 
edly can  be  done  by  a  coin  reserve  of  from  thirty  to  forty  per  cent, 
(which  reserve  we  now  have  on  hand),  while,  if  the  whole  amount  of 
circidation,  including  national-bank  notes,  was  in  United  States  notes, 
no  coin  reserve  that  could  be  reasonably  secured  and  maintained  would 
be  sufficient  for  the  purpose  of  resumption. 

The  bank  notes  are  not  in  any  sense  the  notes  of  the  Government. 
They  are  the  notes  of  private  corporations,  amply  secured,  redeemed 
by  them,  maintained  by  them,  or,  if  they  fail  to  redeem  them,  the  se- 
curity can  at  once  be  applied  to  their  redemption.  This  expedient  of 
allowing  a  portion  of  the  circulation  to  be  issued  by  private  corpora- 
tions enables  us  to  maintain  in  circulation  nearly  twice  as  much  paper 
money  as  could  be  maintained  at  par  in  coin  if  issued  directly  by  the 
Government. 

His  plan  would  directly  violate  the  provisions  of  the  loan  laws, 
under  which  both  United  States  bonds  and  notes  are  issued,  and  which 
limit  expressly  the  amount  of  United  States  notes  to  $400,000,000.  It 
would  be  a  violation  of  the  public  faith,  and  would  impair  at  once  the 
public  credit,  and  do  inconceivably  more  harm  than  it  could  give  profit 
to  the  Government. 

This  scheme  of  his  conflicts  directly  with  the  decision  of  the  Su- 
preme Court  of  the  United  States,  and  would,  no  doubt,  be  held  un- 
constitutional because  it  provides  for  a  very  large  increase  of  United 
States  notes  in  a  time  of  profound  peace,  where  no  such  exigency  as  is 
contemplated  by  the  Constitution  or  decision  of  the  Supreme  Court 
exists  to  justify  their  issue. 

It  would  at  once  drive  out  of  existence  the  whole  system  of  national 
banks  which  have  been  the  means  alone  by  which  State  banks  have 
been  prevented  from  issuing  circulating  notes.  The  only  franchise  the 
national  banks  receive  from  the  Government,  which  induces  them  to 
maintain  their  corporate  existence,  is  the  right,  under  limits  fixed  by 
law,  to  issue  circulating  notes.  Take  this  from  them,  and  they  would 
at  once  cease,  without  exception,  to  be  national  banks,  and  would  be 
organized  again,  as  before  the  war,  into  State  banks,  with  such  powers 
as  any  State  might  give  them.  The  inevitable  effect  of  this  policy 
would  be  to  revive  again  the  system  of  State  banks  without  any  com- 
mon organization,  without  any  security  for  their  notes,  upon  such  terms 


612  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 

as  any  State  might  prescribe,  and  thus  all  the  evils  of  State-bank  money, 
which  the  people  experienced  before  the  war,  would  recur  again.  Near- 
ly a  generation  has  passed  since  the  incongruous  system  of  paper  money 
which  existed  before  the  war  was  swept  away  by  the  national  banking 

It  is  safe  to  say  that  the  injury  done  to  the  people  of  the  United 
States  by  the  failure  of  State  banks,  by  the  uncertain  value  of  their 
paper  money,  by  its  limited  local  circulation  and  by  successful  counter- 
feiting, was  annually  greater  than  the  interest  of  the  entire  national- 
bank  circulation  of  the  United  States.  ^    • 

It  is  easy  to  oppose  banking  corporations.  Instead  of  having  polit- 
ical power,  they  are  the  weakest  members  of  a  community.  Say  what 
you  will  of  them,  their  substitution  for  State  banks  was  one  of  the  wis- 
est and  most  benehcial  acts  of  the  general  Government  since  the  com- 
mencement of  the  war.  Personally  I  have  but  little  interest  in  or  feel- 
ing for  national  banks.  But  for  the  benefits  derived  from  them,  I  would 
not  care  what  became  of  them.  Their  continued  existence  ought  to 
depend  upon  their  ability,  without  cost  or  trouble  to  the  United  States, 
to  maintain  their  circulating  notes  at  par  with  United  States  notes  or 
coin.  If  they  fail  in  this  they  ought  to  be  abolished.  If  they  do  it 
they  ought  to  be  continued.  Scattered  through  the  United  States,  they 
are  useful  financial  agents  in  exchanging  the  products  of  industry  and 
in  localizing  capital.  Tliey  paid  last  year  to  the  Government  of  the 
United  States  $7,076,087  in  taxes,  and  for  State  and  local  taxes  $9,701,- 
732,  or  a  total  of  $16,777,819,  or  nearly  four  million  more  than  Judge 
Thui-man  estimates  we  will  save  to  the  people  by  issuing  greenbacks 
instead  of  the  bank  notes.  These  taxes  would  all  be  lost  to  the  United 
States  and  to  the  States  if  the  national  banks  were  abolished.  Their 
notes  are  secured  beyond  peradventure  ;  they  are  protected  from  coun- 
terfeiting far  more  successfully  than  any  f onuer  system,  and,  to  their 
credit  be  it  said,  not  one  dollar  has  been  lost  on  any  national-bank  note 
ever  issued.  Wherever  you  go  you  may  carry  their  notes  with  confi- 
dence, without  examination  as  to  where  or  when  they  were  issued. 
They  are  good  everywhere  in  the  United  States. 

Senator  Thurman  has  stated  some  objections  to  the  national  banks, 
to  which  I  will  briefly  reply.     He  says  : 

In  the  first  place,  a  national-bank  currency  means  tlie  indefinite  perpetuation  of 
the  public  debt. 

As  a  nationail  bank  exists  only  for  twenty  years  from  the  date  of 
its  organization,  and  is  liable  at  any  time  by  act  of  Congress  to  be 
abolished,  this  does  not  seem  a  very  potent  objection.  I  am  sorry  to 
say  that  the  prospect  of  paying  our  debt  during  the  life  of  a  national 
bank  is  not  very  flattering,  nor  is  their  existence  likely  to  deter  its  pay- 
ment. As  for  the  influence  of  these  institutions,  so  much  feared  by 
Mr.  Thurman,  it  is  not  an  object  of  alarm,  for  it  can  not  be  combined ; 
or,  if  a  combination  were  attempted,  it  could  be  overthrown  by  a  single 
wave  of  popular  opinion. 

His  second  objection  to  the  national  banking  system  is  "  that  it 
tends  to  combine,  concentrate,  and  intensify  the  money  power." 

This,  again,  is  an  illusive  fear.     There  is  no  power  in  this  country 


FINANCES.  613 

that  is  so  weak  in  political  management  as  what  is  called  the  money 
power.  It  never  has  been  nor  can  it  be  concentrated  so  as  to  affect 
political  questions.  The  tendency  of  our  institutions  makes  it  easy  to 
combine  at  once  jDolitical  opinion  and  political  power  against  it. 

Party  organization  is  infinitely  more  powerful  for  combination  than 
the  money  power.  My  own  experience  in  office  enables  me  to  say  that 
if  you  convene  ten  bank  presidents  you  will  have  ten  different  opinions, 
while  party  organization  brings  even  Judge  Thurman  and  General 
Ewing  on  the  same  platform. 

Nor  is  it  true,  as  stated  by  Judge  Thurman,  that  the  legislation  of 
Congress  favored  the  money  interest  during  the  period  of  the  sway  of 
tlie  Kepublican  party,  for  this  legislation  was  guided  by  the  love  of 
national  unity  and  honor,  and  national  existence.  It  tended  to  make 
our  nation  strong  at  home  and  respected  abroad,  and  in  no  single  ques- 
tion has  it  favored  what  is  called  the  money  interest. 

The  vital  issue  between  the  two  great  parties  has  been,  on  the  part 
of  the  Republicans,  a  desire  to  maintain  the  integrity  of  the  Union  and 
abolish  slavery,  to  secure  equal  political  and  civil  rights  to  all  men, 
to  maintain  the  national  honor,  and  to  advance  the  industrial  inter- 
ests of  the  country,  while  the  theory  and  policy  of  the  Democratic 
party  has  been  to  belittle  the  ISTational  Government,  to  subordinate 
it  to  the  power  of  the  States,  to  preserve  slavery,  to  leave  industry 
without  protection  and  support,  and  to  sectionalize  into  petty  com- 
munities the  elements  of  a  great  and  powerful  nation ;  and  these  are 
now,  and  will  be  in  the  future,  the  inevitable  tendencies  of  these  two 
parties. 

The  third  objection  stated  by  him  to  the  national-bank  circula- 
tion is  that  it  is  a  special  privilege,  and  takes  many  millions  out  of 
the  pockets  of  the  people.  This,  again,  is  untrue  in  point  of  fact, 
and  illogical  in  argument. 

The  national-bank  circulation  is  not  a  special  privilege,  but  is 
open  to  every  association  of  five  persons  that  may  be  organized  in 
any  part  of  the  United  States. 

To  call  it  a  special  privilege  is  absurd.  The  same  privilege  might 
be  granted  to  every  individual  citizen  of  the  United  States,  but  ex- 
perience shows  that  a  corporation  is  more  wisely  administered  when  it 
is  composed  of  a  number  of  persons,  not  less  than  five,  than  when  it 
is  controlled  by  a  single  person ;  and  corporate  authority  is  essential  to 
preserve  its  existence  in  case  of  the  death  of  a  partner.  But  for  this, 
the  special  privilege  might  be  granted  to  every  citizen  who  could  give 
the  requisite  security  for  the  redemption  of  the  notes  issued  by  him. 

As  to  putting  money  into  the  pockets  of  the  share-holders,  this 
again  is  absurd.  The  Government  pays  nothing  and  contributes  no- 
thing to  a  bank.  The  share-holders  buy  the  bonds  of  the  Government 
and  deposit  them  with  the  Government  for  the  security  of  the  note- 
holders. If  the  bank  retires,  the  bonds  belong  to  the  share-holders,  and 
not  to  the  Government.  Nor  can  the  Government  pay  these  bonds  in 
any  other  way  than  it  could  pay  the  bonds  in  the  hands  of  individuals. 
The  Government  would  pay  the  same  interest  on  these  bonds,  whether 
held  by  the  bank  or  by  citizens,  or  in  Europe. 


614  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

The  reason  why  bonds  are  demanded  as  security  is  because  they  are 
the  best  security.  But  for  this  a  mortgage  security  or  a  personal  secu- 
rity might  be  taken,  but  as  the  Government  security  is  the  highest  and 
best,  this  is  demanded,  not  for  the  benefit  of  the  Government,  but  for 
the  note-holder,  for  whom  the  Government  is  a  mere  trustee.  When 
the  Government  jjays  to  the  bank  interest  on  bonds  held  by  it  as  a 
security,  it  only  pays  what  is  justly  due  and  what  it  would  have  to 
pay  at  all  events  to  anybody  holding  the  bonds  until  they  are  redeemed. 

How  it  takes  many  millions  annually  out  of  the  pockets  of  the  peo- 
ple is  hard  to  conceive. 

No  one  borrows  the  notes  of  the  bank  unless  it  is  for  i'lis  interest 
to  do  so.  The  ability  of  the  bank  to  lend  is  a  convenience  to  the  bor- 
rower as  well  as  the  lender.  The  Government  can  not  engage  in  this 
business  of  loaning  money.  It  would  be  a  sorry  time  for  the  people 
other  than  political  strikers,  if  the  Government  loaned  money.  This 
is  purely  a  private,  personal  employment,  that  should  be  as  free  as 
blacksmithing.  The  right  to  issue  notes  is  free  to  all  on  the  same 
terms,  and,  when  so  guarded  as  to  prevent  loss  to  the  note-holder,  is 
the  best  possible  means  of  increasing  the  amount  of  circulating  notes. 

He  says  that  the  Government  ought  to  issue  these  notes.  The  an- 
swer is  that,  if  the  Government  issues  them,  it  must  undertake  to 
maintain  them  at  par  with  coin,  or  else  the  people  must  suffer  from 
the  e^dls  of  an  irredeemable  currency.  The  cost  to  the  banks  of  this 
redemption  is  already  so  great,  before  specie  payments  have  actually 
come,  that  this  so-called  special  privilege  is  getting  to  be  a  special  bur- 
den, and  more  banks  are  surrendering  their  circulation  than  are  taking 
circulation.  It  is  a  special  privilege  that  more  seek  to  avoid  than  to 
acquire. 

Judge  Thurman  computes  how  much  the  United  States  would  save 
if  it  issued  $322,000,000  more  of  greenbacks  and  redeemed  that 
amount  of  bonds.  I  do  not  stop  to  examine  this  computation,  but  I 
only  wonder  why  he  stopped  at  $322,000,000.  Why  not  save  the 
entire  interest  of  the  public  debt  by  issuing  greenbacks  for  the  whole 
of  it  ?  Why  not  repudiate  it  at  once  ?  That  would,  according  to  his 
computatioT],  save  the  entire  interest  of  the  pubhc  debt,  or  $93,000,000, 
with  no  other  loss  than  the  loss  of  national  honor. 

What  assurance  has  he  that  $322,000,000  will  satisfy  the  more  ad- 
vanced lights  of  repudiation  ?  How  will  he  pay  out  the  $322,000,000  ? 
Will  he  claim  the  i-ight  to  pay  the  bonds  at  par  with  them  ?  Does  he 
deny  the  moral  and  legal  obligation  by  which  they  are  to  be  paid  in 
coin  ?     Does  he  propose  to  repudiate  the  act  of  1869  ? 

The  immediate  effect  of  the  commencement  of  such  an  issue  w^ould 
depreciate  the  notes  lower  and  lower,  would  widen  more  and  more  the 
gap  between  the  notes  and  coin,  would  revive  again  the  distinction 
between  the  bond-holder  and  the  note-holder— gold  for  the  bond-holder 
and  depreciated  paper  money  for  the  people.  It  would  at  once  stop 
the  funding  operations  under  which  we  save  one  third  of  the  interest 
of  the  national  debt.  No  man  would  buy  either  a  four  or  a  five  or  a 
ten  per  cent,  bond  in  the  face  of  an  act  of  repudiation. 

Again,  as  the  notes  depreciate,  it  becomes  more  difiicult  to  provide 


FINANCES.  615 

coin  for  the  payment  of  the  interest ;  would  he  repudiate  the  obliga- 
tion to  pay  the  interest  in  coin  ?  He  saj^s  he  is  in  favor  of  receiving 
greenbacks  for  customs  duties.  Will  he,  then,  buy  coin  ?  If  so,  his 
policy  will  already  have  advanced  the  value  of  coin. 

These  are  questions  that  so  astute  a  reasoner  as  Judge  Thurman 
ought  fairly  to  answer  before  he  persuades  the  people  to  embark  in 
his  scheme. 

He  proposes  to  issue  more  notes  without  any  provision  for  their 
payment,  when  our  revenues  are  ample  to  meet  our  expenditure,  in  a 
time  of  profound  peace,  when  there  is  no  motive  of  patriotism  or  duty 
or  safety  to  impel  such  a  course,  and  this  merely  to  save  the  interest 
of  four  per  cent,  on  $322,000,000. 

Bat  this  very  act,  if  adopted,  would  prevent  our  selling  a  thousand 
milhon  of  four  per  cent,  bonds  with  which  to  pay  an  equal  amount  of 
six  per  cent,  bonds,  and  in  this  way  would  work  an  annual  loss  to  the 
Government  of  $20,000,000,  or  $8,000,000  a  year  more  than  the  entire 
saving  proposed  by  his  policy. 

Again,  what  moral  right  has  the  Government  of  the  United  States 
to  require  its  citizens  to  take  its  notes  as  money  and  a  standard  of  value 
merely  for  the  purpose  of  saving  the  interest  on  these  bonds  ?  In  a 
time  of  war  we  may  concede  such  a  right,  but  in  a  time  of  peace  there 
is  no  legal  or  moral  foundation  for  such  a  claim  unless  the  notes  are 
maintained  at  par  and  redeemed  at  par.  Is  not  the  United  States  able 
to  pay  the  interest  of  its  notes  ? 

Judge  Thurman  says  there  has  been  contraction  of  the  currency. 
"No  one  disputes  that  assertion.  It  is  true  that  the  currency  has  been 
contracted,  but  this  has  been  done,  not  under  the  resumption  act,  but 
by  the  voluntary  action  of  the  banks.  They  are  free  to  issue  or  retire 
their  notes,  and  they  have  done  so. 

If  the  special  privilege  about  which  he  has  discussed  so  much  was 
so  valuable  to  them,  they  would  have  increased  their  issues  of  bank 
notes,  but  instead  of  that  the  burdens  ijnposed  upon  this  privilege  and 
the  want  of  profitable  use  of  money  have  induced  the  banks  to  reduce 
their  circulation  by  a  much  greater  amount  than  it  has  been  increased, 
so  that  the  effect  has  been  a  large  decrease  of  the  currency  of  the  country, 
but  it  has  not  been  caused  by  the  resumption  act.  Under  the  resump- 
tion act  the  amount  of  currency  has  been  somewhat  increased,  since 
the  amount  of  United  States  notes  retired  since  its  passage  is,  as  he 
states  it,  $35,328,984.  But  there  was  issued  to  national  banks  in  place 
of  this  $4'1,16],230  of  circulating  notes. 

Now,  these  are  the  objections  stated  to  the  national  banks  by  Judge 
Thurman,  and  my  answer  to  them. 

It  comes  back  again  to  this :  Shall  we  have  in  the  United  States  a 
currency  redeemable  in  coin  ?  "Will  we,  to  save  interest,  bear  in  the 
future  all  the  evils  of  an  irredeemable  currency,  tear  up  a  system  of 
banks  infinitely  better  than  any  ever  before  enjoyed  in  this  country, 
compel  these  banks  to  call  in  their  loans  and  close  up  their  accounts, 
and  add  to  the  distress  of  the  times  by  dangerous  and  almost  revolu- 
tionary proceedings  against  corporations  of  our  own  creation,  which 
have  no  special  privileges,  and  which  contribute  to  the  general  good  by 


616  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN, 

paying  large  taxes  and  by  acting  as  convenient  localized  agencies  of 
loans  and  exchange. 

And  here  I  might  leave  Jndge  Thnrman's  speech,  but  there  are  two 
or  three  points  which  I  regret  I  have  to  answer.     He  says : 

The  seat  of  the  Chief  Magistrate — that  seat  that  in  times  past  has  been  and  in  all 
times  should  be  an  emblem  of  purity  and  honor — is  occupied  by  a  man  who  was 
never  elected  to  it,  and  whose  elevation  was  accomplished  by  the  grossest  frauds  and 
boldest  usurpations  that  ever  disgraced  the  history  of  a  free  people. 

This  declaration  is  a  gross  injustice,  and  I, believe  Judge  Thurman 
will  live  to  regret  that  he  ever  made  it.  He  was  a  member  of  the 
Electoral  Commission  which  passed  upon  the  returns  of  the  votes  of 
electors  for  President.  He  knows  that  every  electoral  vote  of  every 
State  cast  for  President  Hayes  was  received  by  him  without  dispute, 
without  any  pretension  of  fraud  or  error,  except  the  votes  of  Oregon, 
Florida,  and  Louisiana. 

In  Oregon  there  was  an  attempt  by  acknowledged  agents  of  Governor 
Tilden  to  cheat — I  use  the  word  in  its  worst  meaning — the  Pepublicans 
out  of  that  vote  and  to  bribe  an  elector,  and  it  failed.  In  Florida 
there  had  been  great  irregularities  and  frauds  committed  by  the  Demo- 
crats, which  were  met,  to  some  extent,  by  frauds  on  the  part  of  Eepub- 
lican  officers  ;  but  the  evidence  before  the  returning  officers,  as  well  as 
that  taken  in  the  contest  for  the  election  of  a  member  of  the  House 
of  Representatives,  shows  that  a  majority  of  the  votes  in  Florida  were 
fairlv  cast  for  the  Hayes  electors. 

As  to  Louisiana,  I  had  better  means  of  information  than  Judge 
Thurman,  and  I  say  to  you  that  the  criminal  conspiracy  by  the  Demo- 
cratic party  of  that  State  to  control  the  election  of  18Y6  so  as  to  cast 
the  vote  of  the  State  for  Governor  Tilden,  has  never  been  fully  told. 
It  extended  to  more  than  ten  parishes  or  counties,  and  held  in  absolute 
terror  five  Republican  parishes  that  had  always  since  the  war  given 
about  seven  thousand  Republican  niajority.  It  led  to  and  included  in 
its  plan  and  scope  scores  of  murders  of  Republicans,  white  and  black, 
mainly  intelligent  black  leaders  of  their  race.  It  wounded,  whipped, 
and  maimed  others,  drove  hundreds  to  the  swamps  at  night,  and  spread 
universal  terror  among  this  ignorant  and  superstitious  people,  who  had 
the  same  legal  right,  and  a  "better  moral  right,  to  vote  than  their  per- 
secutors, whose  hands  were  only  recently  red  with  the  blood  shed  in 
war  against  the  Union. 

The  chosen  agents  of  this  infamy  were  Democratic  rifle-clubs  fully 
ai-med,  marching  at  night  in  disguise,  distributing  anonymous  threats 
and  occasionally  executing  them,  and  giving  notice  to  leave  the  parish 
to  the  more  intelligent,  accompanied  with  threats  and  devices  to  excite 
fear  and  terror. 

Such  were  the  means  used  b;^  the  Democratic  party  to  carry  Louisi- 
ana. They  may  here  and  there  induce  a  disappointed  office-seeker  like 
Anderson  and  Weber  to  falsify  their  former  oaths,  and  even  prevail 
upon  poor  negroes  like  Amy  Mitchell  and  Mrs.  Pinkston  to  withdraw 
their  fonner  depositions ;  but  the  scores  of  dead  men  killed  by  the 
rifle-chibs  speak  from  their  graves,  and  the  men  who  killed  them  and 
rode  tlieir  nightly  rides  of  terror  know  in  their  hearts  that  all  that  has 


FINANCES.  617 

been  said  of  them  is  true.  Tlae  statements  and  affidavits  made  by  these 
people  were  submitted  to  the  local  returning  officers  selected  by  the 
State  Legislature,  composed  of  two  white  men  and  two  colored  men,  all 
natives  of  the  South,  and  these  men,  who  knew  the  surroundings  and 
many  of  the  facts,  decided,  in  strict  compliance  with  the  law  of  that 
State,  that  under  this  law  these  parishes  and  polling-places  must  be  ex- 
cluded, and  it  was  done.  Thus  Governor  Hayes  got  the  vote  of  Louisi- 
ana as  lawfully  and  fully  as  that  of  Ohio. 

All  this  cry  of  fraud  and  usurpation  ought,  in  the  minds  of  just 
men,  to  react  with  fearful  effect  against  the  Democratic  party ;  for  it 
was  their  organized  crime  and  violence  that  created  the  doubt  which 
the  Returning  Board  and  Electoral  Commission  decided  in  our  favor. 

And  it  must  be  remembered  in  this  connection  that  there  is  a  strong 
conviction,  at  least  among  the  Republicans  in  this  country,  that  the 
States  of  Mississippi  and  Alabama  were  secured  for  Governor  Tilden 
by  the  same  unla^vful  means,  but  the  laws  of  those  States  provided  no 
remedy,  and  they  were  counted  for  Tilden. 

Judge  Thurman  should  remember  also  that  the  history  of  the  Demo- 
cratic party  has  been  marked  in  the  past  by  great  crimes  against  the 
elective  franchise.  The  frauds  in  Plaquemine  Parish,  Louisiana,  and 
in  New  York  City,  in  1844,  will  be  remembered  by  every  Whig  in  the 
land.  Wholesale  frauds  committed  in  the  city  of  New  York  in  1868, 
by  which  the  vote  of  that  State  was  cast  for  Seymour  instead  of  for 
Grant,  were  disclosed  by  a  Congressional  committee,  and  are  now  ad- 
mitted facts. 

The  frauds  and  crimes  committed  by  the  Democratic  party  in  its 
attempt  to  organize  the  State  of  Kansas  into  a  slave  State  were  inves- 
tigated by  me  as  a  member  of  a  Congressional  committee,  and,  though 
disputed  at  the  time  much  more  stoutly  than  the  Louisiana  frauds,  are 
now  acknowledged  as  facts. 

The  chief  frauds  in  this  country  in  elections  have  been  organized 
by  the  Democratic  party.  One  of  the  dangers  which  threaten  the 
country  if  the  Democratic  party  comes  into  power  will  be  the  bold  and 
reckless  use  of  election  machinery  to  commit  frauds  and  to  organize 
violence,  ballot-box-stuffing,  and  kindred  crimes,  as  a  part  of  our  Amer- 
ican system  of  politics. 

The  Republican  party,  in  the  heat  of  party  zeal,  has  done  something 
in  this  way.  I  have  no  apology  to  make  for  such  crimes — no  sym- 
pathy with  them — and  would  denounce  and  expose  such  wrongs,  by 
whatever  party  committed  ;  but  it  is  pretty  hard  for  us  Republicans  to 
be  lectured  about  election  frauds  by  members  of  the  Democratic  party. 

Again,  he  says: 

Fellow  citizens,  nothing  in  politics  seems  more  certain  to  me  than  that  the  Re- 
publican leaders  rest  their  hopes  of  a  prolongation  of  their  power  upon  the  success 
that  may  attend  a  studied  and  energetic  effort  on  their  part  to  excite  and  perpetuate 
sectional  feeling. 

It  is  a  strange  thing  that  the  Republican  party,  distinguished  for 
its  national  feeling,  should  be  charo;ed  by  the  Democratic  party  with  a 
desire  to  excite  and  perpetuate  sectional  feeling. 

The  strength  of  the  Democratic  party  to-day,  as  before  the  war,  lies 


618  SPEECHES  AND  REPORTS   OF  JOHN"  SHERMAN. 

ill  a  united  South,  held,  not  only  by  sectional  feeling,  but  by  sectional 
feeling  antagonistic  to  tlie  Union,  intensified  by  its  early  advocacy  of 
States'  rights,  its  attempt  at  secession,  and  by  four  years  of  bloody  and 
unsuccessful  war  against  the  Union.  This  sectional  feeling  is  so  ram- 
pant that  it  ostracizes  native  white  men  who  become  Kepublicaus,  holds 
in  terror  the  entire  black  population,  and  by  intimidation  and  ostracism 
prevents  the  free  expression  of  opinion  and  the  free  vote  of  Eepubh- 
cans  at  elections  in  the  South.  The  South  is  determined  to  be  sec- 
tional, and  as  a  section  dominates  the  counsels  of  the  Democratic  party. 

Xo  intelligent  man  can  doubt  that  if  in  the  cotton  States  there  was 
an  open,  fair  opportunity  to  establish  newspapers,  to  carry  on  a  can- 
vass, and  to  appeal  to  the  natural  instincts  and  interests  of  the  voters 
of  those  States,  a  majority  of  every  one  of  them  would  be  with  the 
Republican  party. 

The  pohcy  of  President  Hayes,  his  earnest  desire  and  hope,  is  to 
destroy  sectionalism,  to  invite  by  kindness  and  forbearance  a  like  kind- 
ness and  forbearajice  to  the  Republicans  of  the  South.  If  this  effort 
fails  the  South  will  be  a  slumbering  volcano,  which  some  day  will 
break  forth  in  retaliation  and  crime.  For  free  men  having  constitu- 
tional rights  can  not  be  chained  by  violence.  Intelligence  and  organ- 
ization will  soon  enable  them  to  assert  their  rights  or  deter  the  j^ractice 
of  such  violence. 

The  Republican  party  is  purely  a  national  party.  Its  instincts  are 
national,  its  policy  is  national.  In  no  Repubhcan.  State  could  anything 
like  opposition  to  freedom  of  speech,  freedom  of  the  press,  free  discus- 
sion be  tolerated,  nor  would  any  one  for  a  moment  be  allowed  to  be 
deten-ed  from  voting  as  he  pleased ;  while  in  some  of  the  Democratic 
States  in  the  South,  such  a  thing  as  free  speech  and  free  press  and 
reasonable  toleration  of  opinion  is  scarcely  recognized.  The  dominant 
press  would  denounce  as  a  crime  what  we  here  in  the  North  regard  as 
the  right  of  eveiy  citizen — to  speak  and  vote  as  he  chooses. 

In  the  face  of  these  facts  the  following  statement  by  Judge  Thur- 
man  seems  to  me  the  caricature  of  truth  and  justice : 

It  is  not  enough  that  the  South  has  frankly  and  manfully  accepted  the  results  of 
the  war ;  that,  waiving  all  questions  as  to  the  mode  of  their  adoption,  no  voice  is 
raised  against  the  binding  force  of  the  constitutional  amendments;  tliat  every  law 
passed  by  a  radical  Congress,  however  doubtful  its  constitutionality,  or  manifest  its 
injustice  and  impolicy,  is  nevertheless  obeyed. 

I  pass  over,  as  a  matter  of  taste,  the  inference  he  raises  against  the 
mode  of  adoption  of  the  constitutional  amendments,  and  the  doubt  he 
expresses  as  to  the  constitutionality  of  the  laws  to  enforce  them — to 
say  that  the  Democratic  party  has  not  frankly  and  manfully  accepted 
the  results  of  the  war ;  that  it  does  not  accept,  observe,  or  enforce  the 
constitutional  amendments  or  the  laws  passed  in  aid  of  them.  It  is 
precisely  of  this  that  the  Republican  party  complains ;  it  will  try  to 
enforce,  and,  thoiigh  temporarily  divided  and  defeated,  will  continue 
to  demand,  and  will  certainly  in  time  secure,  the  observance  of  these 
amendments.  It  was  the  organized  plan  to  deprive  the  Repubhcans  in 
Louisiana  of  the  right  to  vote, that  occasioned  the  controversy  there, 
and  so  in  Mississippi  and  South  Carolina. 


FINAXOES.  619 

I  have  no  doubt  tliat  many  of  the  planters,  business  men,  and  proj)- 
erty-holders  of  the  South,  now  acting  with  the  Democratic  party,  are 
anxious  to  and  in  time  will  be  able  to  protect  the  blacks  in  their  rights, 
but  they  are  not  the  dominating  influence  in  the  South.  It  is  not  they 
who,  like  Judge  Thurman,  denounce  President  Hayes  as  a  usurper  and 
a  fraud,  but  thousands  of  them  acknowledge  that  the  policy  adopted 
by  the  Republican  party  to  the  people  of  the  South  at  the  close  of  the 
war  was  without  example  in  generosity  in  the  history  of  the  world, 
and  they  gratefully  acknowledge  that  the  policy  of  President  Hayes 
will  secure  to  the  South  peace,  order,  and  prosj)erity. 

But  I,  who  supported  this  policy  and  shared  in  it,  feel  as  do  Repub- 
licans generally,  that  the  South  has  never  frankly  or  manfully  responded 
to  it.  They  do  not  enforce  the  amendments.  They  do  not  give  equal 
civil  and  political  rights  to  either  white  or  black  Republicans.  They 
do  not  permit  or  tolerate  that  free  expression  of  opinion,  discussion,  and 
action  essential  to  a  republican  government ;  but,  by  their  adherence 
to  the  very  elements  in  the  l^orth  that  encouraged  them  to  rebellion, 
that  brought  upon  them  the  very  waste  and  desolation  of  which  they 
complain,  they  repel  all  efforts  to  break  down  the  sectionalism  of  the 
past,  and  make  it  vitally  necessary  again  to  concentrate  the  people  of 
the  ISTorth  in  order  to  secure  peace,  order,  and  liberty. 

Judge  Thurman,  in  conclusion,  says : 

Do  you  wish  the  Union  preserved?  Then  su])port  those  who  would  bind  it  to- 
gether by  the  ties  of  fraternal  feeling  and  a  common  interest,  as  well  as  by  constitu- 
tions and  laws.  Do  you  revere  justice  and  advocate  equality  of  rights?  Then  sup- 
port the  party  on  whose  banner  "Justice  and  Equahty"  are  indelibly  inscribed. 

"  Do  you  wish  the  Union  preserved  ? "  What  party  ever  threatened 
this  Union  ?  "What  party  was  arrayed  in  arms  against  it  during  the 
war,  and  what  sacrifices  were  made  for  it  in  the  North  'i  Did  ever  any 
Republican  seek  to  disturb  the  Union  ?  "  Justice  and  Equality  ! " 
When  did  the  Democratic  party  distinguish  itself  for  justice  and 
equality  ? 

Perhaps,  fellow  citizens,  as  an  executive  officer,  I  have  erred  in 
following  Senator  Thurman  in  so  much  of  his  speech  as  is  purely  politi- 
cal, but  I  am  none  the  less  a  Republican  and  a  partisan,  and  I  trust  the 
time  will  never  come  when  I  will  cease  to  have  pride  in  the  merits  and 
past  achievements  of  the  great  party  to  which  we  belong.  It  is  rather 
hard  to  have  the  Republican  party,  which  has  done  so  much  for  the 
existence  and  honor  of  our  country,  assailed  so  unjustly  by  Democrats, 
who,  during  the  trying  time  of  our  history,  have  been  passive  and 
neutral.  I  promise  you  now  to  adhere,  during  the  brief  time  I  will 
detain  you,  to  the  business  topics  in  which  we  are  all  alike  interested. 

Judge  Thurman  says : 

Now,  certainly  no  one  will  deny  that  this  country  has  for  the  last  five  years 
suffered,  as  perhai)s  no  otlier  country  ever  did  suffer,  from  depression  in  every 
branch  of  business  in  every  industrial  occupation. 

I  deny  this  statement  in  toto.  That  this  country  has  suffered  from 
depression  in  many  branches  of  business  and  in  many  industrial  occu- 
pations I  admit,  but  every  civilized  and  Christian  country  in  the  world 


620  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

has  suffered  to  a  greater  degree.  In  comparison  with  any  nation  of 
modern  times  our  condition  in  every  respect  is  more  prosperous  and 
happy.  If  you  read  the  English,  French,  or  German  papers,  you  will 
find  that  our  causes  of  complaint  are  nothing  to  be  compared  with 
theirs,  while  in  our  country  there  are  many  circumstances  which  relieve 
the  general  depression. 

Let  me  name  some  of  the  hopeful  signs  of  the  times. 

The  whole  period  since  the  war,  and  before  the  panic,  was  a  debt- 
contracting  period.  From  July  1,  1863,  to  July  1,  1873,  our  imports 
exceeded  our  exports  in  the  enormous  sum  of  $1,047,069,219.  Much 
of  this  was  for  silks  and  furbelows,  contracted  for  in  the  faith  of  corner 
lots  marked  up,  of  inflated  fortunes  suddenly  acquired ;  but  most  of  it 
was  for  articles  that  our  own  labor  should  have  produced.  It  repre- 
sented foreign  capital  loaned  to  our  citizens  and  to  corporations,  and 
paid  for  in  government  and  corporation  bonds  and  private  notes. 

The  same  causes  produced  extravagant  prices  here.  Wild  schemes, 
raih'oads  built  twenty  years  in  advance  of  their  need,  reckless  expendi- 
tures, led  to  the  contracting  of  numerous  debts,  and  to  the  mortgaging 
of  our  corporations,  homes,  and  fanns. 

Since  the  panic  the  whole  condition  of  our  trade  and  business  has 
changed.  Since  1874  our  exports  have  exceeded  our  imports  in  the 
sum  of  8507,459,237. 

During  the  last  fiscal  year  the  excess  of  exports  was  $257,459,250, 
the  aggregate  of  our  exports  reaching  the  sum  of  $680,683,798,  and 
during  this  fiscal  year  this  excess  is  increasing.  This  is  a  debt-paying 
process.  The  great  body  of  the  debts  contracted  before  the  panic  is 
now  settled,  either  by  payment,  or  bankruptcy,  or  readjustment. 

At  one  time  it  was  estimated  that  the  amount  of  United  States 
bonds  held  abroad  approached  $1,000,000,000.  Two  years  ago  the  gen- 
eral estimate  was  about  $600,000,000.  IS'ow,  after  the  most  careful  exam- 
ination, it  is  estimated  somewhere  near  $200,000,000  to  $250,000,000. 

The  common  fear  expressed  for  the  success  of  any  plan  of  resump- 
tion was  that  foreign  nations  could  at  once,  by  a  return  of  our  bonds, 
exhaust  our  gold  and  thus  defeat  resumption  ;  but  this  is  no  longer  to 
be  feared  when  the  surplus  exports  for  a  single  year  would  pay  off 
every  dollar  of  our  national  debt  held  beyond  the  limits  of  the  United 
States. 

Last  winter,  when  an  exaggerated  fear  prevailed  in  Em'ope  as  to 
the  effect  of  the  silver  bill,  $60,000,000  of  our  bonds  were  promptly 
absorbed  l)y  onr  own  people  in  sixty  days ;  and,  although  this  stojDped 
the  sale  of  bonds  by  the  Treasury,  it  strengthened  our  position  by 
bringing  them  home. 

Another  favorable  sign  of  the  times  is  the  very  large  increase  of 
domestic  production,  botli  of  the  farm  and  of  the  workshop,  which  not 
only  fill  the  place  of  goods  heretofore  imported,  but  enable  us  to  com- 
pete with  foreign  nations  in  their  own  markets. 

I  have  here  a  recent  table  showing  the  increase  of  leading  exports 
of  our  own  production.  This  shows  that  our  exports  of  cotton,  iron, 
steel,  copper,  leather,  and  other  manufactures  have  increased  within  ten 
years  nearly  twofold,  and  that  the  exports  of  our  agricultural  imple- 


FINANCES.  621 

ments  and  provisions  have  increased  nearly  threefold.  The  total  amount 
of  certain  leading  commodities  exported  in  1868  was  $141,000,000, 
and  in  1878  was  $404,000,000,  showing  an  increase  of  $263,000,000. 

Another  table  shows  that  our  importation  of  certain  fabrics  which 
we  can  readily  make  in  this  country  has  diminished  nearly  one  half. 
Of  textile  fabrics,  including  manufactures  of  cotton,  silk,  clothing,  and 
dress  goods,  the  amount  imported  into  this  country  in  1873  was  $159,- 
000,000;  the  amount  imported  in  1878  was  $85,000,000,  making  a 
diminut'on  of  $74,000,000,  most  of  which  was  supplied  by  our  own 
production. 

The  imports  of  iron  and  steel  in  various  forms  in  1^73  was  $59,- 
308,452,  while  in  1878  it  had  fallen  to  $9,057,633,  showing  a  diminu- 
tion of  $50,250,849.    This  falling  oif  was  supplied  by  our  own  industry. 

The  total  of  the  leading  manufactures  named  in  this  table  imported 
in  1873  was  $272,957,633,  and  during  the  fiscal  year  ending  June  30, 
1878,  it  was  $121,211,734,  making  a  falling  off  of  $148,747,899.  This 
great  decrease  was  especially  noticeable  in  the  imports  of  manufactures 
of  cotton,  silk,  wool,  iron,  and  steel. 

This  increase  of  our  exports  and  diminution  of  our  imports  is  per- 
haps the  most  remarkable  in  modern  times. 

We  are  competing  in  cotton  fabrics  with  Manchester,  in  cutlery 
with  Sheffield,  in  iron  and  steel  with  Birmingham,  in  watches  with 
Switzerland,  and  in  gloves  with  France.  It  is  a  debt-paying  and  trade- 
developing  process  that  is  adding  immensely  to  our  wealth. 

Our  progress  toward  resumption  is  accompanied  by  increased  na- 
tional credit,  and  by  a  large  reduction  of  the  interest  of  the  public  debt. 

Under  the  refunding  act,  which  is  designed  to  convert  our  six  per 
cent,  bonds  into  bonds  bearing  a  lower  rate  of  interest,  we  have  already 
sold  at  par  in  coin,  $500,000,000  of  five  per  cent,  bonds,  $246,000,000 
of  four  and  a  half  per  cent,  bonds,  and  $135,000,000  of  four  per  cent, 
bonds,  the  proceeds  of  which  (except  $90,000,000  sold  for  gold  coin 
now  in  hand)  have  been  applied  to  pay  an  equal  amount  of  six  per 
cent,  debt,  making  an  annual  saving  in  the  interest  of  the  debt  of 
$10,000,000 ;  and  we  are  now  daily  selling  the  four  per  cent,  bonds 
directly  to  the  people  upon  the  basis  of  a  popular  loan  in  sums  as  low 
as  $50.  These  bonds  have  become  the  savings  banks  of  the  people,  a 
safe  deposit  for  their  surplus  money,  always  available  for  use  when 
needed,  and  depending  upon  the  honor  of  the  nation,  and,  therefore, 
safe  from  loss. 

The  most  satisfactory  feature  of  this  loan  is  that  it  is  held  in  small 
sums  by  great  numbers  of  our  fellow  citizens,  and  is  distributed  through- 
out all  the  States  in  the  Union.  During  the  first  twenty  days  of  the 
present  month  our  sales  of  four  per  cent,  bonds  amount  to  $20,000,000, 
and  I  now  have  the  confident  assurance  that  during  this  year  they  will 
exceed  $100,000,000,  and  will  pay  off  all  the  five-twenty  six  per  cent, 
bonds  of  the  issue  of  1865. 

The  United  States  is  now  the  largest  producer  of  gold  and  silver  in 
the  world.  During  the  last  year  the  estimated  production  of  gold  was 
$45,000,p00,  and  of  silver  $39,000,000  ;  and  though  the  Comstock  lode 
gives  evidence  of  exhaustion,  other  mines  are  being  discovered,  and  the 


022  SPEECHES  AND  REPORTS  OF  JOHN  SHERMAN. 

probabilities  are  that  our  production  will  increase  rather  than  diminish. 
This  is  an  important  element  in  the  question  of  our  ability  to  maintain 
resumption. 

Then,  again,  the  enormous  development  of  our  agricultural  produc- 
tion, the  clnef  employment  of  our  people,  gives  a  source  of  wealth  and 
prosperity  unexampled  in  any  nation  in  modern  times.  From  the  At- 
lantic to  the  Pacific,  from  Canada  to  the  Gulf  of  Mexico,  our  country 
has  been  blessed  with  bountiful  harvests,  assuring  plenty  of  food  to  all 
our  people,  and  an  increase  of  our  exports  to  Europe.  I  understand 
that  a  rich  stream  of  wheat  is  now  pouring  into  your  port  for  shipment. 

It  is  this  industry  which  lies  at  the  foundation  of  our  prosperity, 
and  which  invites  now  millions  of  laborers  to  aid  in  the  development 
of  uncultivated  lands.  The  war  withdrew  from  agriculture  millions  of 
laborers  who  are  again  invited  to  join  in  this  most  healthful  and  happy 
pursuit  of  life,  and  the  crowded  cities  are  freely  invited  to  send  their 
suq^lus  population  to  fruitful  fields  and  bountiful  harvests. 

After  the  war  of  1812  the  migration  commenced  which  peopled 
,  Ohio,  Indiana,  and  Illinois ;  and,  although  there  are  no  such  rich  lands 
open  now  for  settlement,  yet  Texas,  Kansas,  Nebraska,  and  the  whole 
tier  of  States  west  of  the  Missouri  river,  together  with  the  undeveloped 
Territories  of  the  West,  invite  migration  and  insure  to  labor  a  just 
reward,  and  offer  facilities  for  transi^ortation  and  settlement  that  our 
fathers  did  not  enjoy. 

And  now,  fellow  citizens,  in  conclusion,  let  me  invite  your  attention 
briefly  to  the  agitation  of  the  labor  question,  not  only  in  this  country, 
but  in  other  countries  where  production  has  exceeded  consumption 
and  thrown  out  of  employment  many  industrious  laboring  men,  and 
paralyzed  important  branches  of  industry,  especially  of  the  iron  and 
coal  industries. 

I  know  that  in  some  places  labor  is  depressed,  that  wages  are  low, 
that  many  a  willing  hand  finds  it  hard  to  get  work,  and  sometimes 
hungry  men,  women,  and  children  want  food  and  clothing ;  and  shame 
be  to  him  who  does  not  sympathize  with  such  suffering  and  relieve  it 
if  possible.  No  wonder  that  honest  labor  grows  soured  at  the  inequali- 
ties of  life,  and  sometimes  listens  to  the  cry  of  the  demagogue  that 
human  laws  have  caused  this  distress,  and  that  if  he  was  in  office  he 
could  furnish  redress. 

The  same  distress  in  a  far  greater  degree  exists  in  Great  Britain, 
France,  Germany,  and  all  civilized  nations,  whatever  may  be  their  forms 
of  currency  or  standards  of  value.  The  only  remedy  would  seem  to  be 
to  pursue  new  industries  and  seek  new  markets  to  be  supplied.  Our 
own  country  is  blessed  with  cheap  lands  inviting  labor,  and  the  energy 
of  our  own  people,  as  I  have  shown,  is  already  discovering  increased 
employment  in  supplying  productions  heretofore  made  abroad,  and  in 
sending  our  home  productions  to  foreign  countries.  All  that  the  Gov- 
ernment can  do  within  its  limited  powers  it  ought  to  do  to  encourage, 
protect,  and  foster  labor. 

And  I  can  say  of  our  laws  and  institutions  that  they  are  far  more 
favorable  to  the  laboring  man  than  those  of  any  other  country ;  and 
any  idea,  or  reform,  or  measure  that  is  proposed  to  relieve  and  protect 


FINANCES.  623 

labor  finds  in  the  Republican  party  its  earnest  and  sympathetic  advo- 
cate. That  party  has  done  more  for  the  protection  and  develoj)ment 
of  labor  than  any  other. 

Our  Constitution  and  laws  guarantee  to  every  man  equal  civil  and 
political  I'ights.  Property  is  more  equally  distributed  here  than  else- 
where, except  in  France  ;  and,  excluding  the  negroes  who  but  recently 
acquired  the  right  to  vote,  a  greater  proportion  of  our  citizens  are  prop- 
erty-holders. More  than  two  thirds  of  our  voters,  with  this  exception, 
are  property-holders,  and  the  rest  want  to  be,  hope  to  be,  and  can  be. 

This  country  of  ours  is  not  a  permanent  field  for  tramps  and  com- 
munists. Our  laws  for  the  distribution  of  property  tend  directly  and 
rapidly  to  distribute  large  estates. 

Property  here  is  required  to  pay  more  tribute  to  labor  than  in  any 
country  in  the  world. 

Property  educates  the  children,  maintains  all  your  charitable  insti- 
tutions, your  streets,  roads,  and  local  improvements,  and  all  parts  of 
IS^ational,  State,  and  local  government. 

The  very  few  taxes  that  attach  to  those  who  have  no  property  are 
on  whisky,  tobacco,  and  beer,  which  are  voluntary  taxes. 

If  the  Government  can  do  more  to  protect  labor,  it  will.  It  offers 
to  every  citizen  a  homestead  on  the  public  lands.  It  offers  every  man 
an  equal  chance.  Every  ofllce  and  honor  is  open  to  equal  competition, 
and  it  gives  to  no  man  rank,  title,  or  advantage  except  what  he  himself 
acquires. 

This  is  all  that  a  free  government  can  do.  It  can  not  take  the  prop- 
erty of  the  ri'li  and  divide  it  among  the  poor.  It  can  not,  as  is  pro- 
posed, take  the  public  treasure,  collected  by  taxes,  and  distribute  it  in 
any  other  way  than  for  the  limited  proper  objects  provided  for  by  the 
Constitution.  It  can  not  control  contracts  men  make  with  each  other, 
except  where  they  are  grossly  immoral  or  violate  public  policy.  Its 
ofiice  is  spent  when  it  secures  freedom,  equality,  and  an  equal  chance 
in  the  race  of  life. 

While  the  sympathies  of  the  Pepublican  party  must  ever  be  with 
the  laboring  man,  it  can  not  violate  the  fundamental  principles  of  free 
government,  in  order  to  favor  any  class,  or  refuse  to  protect  any  class 
in  the  enjoyment  of  life,  property,  and  the  fruits  of  labor. 

In  the  general  management  of  your  affairs  the  Republican  party  has 
done  all  that  it  could  do  to  develop  the  national  resources  and  maintain 
the  national  honor,  to  j^rotect  all  men  in  equal  rights,  to  secure  to  all 
men  equal  privileges  and  an  equal  chance  in  life ;  and  it  is  ready  to 
adopt  any  proper  and  constitutional  mode  of  relieving  distress  and  ad- 
vancing the  interests  of  any  portion  of  the  people.  I  can  safely  appeal 
to  all  of  you  who  have  shared  in  the  honors  and  labors  of  this  party,  to 
still  stand  by  its  flag,  now  that  the  difficulties  of  the  recent  past  are 
passing  away,  with  the  full  hope  that  our  country,  always  advancing 
and  prospering  since  liberty  was  first  proclaimed  by  our  Ilevolutionary 
fathers,  is  still  destined  to  advance,  under  the  guidance  of  the  Repub- 
lican party,  to  higher  honor  and  greater  prosperity. 


624 


SPEECHES  AND  EEPORTS  OF  JOHN  SHERMAN. 


APPENDIX  A. 

Values  of  the  principal  commodities  of  domestic  production,  the  exportation  of  which 
greatly  increased  from  June  30,  1868,  to  June  30,  1878. 


TKAK  ENDING  JUNE   30. 

Increase. 

1868. 

1878. 

Agricultural  implements 

$673,381 

733,395 

68,980,997 

1,516,220 

939,250 

4,871,054 

406,512 

6,389,429 

1,414,372 

2,913,448 

21,810,676 

30,278,253 

$140,926,987 

$2,575,198 

5,844,653 

181,774,507 

2,359,467 

3,078,349 

11,435,628 
1,376,969 

12,084,048 
8,077,659 
5,095,163 

46,574,974 
123,546,986 

$1,901,817 

Live  animals 

5,111,258 

Bread  and  breadstuflfs 

112,793,510 

Coal 

843,247 

2,139,099 

5,564,574 

970,457 

5,694,619 

6,663,287 

2,181,715 

24,764,298 

93,271,733 

Copper,  brass,  and  manufactures  of. . . 
Cotton,  manufactures  of 

Fruit 

Iron,  steel,  and  manufactures  of 

Leather,  and  manufactures  of. 

Oil-cake 

Coal  oil  and  petroleum 

Provisions 

Total 

$403,826,601 

$262,899,614 

APPENDIX   B. 

Values  of  the  jjrincipal  commodities  of  foreign  production,  the  importation  of  which 
greatly  decreased  from  June  30,  1873,  to  June  30,  1878. 


COMMODITIES. 

VALUE   IMPORTED    DURING   YEAR 
ENDING 

Decrease  since  1873. 

June  80, 1873. 

June  80, 1878. 

Clocks,  watches,  and  materials 

$3,274,825 

$812,582 

$2,462,243 

Textiles  : 
Manufactures  of  cotton 

$29,752,116 

20,428,391 

29,835,867 

8,551,161 

20,433,938 

4,388,257 

19,447,797 

26,626,721 

$159,464,248 

$14,398,791 

11,490,758 

19,701,731 

6,676,789 

8,363,015 

398,389 

12,055,806 

12,269,852 

$15,353,325 

8,937,533 

10  134  136 

Manufactures  of  flax 

Manufactures  of  silk 

Clothing 

1,874,372 

12,070,923 

3  989,868 

Wool: 

Carpets   

Dress  goods 

7,391,991 
14,356,869 

Other  manufactures  of. 

Total  textiles 

$85,355,131 

$74,109,117 

Iron  and  Steel  : 

Bar,  rod,  sheet,  and  hoop 

$7,477,556 
13,847,281 
19,740,702 
3,594,900 
4,155,234 
10,492,779 

$1,630,707 

1,250,057 

530 

920,790 

1,220,037 

4,035,512 

$5,846,849 

12,597,224 

19,740,172 

2,674,110 

2,935,197 

6,457,267 

Iron  in  pigs 

Railroad  bars 

Anchors,  chains,  and  other 

Steel  ingots,  bars,  etc 

Steel  cutlery,  saws,  etc 

Total  iron  and  steel 

$59,308,452 

$3,966,471 

3,222,627 

18,356,653 

900,187 

24,466,170 

$9,057,633 

$50,250,819 

Copper,  brass,  and  manufactures  of . . 
Lead  in  pigs  and  bars 

$617,188 

353,936 

12,112,532 

242,564 

15,660,168 

$3,349,283 
2,868,691 
6  244  121 

Tin  and  tin  ])lat(!S 

India  rubber  and  gutta  pcrcha 

Tea 

657,623 
8,806,002 

Grand  total 

$272,959,633 

$124,211,734 

$148,747,899 

CONDITION  OF  THE  COUNTRY.  625 


COISTDITIOX  OF  THE  COUNTRY. 
SPEECH  AT  CUMBERLAND,  MARYLAND,  OCTOBER  2k,  1878. 

The  best  return  for  the  kind  reception  you  have  given  the  President 
and  his  associates  will  be  to  confine  myself,  in  the  brief  speech  he  de- 
sires me  to  make,  to  a  statement  of  such  facts  as  will  exhibit  the  finan- 
cial condition  of  our  country.  I  take  it  that  most  of  you  are  farmers, 
and  that  all,  including  the  lawyers  and  doctors — who,  though  not  good 
producers,  are  very  good  consumers — are  interested  in  the  growth  and 
development  of  the  trade,  commerce,  and  industries  of  our  country.  I 
wish  to  state  some  facts,  taken  mainly  from  the  records  of  the  Treasury 
Department,  which  will  tend,  I  think,  to  show  you  that  our  business 
condition  is  improving,  and  that  though  we  have,  in  common  with 
other  nations,  suffered  from  depressed  trade  and  industry,  yet  that  the 
causes  for  this  are  passing  away,  and  that  now  the  signs  are  hopeful  and 
cheering. 

One  mode  of  testing  the  condition  of  a  country  is  by  its  foreign 
trade.  There  are  a  good  many  theories  about  the  balance  of  trade,  but 
one  thing  we  all  understand  to  be  as  true  of  a  nation  as  of  an  individual. 
If  one  sells  more  than  he  buys,  he  grows  richer — especially  is  this  true 
of  the  products  of  a  farm  if  it  is  all  the  time  improving ;  if  he  buys 
more  than  he  sells,  he  grows  poorer.  Tested  by  this  simple  rule,  the 
condition  of  our  countiy  is  now  very  satisfactory — more  so  than  ever 
before  in  our  history.  We  have  imported  goods  from  foreign  countries 
during  the  last  twelve  months  to  the  value  of  ^430,855,017 ;  we  have 
sold  to  foreign  countries  during  the  same  period  goods  to  the  value  of 
$720,484,171 ;  thus  leaving  a  balance  in  our  favor  of  $289,629,154. 
This  is  a  much  larger  balance  in  our  favor  than  has  ever  occurred 
before  in  our  history,  and  this  balance  is  represented  either  by  debts 
paid  by  us  or  money  paid  to  us — mostly  by  debts  paid  by  us.  AH  this 
sum  has  been  returned  to  us  from  Europe  either  in  bonds  of  the  United 
States  or  in  other  securities  held  abroad,  or  in  money ;  and  this  favora- 
ble balance  of  trade  has  now  continued  for  four  or  five  years,  so  that 
our  debt  to  Europe  is  mostly  paid,  and  our  country  is  rapidly  ceasing  to 
be  a  debtor  nation  except  to  its  own  citizens. 

Another  simple  mode  of  testing  our  financial  condition  is  by  the 
increase  or  decrease  of  our  domestic  productions.  Here  again  we  are 
in  a  satisfactory  condition.  Nearly  all  domestic  productions  have 
largely  increased,  and  especially  those  of  the  farm  and  workshop. 
Compared  with  1870,  when  our  domestic  productions  were  stated  at 
$6,800,000,000,  they  have  largely  increased. 

The  great  increase  in  some  of  the  principal  productions  which  con- 
stitute the  basis  of  our  material  prosperity  is  shown  by  the  following 
table : 

40 


626  SPEECHES  AND  REPOKTS  OF  JOHN  SHERMAN. 

Production. 


COMMODITIES. 

TEAK. 

1S78. 

1878. 

bushels. 

932,274,000 

281,254,700 

15,142,000 

270,340,000 

3,930,508 

1,342,558,000 

Wheat         do. 

365,094,000 

Rye do. 

21,170,100 

Oats 

do. 

406,394,000 

Cotton      .... 

bales . 

4,811,265 

By  comparing  the  figures  of  18Y7  with  those  of  the  census  year  of 
1870,  it  appears  that  the  total  production  of  coal  in  the  United  States 
rose  from  32,860,690  tons  in  1870  to  54,308,000  tons  in  1877,  and  that 
the  production  of  pig  iron  in  the  United  States  increased  from  1,865,- 
000  tons  in  1870  to  2,314,585  tons  in  1877. 

The  production  of  petroleum  (now  constituting  one  of  the  most  im- 
portant articles  of  exportation)  increased  from  5,673,195  barrels  in  1870 
to  13,135,671  barrels  in  1877. 

Compared  with  any  former  year,  the  aggregate  of  these  productions 
has  very  largely  increased.  We  are  blessed  by  Divine  Providence  with 
fruitful  seasons,  and  these  have  been  improved  by  the  industry  of  our 
people.  This  vast  aggregate  of  wealth,  though  won  by  hard  labor  not 
very  well  paid,  greatly  improves  our  financial  condition,  and  enables  us 
to  look  into  the  future  without  fear  of  want,  and  with  an  abundance 
with  which  to  pay  our  debts  and  supply  the  wants  of  Europe. 

Another  good  sign  is  in  the  growing  diversity  of  our  productions. 
The  wealth  of  a  country  depends  upon  this.  No  country  can  be  jn-os- 
perous  whose  industry  is  confined  to  one  pursuit.  We  are  now  making 
at  home  many  articles  that  we  formerly  imported.  The  fact  that,  with 
respect  to  certain  of  the  great  manufacturing  industries,  we  have  ob- 
tained control  of  our  own  markets,  is  shown  by  the  great  falling  off  in 
the  importation  of  certain  commodities  from  1873  to  1878.  This  is 
indicated  by  the  following  table : 


COMMODITIES. 

IMPORTED   DURING   THE   TEAK  ENDED 
JFNE   30. 

1873.                           1878. 

Manufactures  of  cotton 

$29,752,116 

20,428,391 

29,835,867 

4,388,257 

3,966,471 

19,740,702 

$14,398,791 
11  490  758 

ManuHictures  of  flax 

Manufactures  of  silk 

19,701,731 
398  389 

Manufactures  of  carpets 

Copper,  brass,  and  other  manufactures  of 

617  188 

Eailroad  bars 

530 

And  80  I  might  go  on  through  an  immense  category  of  the  products 
of  our  industries. 

Wliile  tlie  importation  of  railroad  bars  fell  off  to  the  extent  shown 
above,  from  $19,000,000  to  $530,  the  production  of  iron  and  steel  bars 
in  the  United  States  increased  from  2,958,141  tons  during  the  five  years 
from  1867  to  1871  to  4,056,340  tons  durhig  tlte  five  years  from  1873  to 


CONDITION  OF  THE  COUNTRY.  627 

18T7 — an  increase  of  thirty-seven  per  cent.  ISTow  we  supply  our  own 
wants  of  the  same  articles  by  domestic  manufacture. 

Not  only  this,  but  we  have  so  increased  our  skill  in  the  industrial 
arts  that  we  are  largely  supjDlying  our  home  markets  with  certain  of  the 
more  important  articles  of  manufacture,  which  but  a  few  years  ago  we 
imported  in  large  quantities,  and  this  in  face  of  the  hard  times  of  the 
last  six  years. 

We  have  also  greatly  increased  the  exportation  of  certain  com- 
modities to  foreign  countries. 

I  will  mention  a  few  of  the  principal  of  these  commodities: 

The  exportation  of  manufactures  of  cotton  increased  from  $2,947,- 
528  during  the  year  ending  June  30,  1873,  to  $11,435,628  during  the 
year  ending  June  30,  1878. 

Our  exports  of  iron  and  manufactures  of  iron,  including  steel,  rose 
from  $10,000,000  in  1873  to  $12,000,000  in  1878. 

Our  exports  of  leather  and  manufactures  of  leather  increased  from 
$5,305,000  in  1873  to  $8,077,000  in  1878 ;  and  our  exports  of  copper 
and  brass  and  manufactures  thereof  rose  from  $753,000  during  the 
year  1873  to  $3,078,000  during  the  year  1878. 

The  schedule  might  be  extended  so  as  to  embrace  many  highly 
wrought  products  of  industry,  including  watches,  clocks,  sewing-ma- 
chines, locomotives,  cars,  steam-machinery,  etc.,  etc.  We  are  now  com- 
peting with  our  productions  in  the  different  marts  of  the  world  in  "all 
the  leading  articles  of  manufacture. 

Another  hopeful  sign  is  the  better  distribution  of  our  population. 
The  tendency  since  the  war  has  been  to  concentrate  into  cities.  All 
the  large  cities  grew  rapidly,  but  the  fanns  and  villages  were  deserted. 
While  the  waste  of  war  and  the  excitement  of  inflated  prices  lasted, 
cities  flourished ;  but  when  the  bubble  burst  and  reverses  came,  the 
blow  fell  mainly  upon  the  cities.  Corner  lots  fell  and  paper  fortunes 
disappeared  in  a  day.  Thousands  of  men  were  thrown  out  of  work. 
They  could  not  comprehend  the  cause.  Many  of  these,  by  reviving 
business,  are  now  again  employed;  but  tens  of  thousands  have  bet- 
tered their  condition  by  seeking  new  homes  in  the  West  and  South, 
where  rich  land  and  fruitful  harvests  invite  them  to  the  cultivation  of 
the  soil,  the  highest  employment  of  life.  All  accounts  concur  that  the 
population  of  Texas,  Kansas,  Nebraska,  Iowa,  and  Minnesota  has  very 
largely  increased  during  the  last  two  years.  In  these  Western  homes 
some  of  your  old  comrades  have  found  the  star  of  their  life. 

Another  hopeful  sign  is  the  advancing  credit  of  our  country^  Cer- 
tainly every  American  citizen  will  take  pride  in  the  fact  that  our  four 
per  cent,  bonds  are  daily  taken  at  par  in  coin.  Though  the  rate  of 
interest  is  low,  yet  the  feeling  of  trust  and  security  in  the  good  faith 
and  honor  of  our  people  makes  every  one  feel  saje  when  he  holds  a 
Government  bond.  The  amount  of  these  bonds  sold  last  year  was 
$71:,900,000,  and  this  year,  thus  far,  $83,359,850;  in  all,  $158,259,850. 
All  of  these  bonds  are  held  by  our  own  citizens,  and  three  fourths  of 
them  by  small  investors,  or  by  savings  banks  and  insurance  companies. 
This  process  enables  us  rapidly  to  pay  off  our  six  per  cent,  bonds,  and 
reduce  the  interest  paid  by  the  Government  one  third. 


628  SPEECHES  AND  EEPORTS  OF  JOHN  SHEEMAN. 

Another  mode  of  testing  our  financial  condition  is  in  our  economy. 
Here  again  we  all  know  there  has  been  an  improvement.  Economy 
has  been  the  rale,  not  only  of  the  nation,  but  of  every  family.  The 
extravagance  of  a  period  of  inflation  produced  the  bitter  effects  of  the 
panic  under  which  we  have  suffered;  but  this  suffering  has  com- 
pelled thrift,  economy,  and  great  prudence,  and  these  homely  virtues 
have  brought  us  rich  rewards.  Debts  have  been  paid.  This  thrift 
has  extended  to  the  National  Government,  so  that  our  national  ex- 
penses have  largely  decreased.  In  18T3  they  amounted  to  $290,345,- 
245.  During  the  last  year  they  amounted  to  $236,964,326.  Both 
parties,  perhaps  I  had  better  say  all  parties,  are  claiming  credit  for 
tliis,  and  the  people  wish  them  a  generous  rivalry  in  pushing  forward 
this  good  work. 

But  the  question  upon  which  I  know,  fellow  citizens,  you  desire 
most  to  hear  from  me,  is  about  our  currency — whether  our  currency  is 
to  be  restored  to  the  specie  standard,  and  our  industry  to  be  measured 
by  the  solid  coin  of  the  world. 

Here  again  our  condition  is  greatly  improved.  Six  years  ago,  in 
18Y3,  when  the  panic  came  upon  us  like  a  thief  in  the  night,  without 
warning  or  notice,  our  paper  money,  which  measured  all  values,  was 
worth  only  eighty-six  cents  on  the  dollar  in  coin ;  now  it  is  worth  with- 
in a  very  small  fraction  of  the  best  coin  issued  from  the  mint.  Then 
the  bond-holder  received  gold  and  the  laboring  man  received  depreci- 
ated paper  money.  This  distinction  was  made  necessary  during  the 
war  in  order  to  sell  our  bonds,  yet  it  was  a  matter  of  complaint  that 
this  discrimination  was  not  removed  as  soon  as  practicable.  This  is 
now  almost  accomplished,  and  who  would  desire  it  otherwise?  All 
money  should  have  equal  value,  and  the  best  standard  is  coin  money. 
I  do  not  say  that  coin  money  should  be  the  only  money ;  for  I  believe 
that  paper  money  equal  to  coin  is,  for  current  purposes,  more  convenient 
than  coin  money ;  but  the  only  test  of  its  equality  to  coin  is  that  it  is 
redeemable  in  coin  on  the  demand  of  the  holder.  I  have  no  wish  to 
enter  upon  the  controverted  political  question  whether  the  best  mode 
has  been  adopted  to  bring  this  about,  for  upon  this  point  we  might 
honestly  differ;  but  upon  one  point  I  think  we  can  all  agree,  that 
having  gold,  silver,  and  paper  money  so  near  to  each  other,  we  will 
not  allow  the  gap  to  widen  again,  but  that  all  money  shall  be  of  equal 
purchasing  power,  so  that  the  rich  and  the  poor,  the  bond-holder  and 
the  note-holder,  the  land-owner  and  the  laborer,  may  have,  as  he 
chooses,  either  form  of  money  for  his  labor  and  productions. 

I  am  frequently  asked  whether  we  can  maintain  the  equality  of  this 
money  after  resumption.  I  say,  without  hesitation,  that  we  can  do  so ; 
but  we  must  not  force  the  issue  of  either  form  of  money  when  its  con- 
venience, the  ]iopular  demand  for  it,  and  the  separate  uses  for  which  it 
is  designed,  will  not  keep  it  at  par  with  the  other. 

Under  the  resumption  act  of  1875,  the  maintenance  of  resumption 
after  January,  18Y9,  was  a  very  easy  problem.  It  was  resumption  upon 
$300,000,000  of  United  States  notes,  and  upon  one  coin,  that  of  gold. 
Congress,  by  law,  requires  resumption  upon  $346,000,000  of  United 
States  notes.     It  also  requires  resumption  upon  gold  and  silver  coin. 


CONDITION  OF  THE   COUNTRY.  629 

but  the  bullion  in  the  two  coins  is  of  unequal  value,  the  silver  in  the 
dollar  being  worth  in  gold  only  eighty-three  cents.  If  the  market 
value  of  these  metals  was  at  or  about  the  relative  value  fixed  by  law  for 
their  coinage,  resumption  in  both  metals  would  be  much  easier  than  in 
either.  It  would  be  very  easy  to  resume  in  silver  doUars  alone,  but  it 
is  resumption  in  gold  coin,  as  well  as  silver,  that  is  provided  for  by 
law  as  well  as  by  public  policy.  The  coining  of  $2,000,000  monthly 
of  silver  dollars  of  full  legal  tender  is  a  disturbing  element  which  we 
can  not  now  compute.  We  can  only  hope  that,  before  the  issue  of 
silver  is  greatly  increased.  Congress  wiU  either  limit  its  amount  or 
make  it  contain  enough  silver  to  be  equal  in  value  to  gold. 

We  have  now  in  circulation  $346,000,000  of  greenbacks,  of  which 
more  than  sixty  millions  is  held  in  reserve.  We  have  now  $137,000,000 
in  gold  and  silver  coin  and  bulKon  in  the  Treasury,  over  and  above  all 
other  coin  liabilities,  to  redeem  any  notes  that  are  presented.  It  is  be- 
lieved that  the  superior  convenience  of  paper  money  for  all  the  uses  of 
life  will  make  it  pass  readily  in  preference  to  gold  and  silver  as  long  as 
the  Government  shows  a  determination  to  maintain  it  at  par  with  coin, 
and  will  freely  use  its  ample  po"\vers  for  that  purpose.  Gold  is  now 
coming  to  us  from  Europe  for  our  productions.  We  are  buying  gold 
and  silver  in  North  Carolina,  Colorado,  l^evada,  California,  and  Mon- 
tana at  par  with  paper  money,  and  our  mines  are  now  yielding  annu- 
ally one  hundred  millions  of  precious  metals  to  reenforce  our  stock. 
We  have  as  a  supplemental  or  ancillary  paper  money  three  hundred 
and  twenty-two  millions  of  bank  notes,  absolutely  secured  beyond  dan- 
ger of  loss,  issued  by  corporations  scattered  through  the  country,  and 
abundantly  able  and  required  to  keep  their  notes  at  par,  and,  if  they 
fail,  w^ith  assets  in  our  hands  ample  to  make  their  promise  good.  I 
therefore  say  with  confidence  that,  unless  the  people  prefer  irredeema- 
ble money,  we  will  have  redeemable  monay  at  par  with  gold  coin, 
unless  the  people  demand  that  silver  coin  of  a  kind  less  valuable  than 
gold  coin  shall  be  issued  in  such  quantities  as  to  drive  out  of  circula- 
tion gold  coin,  and  thus  become  the  sole  standard  of  value. 

But  the  brightest  promise  of  the  future  is  that  our  people,  inhabiting 
the  fairest  portion  of  a  continent,  fresh  for  profitable  labor,  are  becom- 
ing day  by  day  one  people,  united  in  hope,  confidence,  and  fraternity  ; 
that  the  jealousies,  dissensions,  and  sectional  contests  of  the  past  are 
disappearing.  Accursed  be  the  man  who  would  reopen  these  dissen- 
sions, or  would  deny  to  any  man  the  free  and  equal  and  peaceable 
enjo)nnent  of-  any  right  given  to  him  by  the  Constitution  and  laws  of 
our  land.  It  is  only  on  this  platform  we  can  build  our  hopes  for  the 
future.  If  we  can  all  stand  on  this,  there  is  no  hope  or  aspiration  for 
our  country  we  may  not  indulge — peace,  plenty,  and  prosperity,  lib- 
erty, equality,  and  fraternity — the  law  as  our  master  and  guide. 


630  SPEECHES  AND  REPORTS   OF  JOHN  SHERMAN. 


ANNUAL  KEPOET   TO  CONGEESS 
Sm: 


Treasuey  Department, 
Washington,  D.  C,  December  2,  1878. 


The  important  duty  imposed  on  this  Department  by  the  resumption 
act,  approved  January  14,  1875,  has  been  steadily  pursued  during  the 
past  year.  The  plain  purpose  of  the  act  is  to  secure  to  all  interests  and 
all  classes  the  benefits  of  a  sound  currency,  redeemable  in  coin,  with 
the  least  possible  disturbance  of  existing  rights  and  contracts.  Three 
of  its  provisions  have  been  substantially  carried  into  execution  by  the 
gradual  substitution  of  fractional  coin  for  fractional  currency,  by  the 
free  coinage  of  gold,  and  by  free  banking.  There  remains  only  the 
completion  of  preparations  for  resumption  in  coin  on  the  1st  day  of 
January,  1879,  and  its  maintenance  thereafter  upon  the  basis  of  exist- 
ing law. 

At  the  date  of  my  annual  report  to  Congress  in  December,  1877,  it 
was  deemed  necessary  as  a  preparation  for  resumption  to  accumulate  in 
the  Treasury  a  coin  reserve  of  at  least  forty  per  cent,  of  the  amount  of 
United  States  notes  outstanding.  At  that  time  it  was  anticipated  that 
under  the  provisions  of  the  resumption  act  the  volume  of  United  States 
notes  would  be  reduced  to  $300,000,000  by  the  1st  day  of  January, 
1879,  or  soon  thereafter,  and  that  a  reserve  in  coin  of  $120,000,000 
would  then  be  sufficient.  Congress,  however,  in  view  of  the  strong- 
popular  feeling  against  a  contraction  of  the  currency,  by  the  act  ap- 
proved May  31,  1878,  forbade  the  retirement  of  any  United  States  notes 
after  that  date,  leaving  the  amount  in  circulation  $346,681,016.  Uj)on 
the  principle  of  safety  upon  which  the  Department  was  acting,  that 
forty  per  cent,  of  coin  was  the  smallest  reserve  upon  which  resumption 
could  prudently  be  commenced,  it  became  necessary  to  increase  the 
coin  reserve  to  $138,000,000. 

At  the  close  of  the  year  1877  this  coin  reserve,  in  excess  of  coin 
liabilities,  amounted  to  $63,016,050.96,  of  which  $15,000,000  were  ob- 
tained by  the  sale  of  four  and  a  half  per  cent.,  and  $25,000,000  by  the 
sale  of  four  per  cent,  bonds,  the  residue  being  surplus  revenue.  Sub- 
sequently, on  the  11th  day  of  April,  1878,  the  Secretary  entered  into  a 
contract  with  certain  bankers  in  New  York  and  London — the  parties 
to  the  previous  contract  of  June  9,  1877,  already  communicated  to 
Congress — for  the  sale  of  $50,000,000  four  and  a  half  per  cent,  bonds 
for  resumption  purposes.  The  bonds  were  sold  at  a  premium  of  one 
and  a  haK  per  cent,  and  accrued  interest,  less  a  commission  of  one  half 
of  one  per  cent.  The  contract  has  been  fulfilled,  and  the  net  pro- 
ceeds, $50,500,000,  have  been  paid  into  the  Treasury  in  gold  coin. 
The  $5,500,000  coin  paid  on  the  Halifax  award  have  been  replaced  by 
the  sale  of  that  amount  of  four  per  cent,  bonds  sold  for  resumption 
purposes,  making  the  aggregate  amount  of  bonds  sold  for  these  pur- 
poses $95,500,000,  of  which  $65,000,000  were  four  and  a  half  per  cent, 
bonds,  and  $30,500,000  four  per  cent,  bonds.     To  this  has  been  added 


ANNUAL  EEPORT  TO   CONGRESS.  631 

the  surplus  revenue  from  time  to  time.  The  amount  of  coin  held  in 
the  Treasury  on  the  23d  day  of  ISTovember  last,  in  excess  of  coin  suffi- 
cient to  pay  all  accrued  coin  liabilities,  was  $141,888,100,  and  consti- 
tutes the  coin  reserve  prepared  for  resumption  purposes.  This  sum 
will  be  diminished  somewhat  on  the  1st  of  January  next  by  reason  of 
the  large  amount  of  interest  accruing  on  that  day  in  excess  of  the  coin 
revenue  received  meanwhile. 

In  anticipation  of  resumption,  and  in  view  of  the  fact  that  the 
redemption  of  United  States  notes  is  mandatory  only  at  the  office  of 
the  Assistant  Treasurer  in  the  city  of  New  York,  it  was  deemed  im- 
portant to  secure  the  cooperation  of  the  associated  banks  of  that  city 
in  the  ready  collection  of  drafts  on  those  banks  and  in  the  payment  of 
Treasury  drafts  held  by  them.  A  satisfactory  arrangement  has  been 
made  by  which  all  drafts  on  the  banks  held  by  the  Treasury  are  to  be 
paid  at  the  clearing  house,  and  all  drafts  on  the  Treasury  held  by  them 
are  to  be  paid  to  the  clearing  house  at  the  office  of  the  Assistant  Trea- 
surer, in  United  States  notes ;  and,  after  the  1st  of  January,  United 
States  notes  are  to  be  received  by  them  as  coin.  This  will  greatly 
lessen  the  risk  and  labor  of  collections  both  to  the  Treasury  and  the 
banks. 

Every  step  in  these  preparations  for  resum.ption  has  been  accompa- 
nied with  increased  business  and  confidence.  The  accumulation  of 
coin,  instead  of  increasing  its  price,  as  was  feared  by  many,  has  stead- 
ily reduced  its  premium  in  the  market.  The  depressing  and  ruinous 
losses  that  followed  the  panic  of  1873  had  not  diminished  in  1875, 
when  the  resumption  act  passed ;  but  every  measure  taken  in  the  exe- 
cution or  enforcement  of  this  act  has  tended  to  lighten  these  losses  and 
to  reduce  the  premium  on  coin,  so  that  now  it  is  merely  nominal.  The 
present  condition  of  our  trade,  industry,  and  commerce,  hereafter  more 
fully  stated,  our  ample  reserves,  and  the  general  confidence  inspired  in 
our  financial  condition,  seem  to  justify  the  opinion  that  we  are  pre- 
pared to  commence  and  maintain  resumption  from  and  after  tlie  first 
day  of  January,  a.  d.  1879. 

The  means  and  manner  of  doing  this  are  left  largely  to  the  discre- 
tion of  the  Secretary,  but,  from  the  nature  of  the  duty  imposed,  he 
must  restore  coin  and  bullion,  when  withdrawn  in  the  process  of  re- 
demption, either  by  the  sale  of  bonds,  or  the  use  of  the  sui-plus  reve- 
nue, or  of  the  notes  redeemed  from  time  to  time. 

The  power  to  sell  any  of  the  bonds  described  in  the  refunding  act 
continues  after  as  well  as  before  resumption.  Though  it  may  not  be 
often  used,  it  is  essential  to  enable  this  Department  to  meet  emergen- 
cies. By  its  exercise  it  is  anticipated  that  the  Treasury  at  any  time 
can^  readily  obtain  coin  to  reenforce  the  reserve  already  accumulated. 
United  States  notes  must,  however,  be  the  chief  means  under  existing 
law  with  which  the  Department  must  restore  coin  and  bullion  when 
withdrawn  in  process  of  redemption.  The  notes,  when  redeemed,  must 
necessarily  accumulate  in  the  Treasury  until  their  superior  use  and 
convenience  for  circulation  enable  the  Department  to  exchange  them 
at  par  for  coin  or  bullion. 

The  act  of  May  31,  1878,  already  referred  to,  provides  that  when 


632  SPEECHES   AND  REPORTS   OF  JOHN    SHERMAN. 

United  States  notes  are  redeemed  or  received  in  the  Treasury  under 
any  law,  from  any  source  whatever,  and  shall  belong  to  the  United 
States,  they  shall  not  be  retired,  canceled,  or  destroyed,  but  shall  be 
reissued  and  paid  out  again  and  kept  in  circulation. 

The  power  to  reissue  United  States  notes  was  conferred  by  section 
3579,  Eevised  Statutes,  and  was  not  hmited  by  the  resumption  act. 
As  this,  however,  was  questioned.  Congress  wisely  removed  the  doubt. 

JSTotes  redeemed  are  like  other  notes  received  into  the  Treasury. 
Payments  of  them  can  be  made  only  in  consequence  of  appropriations 
made  by  law,  or  for  the  purchase  of  bullion,  or  for  the  refunding  of 
the  public  debt. 

The  current  receipts  from  revenue  are  sufficient  to  meet  the  current 
expenditures  as  well  as  the  accruing  interest  on  the  public  debt.  Au- 
thority is  conferred  by  the  refunding  act  to  redeem  six  per  cent,  bonds 
as  they  become  redeemable,  by  the  proceeds  of  the  sale  of  bonds  bear- 
ing a  lower  rate  of  interest.  The  United  States  notes  redeemed  under 
the  resumption  act  are,  therefore,  the  principal  means  provided  for  the 
purchase  of  bullion  or  coin  with  which  to  maintain  resumption,  but 
should  only  be  paid  out  when  they  can  be  used  to  replace  an  equal 
amount  of  coin  withdrawn  from  the  resumption  fund.  They  may,  it 
is  true,  be  used  for  current  purposes  like  other  money,  but  when  so 
used  their  place  is  filled  by  money  received  from  taxes  or  other  sources 
of  revenue. 

In  daily  business  no  distinction  need  be  made  between  moneys  from 
whatever  source  received,  but  they  may  properly  be  applied  to  any  of 
the  purposes  authorized  by  law.  JSTo  doubt  coin  liabilities,  such  as  in- 
terest or  principal  of  the  public  debt,  will  be  ordinarily  paid  and  will- 
ingly received  in  United  States  notes,  but,  when  demanded,  such  pay- 
ments will  be  made  in  coin ;  and  United  States  notes  and  coin  will  be 
used  in  the  purchase  of  bullion.  This  method  has  already  been  adopted 
in  Colorado  and  l^orth  Carolina,  and  arrangements  are  being  perfected 
to  purchase  bullion  in  this  way  in  all  the  mining  regions  of  the  United 
States. 

By  the  act  approved  June  8,  1878,  the  Secretary  of  the  Treasury  is 
authorized  to  constitute  any  superintendent  of  a  mint  or  assayer  of  any 
assay  office  an  assistant  treasurer  of  the  United  States  to  receive  gold 
coin  or  bullion  on  deposit.  By  the  legislative  appropriation  bill,  ap- 
proved July  19,  1878,  the  Secretary  of  the  Treasury  is  authorized  to 
issue  coin  certificates  in  payment  to  depositors  of  bullion  at  the  several 
mints  and  assay  offices  of  the  United  States.  These  provisions,  in- 
tended to  secure  to  the  producers  of  bullion  more  speedy  payment,  will 
necessarily  bring  into  the  mints  and  Treasury  the  great  body  of  the 
precious  metals  mined  in  the  United  States,  and  will  tend  greatly  to 
the  easy  and  steady  supply  of  bullion  for  coinage.  United  States  notes, 
when  at  par  with  coin,  will  be  readily  received  for  bullion  instead  of 
coin  certificates,  and  with  great  advantage  and  convenience  to  the  pro- 
ducers. 

Deposits  of  coin  in  the  Treasury  will,  no  doubt,  continue  to  be  made 
after  the  1st  of  January,  as  heretofore.  Both  gold  and  silver  coin, 
from  its  weight  and  bulk,  will  naturally  seek  such  a  safe  deposit,  while 


ANNUAL  EEPORT  TO   CONGRESS.  633 

notes  redeemable  in  coin,  from  their  superior  convenience,  will  be  cir- 
culated instead.  After  resumption  the  distinction  between  coin  and 
United  States  notes  should  be,  as  far  as  practicable,  abandoned  in  the 
current  affairs  of  the  Grovernment ;  and  therefore  no  coin  certificates 
should  be  issued  except  where  expressly  required  by  the  provisions  of 
law,  as  in  the  case  of  silver  certificates.  The  gold  certificates  hitherto 
issued  by  virtue  of  the  discretion  conferred  upon  the  Secretary  will  not 
be  issued  after  the  1st  of  January  next.  The  necessity  for  them  dur- 
ing a  suspension  of  specie  payments  is  obvious,  but  no  longer  exists 
when  by  law  every  United  States  note  is,  in  effect,  a  coin  certificate. 
The  only  purpose  that  could  be  subserved  by  their  issue  hereafter  would 
be  to  enable  persons  to  convert  their  notes  into  coin  certificates,  and 
thus  contract  the  currency  and  hoard  gold  in  the  vaults  of  the  Trea- 
sury without  the  inconvenience  or  risk  of  its  custody.  For  convenience 
United  States  notes  of  the  same  denomination  as  the  larger  coin  certi- 
ficates will  be  issued. 

By  existing  law,  customs  duties  and  the  interest  of  the  public  debt 
are  payable  in  coin,  and  a  jDortion  of  the  duty  was  specifically  pledged 
as  a  special  fund  for  the  payment  of  the  interest,  thus  making  one  pro- 
vision dependent  upon  the  other.  As  we  can  not,  with  due  regard  to 
the  public  honor,  repeal  the  obligation  to  pay  coin,  we  ought  not  to 
impair  or  repeal  the  means  provided  to  procure  coin.  When,  happily, 
our  notes  are  equal  to  coin,  they  will  be  accepted  as  coin,  both  by  the 
public  creditor  and  by  the  Government ;  but  this  acceptance  should  be 
left  to  the  option  of  the  respective  parties,  and  the  legal  right  on  both 
sides  to  demand  coin  should  be  preserved  inviolate. 

The  Secretary  is  of  the  opinion  that  a  change  of  the  law  is  not 
necessary  to  authorize  this  Department  to  receive  United  States  notes 
for  customs  duties  on  and  after  the  1st  day  of  January,  1879,  while 
they  are  redeemable  and  are  redeemed  on  demand  in  coin.  After  re- 
sumption it  would  seem  a  useless  inconvenience  to  require  payment  of 
such  duties  in  coin  rather  than  in  United  States  notes.  The  resump- 
tion act,  by  clear  implication,  so  far  modifies  previous  laws  as  to  permit 
payments  in  United  States  notes  as  well  as  in  coin.  The  provision  for 
coin  payments  was  made  in  the  midst  of  war,  when  the  notes  were  de- 
preciated and  the  public  necessities  required  an  assured  revenue  in  coin 
to  support  the  public  credit.  This  alone  justified  the  refusal  by  the  Gov- 
ernment to  take  its  own  notes  for  the  taxes  levied  by  it.  It  has  now 
definitely  assumed  to  pay  these  notes  in  coin,  and  this  necessarily  im- 
plies the  receipt  of  these  notes  as  coin.  To  refuse  them  is  only  to  in- 
vite their  presentation  for  coin.  Any  other  construction  would  require 
the  notes  to  be  presented  to  the  Assistant  Treasurer  in  Xev/  York  for 
coin,  and,  if  used  in  the  purchase  of  bonds,  to  be  returned  to  the  same 
officer,  or,  if  used  for  the  payment  of  customs  duties,  to  be  carried  to 
the  Collector  of  Customs,  who  must  daily  deposit  in  the  Treasury  all 
money  received  by  him.  It  is  not  to  be  assumed  that  the  law  requires 
this  indirect  and  inconvenient  process  after  the  notes  are  redeemable 
in  coin  on  demand  of  the  holder.  They  are  then  at  a  parity  with  coin, 
and  both  should  be  received  indiscriminately. 

If  United  States  notes  are  received  for  duties  at  the  port  of  New 


634  SPEECHES  AND  EEPOKTS   OF  JOHN  SHERMAN. 

York,  they  should  be  received  for  tlie  same  purpose  in  all  other  ports 
of  the  United  States,  or  an  unconstitutional  preference  would  be  given 
to  that  port  over  other  ports.  If  this  j)rivilege  is  denied  to  the  citizens 
of  other  ports,  they  could  make  such  use  of  these  notes  only  by  trans- 
porting them  to  i^Tew  York  and  transporting  the  coin  to  their  homes 
for  payment ;  and  all  this  not  only  without  benefit  to  the  Government, 
but  with  a  loss  in  returning  the  coin  again  to  I^ew  York,  where  it  is 
required  for  redemption  pui-poses. 

The  provision  in  the  law  for  redemption  in  'New  York  was  believed 
to  be  practical  redemption  in  all  parts  of  the  United  States.  Actual 
redemption  was  confined  to  a  single  place  from  the  necessity  of  main- 
taining only  one  coin  reserve,  where  the  coin  could  be  easily  accumu- 
lated and  kept. 

With  this  view  of  the  resumption  act,  the  Secretary  will  feel  it  to 
be  his  duty,  unless  Congress  otherwise  provides,  to  direct  that  after  the 
1st  day  of  January  next,  and  while  United  States  notes  are  redeemed 
at  the  Treasury,  they  be  received  the  same  as  coin  by  the  ofiicers  of 
this  Department  in  all  payments  in  all  parts  of  the  United  States. 

If  any  further  provision  of  law  is  deemed  necessary  by  Congress  to 
authorize  the  receipt  of  United  States  notes  for  customs  dues  or  for 
bonds,  the  Secretary  respectfully  submits  that  this  autliority  should 
continue  only  while  the  notes  are  redeemed  in  coin.  However  desirable 
continuous  resumption  may  be,  and  however  confident  we  may  feel  in 
its  maintenance,  yet  the  experience  of  many  nations  has  proven  that  it 
may  be  impossible  in  periods  of  great  emergency.  In  such  events  the 
public  faith  demands  that  the  customs  duties  shall  be  collected,  in  coin 
and  paid  to  the  public  creditors,  and  this  pledge  should  never  be  vio- 
lated or  our  ability  to  perform  it  endangered. 

Heretofore  the  Treasury,  in  the  disbursement  of  currency,  has  paid 
out  bills  of  any  denomination  desired.  In  this  way  the  number  of 
bills  of  a  less  denomination  than  five  dollars  is  determined  by  the  de- 
mand for  them.  Such  would  appear  to  be  the  true  policy  after  the  1st 
of  January.  It  has  been  urged  that,  with  a  view  to  place  in  circulation 
silver  coins,  no  bills  of  less  than  five  dollars  should  be  issued.  It  would 
seem  to  be  more  just  and  expedient  not  to  force  any  form  of  money 
upon  a  public  creditor,  but  to  give  him  the  option  of  tlie  kind  and  de- 
nomination. The  convenience  of  the  public  in  this  respect  should  be 
consulted.  The  only  way  by  which  moneys  of  different  kinds  and  in- 
trinsic values  can  be  maintained  in  circulation  at  par  with  each  other  is 
by  the  ability,  when  one  kind  is  in  excess,  to  readily  exchange  it  for 
the  other.  This  principle  is  applicable  to  coin  as  well  as  to  paper 
money.  In  this  way  the  largest  amount  of  money  of  different  kinds 
can  be  maintained  at  par,  the  different  purposes  for  which  each  is 
issued  making  a  demand  for  it.  The  refusal  or  neglect  to  maintain 
this  species  of  redemption  inevitably  effects  the  exclusion  from  circu- 
lation of  the  most  valuable,  which  thereafter  becomes  a  commodity, 
bought  and  sold  at  a  premium. 

When  the  resumj)tion  act  was  passed,  gold  was  the  only  coin  which 
by  law  was  a  legal  tender  in  payment  of  all  debts.  The  act  contem- 
plated resumption  in  gold  coin  only.     IS^o  silver  coin  of  full  legal  tender 


ANNUAL  REPORT  TO   CONGRESS.  635 

could  tlien  be  lawfully  issued.  The  only  silver  coin  provided  was  frac- 
tional coin,  which  was  a  legal  tender  for  five  dollars  onl}^  The  act  ap- 
proved February  28,  1878,  made  a  very  important  change  in  our  coin- 
age system.  The  silver  dollar  provided  for  was  made  a  legal  tender 
for  all  debts,  public  and  private,  except  where  otherwise  expressly 
stipulated  in  the  contract.  The  amount  of  this  coin  issued  will  more 
properly  be  stated  hereafter,  but  its  effect  upon  the  problem  of  resump- 
tion should  be  here  considered. 

The  law  itself  clearly  shows  that  the  silver  dollar  was  not  to  super- 
sede the  gold  dollar;  nor  did  Congress  propose  to  adopt  the  single 
standard  of  silver,  but  only  to  create  a  bimetallic  standard  of  silver  and 
gold,  of  equal  value  and  equal  purchasing  power.  Congress,  therefore, 
limited  the  amount  of  silver  dollars  to  be  coined  to  not  less  than  two 
millions  nor  more  than  four  millions  per  month,  but  did  not  limit  the 
aggregate  amount  nor  the  period  of  time  during  which  this  coinage 
should  continue.  The  market  value  of  the  silver  in  the  dollar,  at  the 
date  of  tlie  passage  of  the  act,  was  ninety-three  and  a  quarter  cents  in 
gold  coin ;  now  it  is  about  eighty-six  cents  in  gold  coin.  If  it  was  in- 
tended by  Congress  to  adopt  the  silver  instead  of  the  gold  standard,  the 
amount  provided  for  is  totally  inadequate  for  the  purpose.  Experience, 
not  only  in  this  country  but  in  European  countries,  has  established 
that  a  certain  amount  of  silver  coin  may  be  maintained  in  circulation 
at  par  with  gold,  though  of  less  intrinsic  bullion  value.  It  was,  no 
doubt,  the  intention  of  Congress  to  provide  a  coin  in  silver  which  would 
answer  a  multitude  of  the  purposes  of  business  life,  without  banishing 
from  circulation  the  established  gold  coin  of  the  country.  To  accom- 
plish this,  it  is  indispensable  either  that  the  silver  coin  be  limited  in 
amount,  or  that  its  bullion  value  be  equal  to  that  of  the  gold  dollar. 
If  not,  its  use  will  be  limited  to  domestic  purposes.  It  can  not  be  ex- 
ported excej)t  at  its  commercial  value  as  bullion.  If  issued  in  excess 
of  demands  for  domestic  purposes,  it  will  necessarily  fall  in  market 
value,  and,  by  a  well-known  princij^le  of  finance,  will  become  the  sole 
coin  standard  of  value.  Gold  will  be  either  hoarded  or  exported. 
When  two  currencies,  both  legal,  are  authorized  without  limit,  the 
cheaper  alone  will  circulate.  If,  however,  the  issue  of  the  silver  dollars 
is  limited  to  an  amount  demanded  for  circulation,  there  will  be  no  de- 
preciation, and  their  convenient  use  will  keep  them  at  par  with  gold, 
as  fractional  silver  coin,  issued  under  the  act  approved  February  21, 
1853,  was  kept  at  par  with  gold. 

The  amount  of  such  coin  that  can  thus  be  maintained  at  par  with 
gold  can  not  be  fairly  tested  until  resumption  is  accomplished.  As  yet 
jjaper  money  has  been  depreciated,  and  silver  dollars,  being  receivable 
for  customs  dues,  have  naturally  not  entered  into  general  circulation, 
but  have  returned  to  the  Treasury  in  payment  of  such  dues ;  and  thus 
the  only  effect  of  the  attempt  of  the  Department  to  circulate  them  has 
been  to  diminish  the  gold  revenue.  After  resumption  these  coins  will 
circulate  in  considerable  sums  for  small  payments.  To  the  extent  that 
such  demand  will  give  employment  to  silver  dollars,  their  use  will  be 
an  aid  to  resumption  rather  than  a  hindrance ;  but,  if  issued  in  excess 
of  such  demand,  they  will  at  once  tend  to  displace  gold  and  become 


636  SPEECHES   AND   REPORTS   OF  JOHN   SHERMAN. 

the  sole  standard,  and  gradually,  as  they  increase  in  number,  will 
fall  to  their  value  as  bullion.  Even  the  fear  or  suspicion  of  such  an 
excess  tends  to  banish  gold,  and,  if  well  established,  will  cause  a  con- 
tinuous drain  of  gold  until  imperative  necessity  will  compel  resump- 
tion in  silver  alone.  The  serious  effects  of  such  a  radical  change  in 
our  standards  of  value  can  not  be  exaggerated ;  and  its  possibility  will 
greatly  disturb  confidence  in  resumption,  and  may  make  necessary 
larger  reserves  and  further  sales  of  bonds. 

The  Secretary  therefore  earnestly  invokes  the  attention  of  Congress 
to  this  subject,  with  a  view  that  either  during  the  present  or  the  next 
session  the  amount  of  silver  dollars  to  be  issued  be  limited,  or  their 
ratio  to  gold  for  coining  purposes  be  changed. 

Gold  and  silver  have  varied  in  value  from  time  to  time  in  the  his- 
tory of  nations,  and  laws  have  been  passed  to  meet  this  changing  value. 
In  our  country,  by  the  act  of  April  2, 1Y92,  the  ratio  between  them  was 
fixed  at  one  of  gold  to  fifteen  of  silver.  By  the  act  of  June  28,  1834, 
the  ratio  was  changed  to  one  of  gold  to  sixteen  of  silver.  For  more 
than  a  century  the  market  value  of  the  two  metals  had  varied  between 
these  two  ratios,  mainly  resting  at  that  fixed  by  the  Latin  nations,  of 
one  to  fifteen  and  a  half. 

But  we  can  not  overlook  the  fact  that  within  a  few  years,  from 
causes  frequently  discussed  in  Congress,  a  great  change  has  occurred  in 
the  relative  value  of  the  two  metals.  It  would  seem  to  be  expedient 
to  recognize  this  controlling  fact — one  that  no  nation  alone  can  change 
— by  a  careful  readjustment  of  the  legal  ratio  for  coinage  of  one  to  six- 
teen, so  as  to  conform  to  the  relative  market  values  of  the  two  metals. 
The  ratios  heretofore  fixed  were  always  made  with  that  view,  and, 
when  made,  did  conform  as  near  as  might  be.  Now  that  the  produc- 
tion and  use  of  the  two  metals  have  greatly  changed  in  relative  value, 
a  corresponding  change  must  be  made  in  the  coinage  ratio.  There  is 
no  peculiar  force  or  sanction  in  the  present  ratio  that  should  make  us 
hesitate  to  adopt  another,  when  in  the  markets  of  the  world  it  is 
proven  that  such  ratio  is  not  now  the  true  one.  The  addition  of  one 
tenth  or  one  eighth  to  the  thickness  of  the  silver  dollar  would  scarcely 
be  perceived  as  an  inconvenience  by  the  holder,  but  would  inspire  con- 
fidence, and  add  greatly  to  its  circulation.  As  prices  are  now  based  on 
United  States  notes  at  par  with  gold,  no  disturbance  of  values  would 
result  from  the  change. 

It  appears  from  the  recent  conference  at  Paris,  invited  by  us,  that 
other  nations  will  not  join  with  us  in  fixing  an  international  ratio,  and 
that  each  country  must  adapt  its  laws  to  its  own  policy.  The  tendency 
of  late  among  commercial  nations  is  to  the  adoption  of  a  single  stan- 
dard of  gold  and  the  issue  of  silver  for  fractional  coin.  We  may,  by 
ignoring  this  tendency,  give  temporarily  increased  value  to  the  stores 
of  silver  held  in  Germany  and  France  until  our  market  absorbs  them  ; 
but,  by  adopting  a  silver  standard  as  nearly  equal  to  gold  as  practicable, 
we  make  a  market  for  our  large  production  of  silver,  and  furnish  a 
full,  honest  dollar,  that  will  be  hoarded,  transported,  or  circulated, 
without  disparagement  or  reproach. 

It  is  respectfully  submitted  that  the  United  States,  already  so  large- 


ANNUAL  REPORT  TO  CONGRESS.  637 

\j  interested  in  trade  with  all  parts  of  the  world,  and  becoming,  by  its 
population,  wealth,  commerce,  and  productions,  a  leading  member  of 
the  family  of  nations,  should  not  adopt  a  standard  of  less  intrinsic 
value  than  other  commercial  nations.  Alike  interested  in  silver  and 
gold,  as  the  great  producing  country  of  both,  it  should  coin  them  at 
such  a  ratio  and  on  such  conditions  as  will  secure  the  largest  use  and 
circulation  of  both  metals  without  displacing  either.  Gold  must  neces- 
sarily be  the  standard  of  value  in  great  transactions,  from  its  greater 
relative  value,  but  it  is  not  capable  of  the  division  required  for  small 
transactions ;  while  silver  is  indispensable  for  a  multitude  of  daily 
wants,  and  is  too  bulky  for  use  in  the  larger  transactions  of  business, 
and  the  cost  of  its  transportation  for  long  distances  would  greatly  in- 
crease the  present  rates  of  exchange.  It  would,  therefore,  seem  to  be 
the  best  policy  for  the  present  to  limit  the  aggregate  issue  of  our  silver 
dollars,  based  on  the  ratio  of  sixteen  to  one,  to  such  sums  as  can  clearly 
be  maintained  at  par  with  gold,  until  the  price  of  silver  in  the  market 
shall  assume  a  detinite  ratio  to  gold,  when  that  ratio  should  be  adopted, 
and  onr  coins  made  to  conform  to  it ;  and  the  Secretary  respectfully 
recommends  that  he  be  authorized  to  discontinue  the  coinage  of  the 
silver  dollar  when  the  amount  outstanding  shall  exceed  iifty  million 
dollars. 

The  Secretary  deems  it  proper  to  state  that  in  the  mean  time,  in  the 
execution  of  the  law  as  it  now  stands,  he  will  feel  it  to  be  his  duty  to 
redeem  all  United  States  notes  presented  on  and  after  January  1  next, 
at  the  office  of  the  Assistant  Treasurer  of  the  United  States  in  the  city 
of  N^ew  York,  in  sums  of  not  less  than  fifty  dollars,  with  either  gold 
or  silver  coin  as  desired  by  the  holder,  but  reserving  the  legal  option  of 
the  Government ;  and  to  pay  out  United  States  notes  for  all  other  de- 
mands on  the  Treasury,  except  when  coin  is  demanded  on  coin  liabili- 
ties. 

It  is  his  duty  as  an  executive  officer  to  frankly  state  his  opinions,  so 
that  if  he  is  in  error  Congress  may  prescribe  such  a  policy  as  is  best  for 
the  public  interests. 

The  report  of  the  Comptroller  of  the  Currency  presents  full  and 
interesting  infonnation  as  to  the  national  banks.  The  number  in  exist- 
ence on  October  1  was  2,053.  The  amount  of  their  circulating  notes 
outstanding,  including  those  in  liquidation,  was  $323,147,719  ;  the  cap- 
ital invested  was  $466,147,436  ;  the  surplus  fund  and  profits  were  $157,- 
833,993  ;  the  loans  and  discounts  were  $830,521,542. 

This  system  of  banks,  though  of  recent  growth  and  adopted  as  an 
experiment  amid  the  necessities  developed  by  the  civil  war,  has,  under 
wise  management,  become  the  most  important  business  agency  in  the 
country.  Though  still  under  trial  and  subject  at  all  times  to  the  dis- 
cretion of  Congress  to  discontinue  and  limit  its  existence  and  opera- 
tions, it  may  be  fairly  claimed,  as  already  established  by  experiment, 
that  the  system  possesses  certain  advantages  over  any  otlier  heretofore 
existing  in  this  country,  and  possible  only  with  a  national  system. 

1.  The  security  of  the  bill-holder  from  loss  through  failure  of  the 
bank. 

2.  The  rapidity  and  certainty  of  the  detection  and  prevention  of 


638  SPEECHES   AND   EEP0RT8   OF  JOHN   SHERMAN. 

counterfeiting,  from  tlie  fact  that  tlie  notes  are  engraved,  printed,  and 
redeemed  at  the  Treasury  Department. 

3.  The  frequent  and  careful  examination  of  the  banks,  and  the  pub- 
lication of  the  detailed  statements  of  their  condition. 

4.  Uniformity  and  free  circulation  of  the  notes  throughout  the 
United  States,  without  respect  to  the  place  of  their  issue. 

5.  The  admirable  provisions  by  which  faihng  banks  are  j)laced  in 
liquidation,  and  their  assets  cheaply  and  promptly  applied  to  the  pay- 
ment of  creditors. 

These  and  other  advantages,  derived  to  the  public  from  a  national 
system  of  banks  over  a  State  system,  seem  to  be  fully  demonstrated, 
and,  though  irksome  and  apparently  hard  to  the  banks,  are  a  benefit 
and  security  to  the  stock-holders  and  a  safeguard  to  the  pubhc. 

The  only  franchise  conferred  by  this  system,  that  can  not  be  freely 
enjoyed  by  private  bankers  under  State  law,  is  the  power  to  issue  cir- 
culating notes.  This,  it  is  conceded,  is  a  franchise  conferred  by  the 
Government,  but  it  is  not  in  the  nature  of  a  monopoly.  It  may  be  ex- 
ercised by  any  five  persons  who  have  the  means,  and  will  comjDly  with 
the  law. 

Whether  the  power  to  issue  circulating  notes  should  be  granted  to 
private  corporations  or  be  exercised  only  by  the  Government,  is  purely 
a  question  of  public  policy  and  public  interest.  In  behalf  of  a  circula- 
tion issued  by  the  Government,  it  is  claimed  that  interest  is  saved  to 
the  pubhc  on  the  full  amount  of  the  notes  issued.  To  this  it  is  replied 
that  the  issue  of  such  notes  necessarily  involves  their  redemption  in 
coin,  and  this  can  be  secured  only  by  coin  reserves  and  the  ordinary 
machinery  of  banks.  If  the  banks  issue  notes,  they  expect  to  derive  a 
profit  from  their  loan  ;  but  this  profit  is  diminished  by  the  burden  of 
redemption,  by  the  large  taxes  imposed  upon  the  franchise,  and  by  the 
risk  always  incident  to  the  issue  of  circulating  notes.  These  are  con- 
siderations which  will,  no  doubt,  enter  into  the  question  of  the  j)erma- 
nency  of  the  national  banking  system  ;  but  as  the  banks  of  this  system 
are  each  organized  under  the  law  for  twenty  years,  and  none  of  them 
expire  until  June,  1883,  it  is  respectfully  submitted  that  it  is  good  pol- 
icy to  continue  the  experiment  until  that  date,  when  the  public  mind 
will  be  better  prepared  to  consider  the  questions  involved. 

The  annual  report  of  the  Director  of  the  Mint  exhibits  in  detail  the 
operations  of  the  several  mints  and  assay  oflices,  and  also  presents  in- 
teresting information  relative  to  the  production  of  gold  and  silver  in 
the  United  States,  the  estimated  amount  of  gold  and  silver  coin  and 
bullion  in  the  countiy,  the  depreciation  of  silver,  the  position  of  the 
American  trade  dollar  in  the  Oriental  trade,  and  other  subjects  con- 
nected directly  or  indirectly  with  the  coinage. 

The  value  of  the  gold  coinage  executed  during  the  last  fiscal  year  was $52,'798,980  00 

Of  trade  dollars ." 11,378,010  00 

Of  standard  silver  dollars 8,573,600  GO 

Of  fractional  silver  coin. 8,339,315  00 

And  of  minor  coin ' 30,694  00 

A  total  coinage  of $81,120,499  50 

In  addition  to  the  coinage,  fine  and  unparted  bars  were  prepared 


ANNUAL  EEPORT  TO   CONGRESS.  639 

for  depositors  in  the  amount  of  $12,501,926.23  in  gold,  and  $11,854,- 
385.87  in  silver. 

It  is  manifest,  from  the  proven  capacity  of  the  several  mints,  that 
our  coinage  facilities  are  ample  for  all  purposes. 

The  present  production  of  bullion  from  the  mines  of  the  United 
States  appears  to  approximate  one  hundred  million  dollars  in  value. 
All  the  gold  bullion  produced  in  the  country  contains  more  or  less  sil- 
ver, and  the  greater  portion  of  the  silver  bulHon  from  our  mines  con- 
tains a  percentage  of  gold,  making  it  difficult  to  determine  with  accu- 
racy the  proportion  of  each.  It  is  safe,  however,  to  state  that  the  pro- 
duction of  the  two  metals,  calculated  at  their  coining  rates,  is  nearly 
equal. 

During  the  year  1877  and  the  first  few  months  of  the  present 
year,  trade  dollars,  to  the  amount  of  probably  four  million  pieces, 
were  placed  in  circulation  in  the  States  east  of  the  Rocky  Mountains, 
with  a  full  knowledge  on  the  part  of  the  parties  engaged  in  the  busi- 
ness that  the  coin  was  not  a  legal  tender.  This  coin  is  in  no  sense 
money  of  the  United  States  which  the  Government  is  bound  to  re- 
deem or  care  for.  The  Government  stamp  upon  it  is  to  certify  to  its 
weight  and  fineness  for  the  convenience  of  dealers  in  silver  bullion. 
It  is  precisely  like  any  other  silver  bullion  assayed  at  any  assay  office 
or  mint.  The  limited  legal-tender  quality  originally  given  to  it  was 
taken  away  before  any  of  the  coins  were  put  into  domestic  circulation, 
and  it  should  not  now  be  given  any  value  or  attribute  at  the  expense 
of  the  public  that  is  not  incident  to  any  other  silver  bullion.  The 
Government  has  received  no  benefit  from  this  coinage,  and  has  neither 
received  it  nor  paid  it  out.  The  whole  connection  of  the  Government 
with  this  bullion  was  to  perform  the  mechanical  work  of  assaying  and 
dividing  it  into  convenient  form  for  the  merchant,  at  his  cost,  and  for 
his  benefit,  for  exportation  only. 

Recent  advices  from  our  Minister  to  China  indicate  that  a  con- 
siderable amount  of  trade  dollars  is  now  being  hoarded  in  that  empire, 
and  will  be  returned  to  us  if  a  discrimination  is  made  in  their  favor 
over  other  bullion,  ^o  distinction  can  be  made  between  trade  dollars 
in  the  United  States  and  those  out  of  the  United  States ;  but,  if  re- 
deemed at  all,  they  must  all  be  redeemed  alike.  The  bullion  in  35,853,- 
360  trade  dollars  outstanding  can  now  be  purchased  from  our  miners 
for  $31,256,050.  It  would  be  a  manifest  injustice  to  deprive  them  of 
our  market  for  their  bullion,  in  order  to  discriminate  in  favor  of  bul- 
lion coined  for  exportation  and  held  chiefly  in  foreign  countries. 

At  times  the  fractional  coins  of  the  United  States  accumulate  at 
certain  places  and  are  wanted  at  others.  It  is  recommended  that  this 
department  be  authorized  to  redeem  them  in  United  States  notes  when 
presented  in  sums  of  one  hundred  dollars,  or  any  multiple  thereof,  at 
the  mint  at  Philadelphia,  where  they  can  be  recoined  if  necessary,  and 
distributed. 

The  amount  of  gold  coin  and  bullion  in  the  country,  September 
30th,  is  estimated  bv  the  Director  at  $259,353,390,  and  of  silver  coin 
and  bullion  at  $99,090,557— a  total  of  $358,443,947. 

The  estimating  of  the  production  of  the  precious  metals  in  this 


640  SPEECnES  AND  REPORTS   OF  JOHN   SHERMAN. 

country,  and  of  the  amount  of  coin  and  bullion,  is  a  matter  attended 
with  great  difficulties,  and  the  estimates  can  only  be  regarded  as  ap- 
proximately correct,  though  they  have  been  compiled  from  the  best 
attainable  sources. 

By  reason  of  the  acts  authorizing  this  Department  to  purchase 
gold  and  silver  bullion  at  the  several  mints  and  assay  offices,  its  trans- 
portation is  thrown  upon  the  Government.  The  great  body  of  the 
bullion  accumulates  in  San  Francisco  and  Carson,  and  the  chief  trans- 
portation is  from  those  places  to  ISTew  York.  Efforts  were  made  to 
secure  favorable  rates,  but  the  lowest  offer  was  three  tenths  of  one  per 
cent,  for  gold  and  one  and  two  tenths  per  cent,  for  silver,  which  was 
deemed  to  be  excessive.  Silver  coin  and  bullion  can  be  transported 
with  but  little  risk,  while  at  the  rate  proposed  for  transporting  a  car 
containing  $250,000,  or  about  eight  tons,  the  cost  would  be  $3,000. 
The  chief  cost  is  in  the  transportation  over  the  Central  and  Union 
Pacific  Eailroads,  both  largely  indebted  to  the  United  States.  It  is 
respectfully  submitted  that  "the  rate  over  these  roads  be  prescribed  by 
Congress,  and  that  the  proceeds  form  part  of  the  sinking  fund  of  said 

raih'oads,  provided  by  law. 

***  *  *  *  *  * 

JOHK   SHEEMAI^, 

Secretary  of  the  Treasury. 
Hon.  Saimuel  J.  Randall, 

Sjgeciker  of  the  House  of  Rejgresentatives. 


THE  END. 


B.  APPLETON  &  CO.'S  NEW  PUBLICATIONS. 


AMERICAN  PAINTERS. 

Containing  Biographical  Sketches  of  Fifty  American  Artists,  with 
Eighty-three  Examples  of  their  "Works,  engraved  on  "Wood  in  the  most 
perfect  manner. 

As  an  evidence  of  the  value  and  beauty  of  this  volume,  we  may  mention  that  the  cost 
of  the  engravings  was  nearly  thirteen  thousand  dollars.  The  publishers  are  justified  in 
saying  that  the  contemporaneous  art  of  no  country  has  ever  been  so  adequately  repre- 
sented in  a  single  volume,  while  the  engravings  are  equal  to  the  finest  examples  of  wood- 
engraving  produced  here  or  abroad.     In  cloth,  extra  gilt,  price,  $7.00 ;  full  mor.,  $13.00. 

II. 

THE  TURNER  GALLERY. 

A  Series  of  One  Hundred  and  Twenty  Engravings  on  Steel,  from  the 
"Works  of  J.  M.  "W.  Turnee,  R.  A.  The  admirable  adaptability  of  Turner's 
paintings  for  engraving  has  led  the  very  best  engravers  to  reproduce 
them,  and,  as  a  result,  the  most  brilliant,  imaginative,  and  inspiring  works 
of  recent  times  are  brought  within  the  reach  of  the  general  public.  Each 
plate  is  accompanied  by  liistorical  and  critical  remarks,  compiled  from 
authentic  sources,  so  that  the  whole  affords  a  most  instructive  guide  to  the 
study  of  Turner's  unrivaled  pictures.  In  two  folio  volumes.  Price,  half 
morocco,  $32.00  ;  full  morocco,  |36.00. 

III. 

THE  POET  AND  PAINTER; 

Or,  Gems  of  Art  and  Song.  An  imperial  octavo  volume,  containing  choice 
Selections  from  the  English  Poets,  and  superbly  illustrated  with  99  Steel 
Engravings,  printed  in  the  best  manner  on  the  page  with  the  text.  New 
edition.     Clqth,  extra,  $12.00  ;  morocco,  antique  or  extra,  $20.00. 

IV. 

BRYANT'S  POETICAL  WORKS. 

Illustrated  Edition,  100  Engravings,  cloth,  gilt,  $4.00  ;  Household  Edition, 
cloth,  $2.00 ;  Pved-Line  Edition,  illustrated,  cloth,  gilt,  $3.00 ;  Blue-and- 
Gold  Edition,  cloth,  gilt,  $1.50. 

V. 

CHARLES  DICKENS'S  WORKS,  Household  Edition. 

"With  numerous  Illustrations.  Complete  in  19  volumes,  bound  in  eight 
volumes.  Square  8vo.  Cloth,  $20.00 ;  half  calf,  $40.00 ;  half  morocco, 
$40.00. 

This  edition  of  Dickens's  Works,  which  has  been  in  course  of  publication  for  several 
years,  and  which  is  only  just  completed,  is  the  handsomest  edition  of  the  works  of  the 
great  novelist ;  the  type  is  large,  the  illustrations  entirely  new  and  numerous,  and  the 
price  remarkably  low. 

VI. 

THE  FRENCH  REYOLUTIONARY  EPOCH. 

Being  a  History  of  France  from  the  Beginning  of  the  First  French  Revo- 
lution to  the  End  of  the  Second  Empire.  By  Henbi  Van  Laun,  author 
of  "  History  of  French  Literature,"  etc.    In  2  vols.,  12mo.  Cloth,  $3.50. 


2  D.  APPLET  OK  &  CO:s  NEW  PVBLI  CATIONS. -Continued. 

VII. 

SOCIAL  ETK^UETTE  OF  NEW  YORK. 

Contents  :  The  Value  of  Etiquette — Introductions — Solicitations — Strangers  in  Town 
— Debuts  in  Society — Visiting,  and  Visiting-Cards  for  Ladies — Card  and  Visiting- 
Customs  for  Gentlemen — Morning  Receptions  and  Kettle-Drums — Giving  and 
attending  Parties,  Balis,  and  Germans — Dinner-giving  and  Dining  out — Breakfasts, 
Luncheons,  and  Suppers — Opera  and  Theatre  Parties,  Private  Theatricals,  and 
Musicales — Etiquette  of  Weddings — Christenings  and  Birthdays — Marriage  An- 
niversaries— New-Year's-Day  in  New  York — Funeral  Customs  and  Seasons  of 
Mourning. 

18mo.     Cloth,  gilt  edges,  price,  $1.00. 

VIII. 

NEW  YORK  ILLUSTRATED. 

With  One  Hundred  and  Three  Views  of  Streets,  Buildings,  etc.,  in  Xew 
York,  Brooklyn,  and  vicinity. 

This  is  an  entirely  new  edition  of  this  pictorial  guide  to  New  York  City,  containing 
forty-two  new  illustrations  (total,  103),  and  twenty  additional  pages.  4to.  Paper  cover, 
price,  60  cents. 

AN  AMERICAN  GEOLOGICAL  RAILWAY  GUIDE, 

Giving  the  Geological  Formation  at  every  Railway  Station,  with  E"otes  on 
Interesting  Places  on  the  Routes,  and  a  Description  of  each  of  the  For- 
mations. By  James  Macfaelaxe,  Ph.  D.,  author  of  "  The  Coal  Regions 
bf  America,"  and  one  of  the  Commissioners  of  the  Second  Geological 
Survey  of  Pennsylvania,  Avith  the  Cooperation  of  the  State  Geologists  and 
other  Scientific  Gentlemen.     1  vol.,  8vo.     Flexible  cloth,  price,  $1.50. 

STOCK-BREEDING: 

A  Practical  Treatise  on  the  Application  of  the  Laws  of  Development  and 
Heredity  to  the  Improvement  and  Breeding  of  Domestic  Animals.     By 
Manly  Miles,  M.  D.,  late  Professor  of  Agriculture  in  the  Michigan  State 
Agricultural  College.  1  vol.,  12mo,  cloth.  With  Illustrations.  Price,  $1.50. 
"  It  is  somewhat  remarkable,  in  this  book-making  age,  that  there  is  no  systematic 
work  accessible  to  the  student  in  which  the  known  facts  and  principles  of  the  art  of 
improving  and  breeding  domestic  animals  are  presented,  in  convenient  form,  for  'study 
and  reference,  notwithstanding  the  importance  of  live-stock  to  the  farmer,  and  the  won- 
derful progress  that  has  been  made  in  its  improvement  since  the  time  of  Bakewell.     The 
present  attempt  to  supply  this  want  has  been  made  in  response  to  the  repeated  solicita- 
tions of  persons  interested  in  stock-breeding,  who  have  attended  my  lectures  on  this  sub- 
ject, in  various  places,  for  several  years  past." — From  Preface. 

ON  GASTRO-ELYTROTOMYf 

By  IIexey  J.  Gaerigues,  M.  D.,  Fellow  of  the  American  Gynecological 
Society,  Fellow  of  the  New  York  Obstetrical  Society,  etc.  Reprinted 
from  the  "New  York  Medical  Journal."    8vo.    Paper  cover,  price,  50  cts. 

XII. 

PAPER  MONEY : 

A  Collection  of  the  Principal  Historical  Facts  bearing  upon  the  Current 

Financial  Discussion.     By  H.  W.  Richaedson.      12mo.     Paper  cover, 

price,  15  cents. 

For  sale  by  all  booksellers.    Any  volume  mailed,  post-paid,  or  sent  carriage-free,  to  any  address 
in  the  United  States,  on  receipt  of  the  price. 

D.  APPLETON  &  CO.,  Publishers,  549  &  551  Broadway,  Xew  York. 


APPLETONS' 

AMERICAN  CYCLOPi^DIA. 

nSTE-W"     HE-VISEID     EXDITIOHST. 

Entirely  rewritten  by  the  ablest  writers  on  every  subject.       Printed  f 7-0711   new   type, 
and  ilhisirated  with  Several  Thotisand  Engravings  atid  Maps. 

The  work  originally  published  under  the  title  of  The  New  American  Cyclopaedia  was 
completed  in  1863,  since  which  time  the  wide  circulation  which  it  has  attained  m  all  parts  of 
the  United  States,  and  the  signal  developments  which  have  taken  place  i»  every  branch  of 
science,  literature,  and  art,  have  inducecl  the  editors  and  publishers  to  submit  it  to  an  exact 
and  thorough  revision,  and  to  issue  a  new  edition  entitled  The  American  Cyclopedia. 

Within  the  last  ten  years  the  progress  of  discovery  in  every  department  of  knowledge 
has  made  a  new  work  of  reference  an  imperative  want. 

The  movement  of  political  affairs  has  kept  pace  with  the  discoveries  of  science,  and  their 
fruitful  application  to  the  industrial  and  useful  arts  and  the  convenience  and  refinement  of 
social  life.  Great  wars  and  consequent  revolutions  have  occurred,  involving  national  changes 
of  peculiar  moment.  The  civil  war  of  our  own  coimtry,  which  was  at  its  height  when  the 
last  volume  of  the  old  work  appeared,  has  happily  been  ended,  and  a  new  course  of  com- 
mercial and  industrial  activity  has  been  commenced. 

Large  accessions  to  our  geographical  laiowledge  have  been  made  by  the  indefatigable 
explorers  of  Africa. 

The  great  political  revolutions  of  the  last  decade,  with  the  natural  result  of  the  lapse  of 
time,  have  brought  into  public  view  a  multitude  of  new  men,  whose  names  are  in  every 
one's  mouth,  and  of  whose  lives  every  one  is  curious  to  know  the  particulars.  Great  bat- 
tles have  been  fought,  and  important  sieges  maintained,  of  which  the  details  are  as  yet 
preserved  only  in  the  newspapers,  or  in  the  transient  publications  of  the  day,  but  which 
ought  now  to  take  their  place  in  permanent  aud  authentic  history. 

In  preparing  the  present  edition  for  the  press,  it  has  accordingly  been  the  aim  of  the 
editors  to  bring  down  the  information  to  the  latest  possible  dates,  and  to  furnish  an  accurate 
account  of  the  most  recent  discoveries  in  science,  of  every  fresh  production  in  literature,  and 
the  newest  inventions  in  the  practical  arts,  as  well  as  to  give  a  succinct  and  original  record 
of  the  progress  of  political  and  historical  events. 

The  work  has  beeft  begun  after  long  and  careful  preliminary  labor,  and  with  the  most 
ample  resources  for  carrying  it  on  to  a  successful  teraiination. 

None  of  the  original  stereotype  plates  have  been  used,  but  every  page  has  been  printed 
on  new  type,  foiining  in  fact  a  new  Cyclopirdia,  with  the  same  plan  and  compass  as  its 
predecessor,  but  with  a  far  greater  pecuniaiy  expenditure,  and  with  such  improvements  in 
its  composition  as  have  been  suggested  by  longer  experience  and  enlarged  knowledge. 

The  illustrations,  which  are  Introduced  for  the  first  time  in  the  ]>iet^cnt  edition,  have 
been  added  not  for  the  sake  of  pictorial  effect,  but  to  give  greater  lucidity  and  force  to  the 
explanations  in  the  text.  They  embrace  all  branches  of  science  and  of  natural  history,  and 
depict  the  most  famous  and  remarkable  features  of  scenery,  architecture,  and  art,  as  well  as 
the  various  processes  of  mechanics  and  manufactures.  "Although  intended  for  instraction 
rather  than  embellishment,  no  pains  have  been  spared  to  insure  their  artistic  excellence ; 
the  cost  of  their  execution  is  enormous,  and  it  is  believed  that  thej-  will  find  a  welcome  re- 
ception as  an  admirable  feature  of  the  Cyclopaedia,  and  worthy  of  its  high  character. 

This  work  is  sold  to  subscribers  only,  payable  on  delivery  of  each  volume.  It  is 
completed  in  sixteen  large  octavo  volumes,  each  contaming  about  800  pages,  fuUv  illustrated 
with  several  thousand  Wood  Engravings,  and  with  numerous  colored  Lithograpbic  Maps. 

PRICE    AND    STYLE    OF    BINDING. 


In  extra  cloth,  per  vol.  ....  $5.00 
In  library  leather,  per  vol.  .  .  .  6.00 
In  lialf  turkey  jnorocco,  per  vol.       .         .         7.00 


In  half  riissia,  extra  gilt,  per  vol.  .      $8.00 

hi  full  >norocco  antique,  gilt  edges,  per  vol.      10.00 
In  full  russia,  per  vol.       .         .         .         .10.00 


_  %*  Specimen  pages  of  the  American  Cyclopedia,   showing  type,  illustrations 
will  be  sent  gratis,  on  application. 


,  etc., 


D.    APPLETON   &   CO.,  Publishers, 

549  &  551  Broadway,  New  York. 


DISTINGUISHING    EXCELLENCES 


OF 

THE  AMERICAN  CYCLOPEDIA. 


I.  AcccRACY  AND  FRESHNESS  OF  INFORMATION. — The  value  of  a  work  of  this  kind  is 
exactly  proportioned  to  its  correctness ;  and  to  insure  that,  as  well  as  the  latest  informa- 
tion, no  expense  or  literary  labor  has  been  considered  too  great. 

II.  iMFiRTiALiTr. — The  work  has  been  pronounced  by  distinguished  men  and  leading 
reviews  in  all  parts  of  the  Union  strictly  fair  and  national.  Eschewing  all  expressions  of 
opinion  on  controverted  points  of  science,  philosophy,  religion,  and  politics,  it  has  aimed 
at  an  accurate  representation  of  facts  and  institutions,  of  the  results  of  physical  research, 
of  the  prominent  events  in  the  history  of  the  world,  of  the  most  significant  productions 
of  literature  and  art,  and  of  the  celebrated  individuals  whose  names  have  become  asso- 
ciated with  the  conspicuous  phenomena  of  their  age,  doing  justice  to  all  men,  all  creeds, 
all  sections. 

HI.  Completeness. — It  treats  of  every  subject,  in  a  terse  and  condensed  style,  but 
fully  and  exhaustively. 

IV.  Its  American  Character. — The  American  Cyclopaedia  is  found  especially  to 
meet  the  intellectual  wants  of  the  American  people.  It  is  not,  therefore,  modeled  after 
any  European  works ;  but,  while  it  embraces  all  their  excellences,  it  has  added  to  them 
an  unmistakable  American  character,  and  is  the  production  mainly  of  American  mind. 

V.  Its  Practical  Bearing. — The  day  of  philosophical  abstraction  and  speculation 
has  passed  away.     In  this  age  of  action,  the  work  has  been  made  thoroughly  practical. 

VI.  Its  Style. — The  cold,  formal,  and  repulsive  style  of  older  works  of  this  kind 
has  given  place  to  a  style  sparkling  and  emphatically  readable — a  style  that  interests  and 
pleases  as  well  as  instructs.  Many  of  the  writers  hold  the  foremost  rank  in  general  lit- 
erature, and  their  articles  have  been  characterized  by  the  best  critics  as  models  of  ele- 
gance, force,  and  beauty. 

VII.  Convenience  of  Form. — No  ponderous  work,  with  small  type  that  strains  the 
eyes  and  wearies  the  brain,  is  here  presented.  The  volumes  are  just  the  right  size  to 
handle  conveniently,  the  paper  is  thick  and  white,  the  type  large,  the  binding  good  and 
durable. 

VIII.  Cheapness. — The  work  has  been  regarded  as  a  miracle  of  cheapness.  In 
order  to  enlarge  its  sphere  of  usefulness,  and  make  it,  in  a  true  sense,  a  book  for  the  peo- 
ple, it  is  offered  to  the  public  at  the  lowest  possible  price. 

To  sum  up  the  above  and  other  advantages  of  this  work,  it  claims  that  it  surpasses  all 
other  works  in  the  fullness  and  ability  of  the  articles  relating  to  the  United  States ;  that 
no  other  book  contains  so  many  reliable  biographies  of  the  leading  men  of  this  and  other 
nations ;  that  the  best  minds  of  the  country  have  enriched  its  pages  with  the  latest  data, 
and  the  most  recent  discoveries  in  manufactures,  mechanics,  and  general  science ;  that  it 
is  a  library  in  itself;  that  it  is  well  printed,  and  in  convenient  form  ;  that  it  is  reliable, 
impartial,  complete,  thoroughly  American,  deeply  interesting  and  instructive,  and  cheap. 

D.  APPLETON  &  CO*  PuDlisHers,  549  &  551  Broadway,  New  Yort 


A 

HISTORY    OF    ENGLAND 

IN    THE 

EIGHTEENTH  CENTURY. 

By  WILLIAM  EDWARD  BABTPOLE  LECKY, 

Author  of  "History  of  the  Rise  and  Influence  of  the  Spirit  of  Rationalism  in  Europe,"  "Hietery 
of  European  Morals,  from  Augustus  to  Charlemagne,"  etc. 


2  vols.,  12ino.     Cloth,  $5.00. 


"  No  more  important  book  has  appeared  of  late  years  than  this  history,  uniting  as  it 
does  so  engrossing  a  subject  with  so  vital  an  object.  .  .  .  We  say,  again,  that  Mr.  Lecky 
has  made  his  mark  upon  our  time  by  his  careful  and  fascinating  book,  and  we  have 
reason  to  be  glad  that  while  he  is  still  himself,  and  his  pen  has  a  sharp  point  and  is  held 
with  a  strong  hand,  his  temper  has  gained  gentleness  with  time,  and  his  mind  has  not 
lost  insight  by  laborious  study.  We  congratulate  the  publishers  upon  what  cannot  fail 
to  be  a  great  success,  and  we  wish  them  speed  in  their  task  for  our  sake  and  their  own." 
■ — New  York  Times. 

"On  every  ground  which  should  render  a  history  of  eighteenth-century  England  pre- 
cious to  thinking  men,  Mr.  Lecky's  work  may  be  commended.  The  materials  accumu- 
lated in  these  volumes  attest  an  industry  more  strenuous  and  comprehensive  than  that 
exhibited  by  Froude  or  by  Macaulay,  and,  if  its  fruits  are  not  set  forth  with  the  pictorial 
charm  of  the  latter  writer,  they  are  invested  with  more  authority.  Mr.  Lecky's  style  is 
lucid  and  effective,  often  spirited,  sometimes  eloquent.  But  it  is  his  supreme  merit  that 
he  leaves  on  the  reader's  mind  a  conviction  that  he  not  only  possesses  the  acuteness 
which  can  discern  the  truth,  but  the  unflinching  purpose  of  truth-telling." — New  York 
Sun. 

"The  author  of  these  volumes  has  not  trodden  in  the  beaten  path.  His  work  is  a 
record  of  the  progress  of  art,  of  manners,  of  belief,  and  of  political  ideas.  Judicial  im- 
partiality is  a  characteristic  of  his  writings." — The  New  York  Churchman. 

"  The  work  will  enrich  any  library.  The  account  of  John  Wesley  in  the  second  vol- 
ume will  be  interesting  to  our  Methodist  readers  ;  and,  if  it  is  not  in  all  details  just,  it  is 
unexpectedly  just  in  the  general  outlines  of  Wesley's  work  and  character.  The  great 
influence  of  the  Wesleyan  movement  is  recognized,  and  especially  the  impetus  it  gave 
(against  Wesley's  wish)  to  nonconformity." — New  York  Methodist. 

"Mr.  Lecky  belongs  to  the  newer  school  of  thinkers,  who  accept  little  which  does  not 
bring  credentials  that  will  bear  the  test  of  examination,  and  who  do  not  hesitate  to  shock 
conventional  ideas  of  authority.  Not  the  least  attraction  of  this  history  is  the  indepen- 
dence of  thought  in  its  author,  the  conscientious  frankness  of  opinion,  as  well  as  the 
freshness  of  style  which  he  brings  to  its  discussions.  Mr.  Lecky  adds  to  intelligence  and 
fairness  a  remarkable  reasoning  capacity  and  a  rare  degree  of  literary  skill ;  and  his  work 
is  an  invaluable  additioh  to  the  higher  literature  of  the  day." — Boston  Gazelle. 

D.  APPLETON  &  CO.,  Publishers, 

S49  &  SSI  Broadway,  Ne-w  Vork. 


D.  APPLETON  &  CO.'S  PUBLICATIONS. 


"  Unquestionably  the  "best  living  writer  on  Political  Economyy — Prof.  Bowex. 


WITH    SOME    OF    THEIR    APPLICATIONS    OF 

SOCIA^L    PHILOSOP^HY. 

By  JOHN   STUART  MILL. 
2  vols.,  8vo. Cloth,  $4.00, 


That  there  has  heretofore  been  no  American  edition  of  a  work  held  in  such 
high  estimation  may,  perhaps,  be  owing  in  part  to  the  fact  that  since  its  publi- 
cation our  politics  have  hinged  on  an  engrossing  question,  which  belongs  rather 
to  the  domain  of  humanitarian  philosophy  than  to  that  of  political  economy,  and 
partly  to  the  facility  with  which  a  European  work  not  requiring  translation  can 
be  supplied  to  American  readers  from  the  original  publishers.  The  present  state 
of  our  currency  goes  far  to  remove  both  of  these  obstacles  to  the  success  of  an 
American  edition.  The  most  important  economic  discussions  which  have  ever 
taken  place  in  Great  Britain  grew  out  of  the  condition  into  which  that  country 
was  brought  by  its  protracted  struggle  against  Napoleon.  Our  politics  are  likely 
to  pass  through  a  similar  phase,  in  which  we  shall  need  all  the  light  shed  upon 
economic  questions  by  the  most  advanced  science. 

In  the  whole  range  of  extant  authorship  on  political  economy,  there  is  no 
writer  except  Adam  Smith  with  whom  John  Stuart  Mill  can,  without  injustice, 
be  compared.  In  originality,  Adam  Smith,  as  being  the  acknowledged  father 
of  the  science,  takes  the  precedence,  as  he  does  also  in  exuberance  of  apt  illus- 
tration. But  in  rectitude  of  understanding,  clearness,  and  sagacity.  Mill  is  fully 
his  peer ;  in  precision  of  method,  range  of  topics,  and  adaptation  to  the  present 
state  of  society,  he  is  altogether  his  superior.  The  "  Wealth  of  Nations  "  now 
belongs,  indeed,  rather  to  the  history  of  the  science  than  to  its  exposition.  But 
the  "  Principles  of  Political  Economy  "  is  an  orderly,  symmetrical,  and  lucid  ex- 
position of  the  science  in  its  present  advanced  state.  In  extent  of  information, 
breadth  of  treatment,  pertinence  of  fresh  illustration,  and  accommodation  to  the 
present  wants  of  the  statesman,  the  merchant,  and  the  social  philosopher,  this 
work  is  unrivaled.  It  is  written  in  a  luminous  and  smooth,  yet  clear-cut  style; 
and  there  is  diffused  over  it  a  soft  atmosphere  of  feeling,  derived  from  the  au- 
thor's unaffected  humanity  and  enlightened  interest  in  the  welfare  of  the  masses. 


D.  APPLETON  &  CO.,  549  &  551  Broadway,  N.  Y. 


FINANCE,  CURRENCY,  AND  BANKING. 


THE  EXAMPLE  OF  FRANCE:  Two  Essays  on  the  Payment  of  the  In- 
demnity and  the  Management  of  the  Currency  since  the  German 
War,   1870-74.      By  Victor  Bojotet.      Translated  from   the 

Bei-ue  des  Deux  Mondes  by  George  Walker.     Paper  cover,  50  cents. 

PAPER-MONEY  INFLATION  IN  FRANCE:  How  it  Came,  what  it 
Brought,  and  how  it  Ended.  A  Paper  read  before  several  Sena- 
tors and  Members  of  the  House  of  Representatives,  of  both  Political  Par- 
ties, at  Washington,  April  12,  and  before  the  Union  League  Club,  at  New 
York,  April  13,  1876.  By  Andrew  D.  White,  LL.  D.,  President  of  Cornell 
University.     Price,  50  cents. 

NOMISMA;  or,  "Legal  Tender."  By  Henri  Ceunuschi,  author  of 
"Bi-Metallic  Money."     1  vol.,  12mo,  cloth,  $1.25. 

The  principal  part  of  the  information  contained  in  this  volume  was  given  by  the  au- 
thor, before  a  commission  appointed  by  Congress,  for  the  purpose  of  ascertaining  whether 
it  was  feasible  for  the  United  States  to  introduce  a  Bi-Metallic  Standard  of  Gold  and  Silver. 

The  author  is  an  authority  on  finance  in  France,  and  his  information  is  given  in  a 
clear  and  intelligible  form,  which  cannot  fail  to  be  very  convincing. 

CURRENCY  AND  BANKING.  By  Bonamy  Price,  Professor  of  Politi- 
cal Economy  in  the  University  of  Oxford.     1  vol.,  12mo.     Cloth,  $1.50. 

"  His  discussion  on  the  subject  of  currency  is  very  clear  and  satisfactory,  as  well  as 
timely." — New-Englander. 

"  The  idea  that  the  government  stamp  on  the  coin  gives  to  money  its  value,  he  dis- 
poses of  in  a  sentence,  yet  it  is  a  large  part  of  the  money  argument." — Hartford  Courant. 

"  The  author  puts  forth  views  as  to  the  mode  of  resuming  specie  payments  in  this 
country  without  dogmatism  and  with  common-sense." — Evening  Mail. 

"  This  is  probably  the  best  and  most  lucid  work  on  the  subject." — Sunday  Herald, 
Washington. 

MONEY  AND  THE  MECHANISM  OF  EJCHANGE.  By  W.  Staisley 
Jevoxs,  Professor  of  Logic  and  Political  Economy  in  the  Owens  College, 
Manchester.     1  toI.,  12mo.     Cloth,  $1.75. 

"  Mr.  Jevons's  valuable  book  ought  to  be  read  by  every  statesman,  legislator,  and 
journalist,  in  the  United  States,  who  undertakes  to  discuss  the  monetary  problems  of  the 
time." — International  Review. 

*'  Professor  Jevons's  work  is  of  the  greatest  value,  and  no  thinker  who  cares  for  his 
reputation  will  be  willing  to  leave  it  unread." — Hartford  Post. 

"  His  work  is  properly  written,  and  every  page  is  replete  with  solid  instruction  of  a 
kind  that  is  just  now  lamentably  needed  by  multitudes  of  our  people  who  are  victimized 
by  the  grossest  fallacies." — Popular  Science  Monthly. 

WEIGHTS,  MEASURES,  AND  MONEY,  OF  ALL  NATIONS  Compiled 
by  F.  W.  Clarke,  Professor  of  Physics  and  Chemistry  in  the  University  of 
Cincinnati.     1  vol.,  12mo.     $1.50. 

"  We  commend  this  carefully-prepared  and  convenient  volume  to  all  persons  who 
wish  to  acquire  information  on  the  subject  of  which  it  treats." — Boston  Globe. 

"  The  work  necessary  to  the  production  of  this  little  volume  has  been  judiciously 
planned  and  skillfully  executed." — Chicago  Tribune. 

D,  APPLETON  ^.  CO.,  Publishers,  549  ^  551  Broadway,  New  York. 


WORKS 

OF 

WILLIAM  CULLEN  BRYANT. 


Illustrated  8vo  Edition  of  Bryant's  Poetical  "Works, 

100  Engravings  by  Birket  Foster,  Harry  Fenn,  Alfred  Fredericks,  and 
other  Artists.  1  vol.,  8vo.  Cloth,  gilt  side  and  edge,  $4.00 ;  half  calf, 
marble  edge,  $6.00 ;  full  morocco,  antique,  $8.00  ;  tree  calf,  $10.00. 

Household  Edition. 

1  vol.,  12mo.  Cloth,  $2.00;  half  calf,  $4.00;  morocco,  $5.00;  tree  calf, 
$5.00. 

Red-Line  Edition. 

With  24  Illustrations,  and  Portrait  of  Bryant,  on  Steel.  Printed  on 
tinted  paper,  with  red  line.  Square  12mo.  Cloth,  extra,  $3.00;  half 
calf,  $5.00 ;  morocco,  $7.00 ;  tree  calf,  $8.00. 

Blue-and-Gold  Edition. 

18mo.  Cloth,  gilt  edge,  $1.50;  tree  calf,  marble  edge,  $3.00;  morocco, 
gilt  edge,  $4.00. 


Letters  from  Spain  and  other  Countries. 

1  vol.,  12rao.     Price,  $1.25. 

The  Song  of  the  Sower. 

Illustrated  with  42  Engravings  on  Wood,  from  Original  Designs  by  Hen- 
nessy,  Fenn,  Winslow  Homer,  Hows,  Griswold,  Nehlig,  and  Perkins; 
engraved  in  the  most  perfect  manner  by  our  best  Artists.  Elegantly 
printed  and  bound.     Cloth,  extra  gilt,  $5.00 ;  morocco,  antique,  $9.00. 

The  Story  of  the  Fountain. 

"With  42  Illustrations  by  Harry  Fenn,  Alfred  Fredericks,  John  A.  Hows, 
Winslow  Homer,  and  others.  In  one  handsome  quarto  volume.  Printed 
in  the  most  perfect  manner,  on  heavy  calendered  paper.  Uniform  with 
''The  Song  of  the  Sower."  8vo.  Square  cloth,  extra  gilt,  $5.00;  mo- 
rocco, antique,  $9.00. 

The  Little  People  of  the  Snow. 

Illustrated  with  exquisite  Engravings,  printed  in  Tints,  from  Designs  by 
Alfred  Fredericks.     Cloth,  $5.00 ;  morocco,  $9.00. 


D.  APPLETON  &  CO.,  549  &  551  Beoadway,  N'ew  York. 


m- 


